( ProPublica) – Ever since he was a medical student, Dr. Neil Martinson has confronted the horrors of tuberculosis, the world’s oldest and deadliest pandemic. For more than 30 years, patients have streamed into the South African clinics where he has worked — migrant workers, malnourished children and pregnant women with HIV — coughing up blood. Some were so emaciated, he could see their ribs. They’d breathed in the contagious bacteria from a cough on a crowded bus or in the homes of loved ones who didn’t know they had TB. Once infected, their best option was to spend months swallowing pills that often carried terrible side effects. Many died.

So, when Martinson joined a call in April 2018, he was anxious for the verdict about a tuberculosis vaccine he’d helped test on hundreds of people.

The results blew him away: The shot prevented over half of those infected from getting sick; it was the biggest TB vaccine breakthrough in a century. He hung up, excited, and waited for the next step, a trial that would determine whether the shot was safe and effective enough to sell.

Weeks passed. Then months.

More than five years after the call, he’s still waiting, because the company that owns the vaccine decided to prioritize far more lucrative business.

Pharmaceutical giant GSK pulled back on its global public health work and leaned into serving the world’s most-profitable market, the United States, which CEO Emma Walmsley recently called its “top priority.” As the London-based company turned away from its vaccine for TB, a disease that kills 1.6 million mostly poor people each year, it went all in on a vaccine against shingles, a viral infection that comes with a painful rash. It afflicts mostly older people who, in the U.S., are largely covered by government insurance.

Importantly, the shingles vaccine shared a key ingredient with the TB shot, a component that enhanced the effectiveness of both but was in limited supply.

From a business standpoint, GSK’s decision made sense. Shingrix would become what the company calls a “crown jewel,” raking in more than $14 billion since 2018.

But the ability of a corporation to allow a potentially lifesaving vaccine to languish lays bare the distressing reality of public health vaccine creation. With limited resources, governments have long seen no other option but to team with Big Pharma to develop vaccines for global scourges. But after the governments pump taxpayer money and resources into the efforts, the companies get control of the products, locking up ownership and prioritizing their own gain.

That’s what GSK did with the TB vaccine. Decades ago, the U.S. Army brought in GSK to work on a malaria vaccine and helped develop the ingredient that would prove game-changing for the company. It was an adjuvant, a substance that primed the body’s immune system to successfully respond to a vaccine for malaria — and, the company would come to learn, a variety of other ailments.

GSK patented the adjuvant and took control of the supply of the ingredients in it. It accepted government and nonprofit funding to develop a TB vaccine using the adjuvant. But even though it isn’t carrying the vaccine to the finish line, it isn’t letting go of it entirely either, keeping a tight grip on that valuable ingredient.

As TB continued to rage around the globe, it took nearly two years for GSK to finalize an agreement with the nonprofit Bill & Melinda Gates Medical Research Institute, or Gates MRI, to continue to develop the vaccine. While the Gates organization agreed to pay to keep up the research, GSK reserved the right to sell the shot in wealthy countries.

The trial that will determine whether the vaccine is approved won’t begin until 2024, and isn’t expected to end until at least 2028. “We just can’t operate like that for a disease that is this urgent,” said Thomas Scriba, a South African scientist and TB expert who also worked on the study.

GSK pushes back against the premise that the company delayed the development of the TB vaccine and says it remains dedicated to researching diseases that plague underserved communities. “Any suggestion that our commitment to continued investment in global health has reduced, is fundamentally untrue,” Dr. Thomas Breuer, the company’s chief global health officer, wrote in a statement.

The company told ProPublica that it cannot do everything, and it now sees its role in global health as doing early development of products and then handing off the final clinical trials and manufacturing to others. It also said that a vaccine for TB is radically different from the company’s other vaccines because it can’t be sold at scale in wealthy countries.

Though a good TB vaccine would be used by tens of millions of people, it has, in the parlance of industry, “no market,” because those who buy it are mostly nonprofits and countries that can’t afford to spend much. It’s not that a TB vaccine couldn’t be profitable. It’s that it would never be as profitable as a product like the shingles vaccine that can be sold in the U.S. or Western Europe.

Experts say the story of GSK’s TB vaccine, and its roller coaster of hope and disappointment, highlights a broken system, which has for too long prioritized the needs of corporations over those of the sick and poor.

“We don’t ask for a fair deal from our pharma partners,” said Mike Frick, a director of the tuberculosis program at Treatment Action Group and a global expert on the TB vaccine pipeline. “We let them set the terms, but we don’t ask them to pick up the check. And I just find it frankly a little humiliating.”

Steven Reed, a co-inventor of the TB vaccine, brought his idea to GSK decades ago, believing that working with a pharmaceutical giant was essential to getting the shots to people who desperately needed them. He’s disillusioned that this hasn’t happened and now says that Big Pharma is not the path to saving lives with vaccines in much of the world. “You get a big company to take it forward? Bullshit,” he said. “That model is gone. It’s failed. It’s dead. We have to create a new one.”

Gaining Control

In the early 1980s, the U.S. Army was desperate for a way to keep troops safe from the parasite that causes malaria. Military scientists had some promising ideas but wanted to find a company that could help them develop and manufacture the antigen, the piece of a vaccine that triggers an immune response. They called on SmithKline Beckman, now part of GSK, which had a plant outside of Philadelphia committed to the exact type of antigen technology they were researching.

For the company’s part, working with the Army gave it access to new science and, importantly, the ability to conduct specialized research. The Army had laboratories for animal testing and ran clinical trial sites around the world. It’s also generally easier to get experimental products through regulatory approval when working with the government, and Army scientists were willing to be infected with malaria and run the first tests of the vaccine on themselves.

Col. Carl Alving, then an investigator at the Walter Reed Army Institute of Research, said he was the first person known to be injected with an ingredient called MPL, an adjuvant added to the vaccine. Today, we know that adjuvants are key to many modern vaccines. But at the time, only one adjuvant, alum, had ever been approved for use. Alving published promising results, showing that MPL boosted the shot’s success in the body.

Company scientists took note and began adding MPL to other ingredients. If one adjuvant was good, maybe two adjuvants together, stimulating different parts of the immune system, might be even better.

Image by Arek Socha from Pixabay

It was an exciting development, bringing the multiple adjuvants together, Alving said in an interview. But then he learned that the company scientists had filed a patent for the combinations in Europe, which put limits on what he and his colleagues could do with MPL. “The Army felt perhaps a little frustrated by that because we had introduced Glaxo to the field.”

Still, the Army wanted the malaria vaccine. Military personnel started comparing the adjuvant combinations on rhesus monkeys at an Army facility in Thailand and ran clinical trials that tested the most promising pairs in humans and devised dosing strategies.

The Army found that one of the combinations came out on top: MPL and an extract from the bark of a tree that grows in Chile. The bark extract was already used in veterinary vaccines, but a scientist at one of the world’s first biotech companies had recently discovered you could purify it into a material that makes it safe enough for use in humans.

Alving said that at the time, he didn’t patent the work he and his colleagues were doing or demand an exclusive license for MPL. “It’s a question of the Army being the Army, which is not a company,” Alving said. (This was actually the second time the government failed to secure its rights over MPL. Decades earlier, the ingredient was discovered and formulated by scientists working for the Department of Veterans Affairs and a National Institutes of Health lab in Montana. One of the scientists, frustrated that his bosses in Bethesda, Maryland, wouldn’t let him test the product in humans, quit and formed a company, taking the research with him. Though his company initially said it thought MPL was in the public domain and couldn’t be patented, he did manage to patent it.)

Experts say drug development in the U.S. is littered with such missed opportunities, which allow private companies to seize control of and profit off work done by publicly funded researchers. Governments, they say, need to be more aggressive about keeping such work in the public domain. Alving has since done just that, recently receiving his 30th patent owned by the military.

It’s an open secret in the pharmaceutical world that companies participate in global health research because it’s where they get to try out new technologies that can be applied to other, more lucrative diseases.

At an investor presentation in 2016, a GSK executive used the malaria vaccine example to explain the benefit of such work. “Of those of you who think this is just philanthropy, it is not,” Luc Debruyne, then president of vaccines at GSK, told the group. He explained that it was through the malaria work that the company invented the adjuvant that is now in its blockbuster shingles vaccine. And, he explained, vaccines are high-volume products that make a steady stream of money over time. “So doing good business, innovating and doing well for the world absolutely can get married.”

As the Army’s research on the combination of MPL and the bark extract evolved — and its market potential became clear — GSK moved to vacuum up the companies that owned the building blocks to the adjuvant.

In 2005, it bought the company that owned the rights to MPL for $300 million. In 2012, it struck a deal for the rights to a lion’s share of the supply of the Chilean tree bark extract.

The company was now in full control of the adjuvant.

Picking a Winner

GSK eagerly began to test its new adjuvant on a number of diseases — hepatitis, Lyme, HIV, influenza.

Steven Reed, a microbiologist and immunologist, had come to the company in 1994 with an idea for a tuberculosis vaccine. An estimated 2 billion people are infected with TB globally, but it’s mainly those with weakened immune systems who fall ill. A century-old vaccine called BCG protects young children, but immunity wanes over time, and that vaccine does little to shield people from the most common type of infection in the lungs.

Reed had just the background and resources to attempt a breakthrough: An adjunct professor at Cornell University’s medical school, he also ran a nonprofit research organization that worked on infectious diseases and had co-founded a biotech company to create and market products.

He and his colleagues were building a library of the proteins that make up the mycobacterium that causes TB. He also had access to a blood bank in Brazil, where TB was more prevalent, that he could screen the proteins against to determine which generated an immune response that prevented people from getting sick.

At the time Reed pitched the vaccine, the company’s decision over whether to take him up was made by researchers, said Michel De Wilde, a former vice president of research and development at the company that partnered with Reed and later became part of GSK. Today, across the industry, finance units play a much stronger role in deciding what a company works on, he said.

GSK signed on, asking Reed to add the company’s promising new adjuvant to his idea for a TB vaccine.

Reed and his colleagues used more than $2 million in federal money to conduct trials from 1995 to 2005. GSK also invested, but NIH money and resources were the key, Reed said. As the vaccine progressed into testing, the Bill & Melinda Gates Foundation pitched in, as did the governments of the United Kingdom, the Netherlands and Australia, among others.

Amid all that, in 2003, GSK started testing the adjuvant in its shingles vaccine, according to annual reports, but at a much faster speed. With TB, it performed a small proof-of-concept study to justify moving to a larger one. There’s no evidence it did so with shingles. By 2010, GSK’s shingles vaccine was in final trials; in 2017, the FDA approved it for use.

To employees and industry insiders, GSK was making its priorities clear. The company built a vaccine research facility in Rockville, Maryland, to be closer to the NIH and the Food and Drug Administration; at the same time, it was retreating from TB and other global public health projects, according to former employees of the vaccine division.

All the while, the adjuvant was limited. GSK struggled to ramp up production of MPL, according to former employees there; it relies on a cumbersome manufacturing process. And it wasn’t clear whether there was sufficient supply of the Chilean tree that is essential to both vaccines.

After researchers learned of the TB vaccine’s successful proof-of-concept results in 2018, GSK said nothing about what was next.

“You would have thought people would have said: ‘Oh shit, this is doable. Let’s double down, let’s quadruple down,’” said Dr. Tom Evans, former president and CEO of Aeras, a nonprofit that led and paid for half of the proof-of-concept study. “But that didn’t happen.”

Scriba, who was involved in the study in South Africa, said he never imagined that GSK wouldn’t continue the research. “To be honest it never occurred to us that they wouldn’t. The people we worked with at GSK were the TB team. They were passionate about TB,” Scriba said. “It’s extremely frustrating.”

But Reed said that when the shingles vaccine was approved, he had a gut feeling that GSK would abandon the tuberculosis work.

“The company that dropped it used similar technology to make billions of dollars on shingles, which doesn’t kill anyone,” Reed said.

Those in the field grew so concerned about the fate of the TB vaccine that the World Health Organization convened a series of meetings in 2019.

Breuer, then chief medical officer for GSK’s vaccine division, explained that the pharmaceutical giant was willing to hand off the vaccine to an organization or company that would cover the cost of future development, licensing, manufacturing and liability. If the next trial went well, they could sell the vaccine in the “developing world,” with GSK retaining the sales rights in wealthier countries.

GSK would, however, retain control of the adjuvant, Breuer said. And the company only had enough for its other vaccines, so whoever took over the TB vaccine’s development would need to pay GSK to ramp up production, which Breuer estimated would cost around $200 million.

Dr. Julio Croda was director of communicable diseases for Brazil at the time and attended the meeting. He said he was authorized to spend significant government funds on a tuberculosis vaccine trial but needed assurances that GSK would transfer technology and intellectual property if governments paid for its development. “But in the end of the meeting, we didn’t have an agreement,” he said.

Dr. Glenda Gray, a leading HIV vaccine expert who attended the meeting on behalf of South Africa, said she wasn’t able to get a straight answer about the availability of the adjuvant.

The year after the WHO meeting, after what a Gates representative described as “a lot of negotiation,” GSK licensed the vaccine to Gates MRI, a nonprofit created by the Gates Foundation to develop drugs and vaccines for global health issues that for-profit companies won’t tackle.

GSK told ProPublica that it did not receive upfront fees or royalties as part of the arrangement, but that Gates MRI paid it a small incentive to invest in the company’s global health endeavors. GSK and Gates MRI declined to comment on the amount.

Gates MRI tax documents show a payment designated as “royalties, license fees, and similar amounts that allow the organization to use intellectual property such as patents and copyrights” the year the agreement was finalized. Among available tax documents, that is the only year the organization has made a payment in that category.

The amount: $10 million.

An Uncertain Future

In June of this year, the Gates Foundation and the Wellcome Trust announced they were pledging $550 million to fund the phase 3 trial that will finally show whether the vaccine works. They’ve selected trial locations and are currently testing it on a smaller subset of patients, those with HIV.

Jeremy Farrar, chief scientist at the WHO, said he’s more optimistic than he’s ever been in his career that we’ll have a new TB vaccine this decade.

Gates MRI and GSK declined to say who had the rights to sell the vaccine in which countries, but Gates MRI said it will “work with partners to ensure the vaccine is accessible for people living in high TB-burden lower- and middle-income countries,” and GSK acknowledged that its rights extend to South America and Eastern Europe, two regions with significant pockets of TB.

As expected, Gates MRI will be reliant on GSK to supply the adjuvant, which concerns vaccine hopefuls because of the lack of transparency surrounding its availability. One of the key ingredients, the bark extract, comes from a tree whose harvest and export has been controlled by the Chilean government since the 1970s because of overexploitation. A megadrought and forest fires continue to threaten native forests today. The main exporter of the bark says it has resolved previous bottlenecks, and GSK said it is working on a synthetic version as part of its long-term plan.

In response to questions about why it retained control of the adjuvant, GSK said it was complicated to make, would not be economical to produce in more than one place, and was a very important component in many of the company’s vaccines, so it wasn’t willing to share the know-how.

The adjuvant is only growing in value to the company, as it adds yet another lucrative vaccine to its portfolio that requires it. In May, the FDA approved a GSK vaccine for the respiratory virus known as RSV. Analysts project that the shot will bring in $4 billion annually at its peak. GSK continues to study the adjuvant in additional vaccines.

GSK strongly insists that it has enough of the adjuvant to fulfill its forecasted needs for the RSV, shingles, malaria and TB vaccines through 2035.

The company and Gates MRI said their agreement includes enough adjuvant for research and the initial supply of the TB vaccine, if it is approved. The organizations declined, however, to specify how many people could be vaccinated. GSK also said it was willing to supply more adjuvant after that, but further negotiations would be necessary and Gates MRI would likely need to pay to increase adjuvant manufacturing capacity. For its part, Gates MRI said it is evaluating several strategies to ensure longer term supply.

Several experts said that Gates MRI should test other adjuvants with the vaccine’s antigen. That includes Farrar, who said it would be “very wise” to start looking for a new adjuvant. He is one of the few people who has seen the agreement between Gates MRI and GSK as a result of his previous role as director of the Wellcome Trust. Farrar is now helping to lead a new TB Vaccine Accelerator Council at the WHO and said he believes one of the group’s roles would be to find solutions to any future problems with the adjuvant.

Gates MRI declined to answer when asked if it was considering testing other adjuvants with the vaccine’s antigen. GSK, along with several other scientists and regulators that ProPublica spoke with, expressed that using a new adjuvant would require redoing all of the long and expensive clinical trials.

U.S. government officials, meanwhile, are working to identify adjuvants that aren’t already tied up by major pharmaceutical companies.

For a corporation, the primary concern is “what is this adjuvant doing for my bottom line,” said Wolfgang Leitner, who began his career working at Walter Reed Army Institute of Research on the malaria vaccine as a consultant for GSK. Now the chief of the innate immunity section at the National Institute of Allergy and Infectious Diseases, his job is to encourage the development of new adjuvants and to make sure that researchers have access to ones that aren’t tightly controlled by individual companies.

The WHO has also been helping to build a global network of vaccine manufacturers who can develop and supply vaccines to less wealthy countries outside of the shadow of Big Pharma; it is using a technology debuted during the COVID-19 pandemic called mRNA, which deploys snippets of genetic code to trigger an immune response. Reed, an inventor of GSK’s TB vaccine, co-founded the company at the center of that effort, Afrigen, after growing concerned about the fate of the vaccine he made for GSK.

Reed helped create a second TB vaccine, which Afrigen has the rights to manufacture for sale in Africa. But that vaccine has yet to start a proof-of-concept trial.

Over the past five years, an average of just $120 million a year has been spent on all TB vaccine research globally, including money from governments, pharmaceutical companies and philanthropic organizations, according to annual surveys conducted by the Treatment Action Group. For perspective, the U.S. alone spent more than $2 billion developing COVID-19 vaccines from 2020 to 2022. At a special UN meeting on tuberculosis in 2018, the nations of the world pledged to ensure $3 billion was spent on TB vaccine research and development over the next five years. Just 20% of that was handed out.

While that mRNA hub holds promise, it will be years before an mRNA TB vaccine enters a proof-of-concept trial, according to people involved. The pharmaceutical companies that made successful COVID-19 vaccines have refused to share the technology and manufacturing techniques that make mRNA vaccines work. One company, Moderna, has said it won’t enforce its patents on mRNA vaccines Afrigen creates for COVID-19, but it’s not clear what it’ll do if Afrigen applies those techniques to a disease like TB. (Paul Sagan, board chairman of ProPublica, is a member of Moderna’s board.)

To date, the GSK tuberculosis vaccine — which does not use mRNA technology — is the only one that meets a set of characteristics the WHO believes are necessary for a viable TB vaccine.

The phase 3 trial is set to begin early next year. In the time between the two trials, approximately 9 million people will have died from TB.

ProPublica

The mechanism by which globalization spread throughout the world, the key strand of its DNA, has been the “free trade” treaty.

“We’ve had 30 years of free trade agreements and bilateral investment treaties,” points out Luciana Ghiotto, a researcher at CONICET-Argentina and associate researcher with the Transnational Institute. “They’ve created this enormous legal architecture, what one friend of ours calls the ‘corporate architecture of impunity,’ which has spread like grass and gives legal security and certainty to capital. It has nothing to do with the protection of human rights or environmental rights.”

Indeed, among the many problems associated with the expansion of world trade has been environmental degradation in the form of land, air, and water pollution. More recently, however, attention has turned to the more specific problem of carbon emissions, which are largely responsible for climate change. According to the World Trade Organization, the production and transport of goods for export and import account for 20-30 percent of global carbon emissions.

Embedded in many of the treaties governing trade and investment are clauses that give corporations the right to sue governments over regulations, particularly those addressing the environment and climate change, that adversely affect the expected profit margins of those businesses. These investor-state dispute settlement (ISDS) provisions have a “chilling effect on the regulatory system because governments, worried that they will be sued, decide to delay reforms related to climate change,” points out Manuel Perez Rocha, an associate fellow of the Institute for Policy Studies in Washington. “There have been several cases around the world where companies were able to defeat regulatory changes that favor the climate.”

Trade rules that privilege corporations over the environment are particularly influential in the realm of agriculture, which is an extractive industry no less powerful than mining.

“The global system of trade and investment contributes to the monopoly control by just a few transnational corporations over fossil-fuel-guzzling agrobusiness, whose products are often transported thousands of miles before they reach a dinner table,” relates Jen Moore, an associate fellow at the Institute for Policy Studies. “At the same time. the system has been decisive in making the lives of millions of small-scale farmers more precarious, undermining their role as a better alternative to mass monoculture operations.”

Carbon emissions are not the only byproduct of the agrobusiness that global trade sustains. “There’s also methane emissions,” adds Karen Hansen-Kuhn, program director at the Institute for Agriculture & Trade Policy. “A lot of methane comes from meat production. Nitrous oxide, which is 265 times more potent than carbon and stays in the atmosphere over 100 years, results from chemical fertilizers.”
These perspectives on global trade—and more environmentally sound alternatives to the “free trade” model—were presented at a December 2022 webinar sponsored by Global Just Transition project of the Institute for Policy Studies and the Ecosocial and Intercultural Pact of the South.

The Rise of “Free Trade”

Throughout the modern era, states throughout the world protected their domestic economies through tariffs on foreign goods and restrictions on foreign investment. Behind these protective walls, states helped local farmers and businesses compete against cheaper imports and deep-pocketed investors.

But states that depended increasingly on exports of cheap industrial goods and surplus food—aided by transnational companies eager to boost their profits—lobbied for the reduction of these barriers. Arguments for “free trade,” traditionally linked to the presumed benefits of globalization, emerged within the most powerful economies in the nineteenth century, but it was more recently, in the 1970s, that states and international institutions dramatically revived this discourse under the banner of “neoliberalism.”

“When we talk about the circulation of capital, we’re talking about trade,” explains Luciana Ghiotto. “That is, import and export for states and the circulation of thousands of vessels and planes for the transport of commodities all around the world. One of the aims of capital is to make that circulation faster, simpler, and easier. Who would not want to make trade easier or faster? Well, the state.”

Faster and more efficient trade, while more profitable for corporations, also has meant a number of negative consequences for states such as job loss among domestic producers. Because of the wide array of free trade agreements and bilateral investment treaties now in force—and the power invested in international bodies to enforce these agreements—states have lost many of the tools they once used to protect or develop national industries.

The spread of the free-trade orthodoxy has had a major impact on the energy industry, which has in turn pushed up carbon emissions. Ghiotto points to the efforts of fossil-fuel corporations to protect their investments in Russia after the collapse of the Soviet Union as a primary motivation to negotiate an Energy Charter Treaty (ECT) in the early 1990s, which guaranteed a free trade in global energy markets. The ECT was originally signed by 53 European and Central Asian countries. Today, another 30 countries from Burundi to Pakistan are in the queue for membership.

“The ECT is actually a treaty made specially to protect fossil fuel Industries,” Ghiotto continues. “It’s already been used by investors to protect their investments in the face of state policies. But that was 30 years ago. Now, because of the global climate crisis, states are pushing for other kinds of regulations that are jeopardizing the investments of these corporations.”

Energy companies have taken states to dispute settlement in 124 cases, with around 50 against Spain alone because of its reforms in the renewable energy sector. Companies “have used the ECT as a legal umbrella in order to increase business and profits, or simply to protect their investments against state regulation,” Ghiotto adds. Italy, for instance, instituted a ban on offshore drilling only to be hit by a suit from the UK energy company Rockhopper. In November 2022, the ECT arbitration panel ordered the Italian government to pay the company 190 million Euros plus interest.

“Investors in the mining and oil sector have launched 22 percent of the claims against Latin American states,” she reports. “There was the big case of Chevron against Ecuador. But there have been others. For instance, Ecuador had to pay a $374 million penalty to the French oil company Parenco after the state changed some clauses regarding the amount of taxes the company had to pay in order to give back some of the revenues to the Ecuadorian people.”

Agriculture and Climate Change

Global food production generates 17 billion tons of greenhouse gasses every year. That’s about a third of the 50 billion tons of such gasses emitted annually. The production of beef and cow milk are the worst offenders, largely because of the methane that’s released by the animals themselves. But other major contributors include soil tillage, manure management, transportation, and fertilizer.

“Along with Greenpeace and Grain, our institute has been working with scientists to think about how increased fertilizer use is affecting climate change,” Karen Hansen-Kuhn reports. “Fertilizer use has been increasing all over the world. It’s a key part of Green Revolution practices. The scientists we worked with found that the use of nitrogen fertilizer, bringing together the natural gas and the energy used in production along with transportation and the impacts in the field, amounts to more than 21 percent of emissions from agriculture, and it’s been growing.”

According to a map of excess nitrogen per hectare of cropland, countries like China, Netherlands, Saudi Arabia, Pakistan, Egypt, and Venezuela are using more nitrogen for fertilizers than the crops can even absorb. “This excess contributes to more emissions and causes other problems, for instance with run-off into waterways,” she continues. “The incentives right now in the agricultural system are for extreme overproduction, especially around commodity crops, like corn, soybeans, and wheat, which require these cheap chemical inputs.”

Many of these commodity crops are produced for export. Netherlands is the world’s second largest exporter of food; China is the second largest importer of food but also the sixth larger exporter. The challenge is to continue to feed the world while reducing the use of so much fertilizer. “Many countries are advancing important agroecological solutions like crop rotation, using plants that fix nitrogen in the soil, and doing more composting,” Hansen-Kuhn adds. “These techniques are under the control of farmers, so they don’t rely on imports or trade in these chemical inputs.”

Another strategy, embraced by the European Union, has been to use trade rules to reduce the carbon content of imports and exports. “In Europe, they are currently in the process of finalizing a Carbon Border Adjustment Mechanism,” she reports. “The CBAM mostly applies to things like aluminum, steel, and cement, but fertilizer is part of it as well. A lot of firms in Europe are modernizing their plants so they’ll be more energy efficient. And they say they need protection in order to do that. Under this plan, fertilizer imports coming from other countries that don’t have the same environmental standards would be subject to a fee tied to the price of carbon.”

In theory, the CBAM would push exporting countries to raise their environmental standards and/or make their fertilizer production more efficient. “Maybe these plants will become more efficient,” she adds. “But maybe some firms will just decide to produce fertilizer in other countries. Or maybe in cases where a country has two factories, it will just export from the efficient factory, and there’s no change in emissions.”

On top of that, the CBAM will affect countries very differently. “Most of the fertilizer imports into the EU come from nearby countries like Russia or Egypt,” she continues. “But some imports come from countries like Senegal, where the fertilizer exports to Europe amount to 2-5 percent of their entire GDP. So, the CBAM would be a huge problem for such countries. And there’s nothing in this initiative that would give countries the technology they need to make changes. In fact, there are strong incentives against that in the trade deals. The CBAM provision specifically says that all of the resources generated by the carbon fee will be kept internally to foster the transition within Europe.”

Although CBAM may make European trade greener, it may also widen the “green gap” between Europe and the rest of the world. “We need a transition to agroecology, but what we’re getting in the trade deals lock in new incentives to continue with business as usual,” Hansen-Kuhn concludes. “If we look at the renegotiated NAFTA, there’s a new chapter on agricultural biotechnology that streamlines the process for approving both GMOs and products of gene editing. There are also restrictions on seed saving and sharing. And this new NAFTA will probably be the model for other agreements like the Indo-Pacific Economic Framework.”

Action at the Global Level

Civil society organizations have been pushing for a legally binding treaty at the UN level to make business responsible for human rights violations and environmental crimes connected to their operations.

“Since the UN is made up of states, the more industrialized countries who can invest in the world are opposed to such a binding treaty,” Luciana Ghiotto points out. “In the United States, Canada, and Japan, we’ve seen debates about holding companies responsible for human rights violations throughout the production chain. It’s a relatively new political process. But it’s an example of civil society organizations putting a question of human rights and environmental rights at the center of discussion.”

Efforts at the international level are very complicated, Manuel Perez Rocha concedes: “For instance, the World Bank has the International Centre for the Settlement of Investment Disputes (ICSID) through which corporations can sue states.” He recommends a more regional approach. “We have proposed a dispute resolution center for Latin America that countries could use after pulling out of ICSID. “Unfortunately, most progressive countries have not embraced this,” he reports.

One of the challenges to persuading governments to embrace these alternatives is corruption. “There’s a tremendous circle of corruption,” he adds. “We’re talking here about the revolving door where public officials who negotiate these treaties then become private lawyers or counselors or board members of the corporations who are lobbying for their adoption. This corruption helps explain why governments sign these treaties even if they’re going to be sued.”

He points as well to the issue of access to critical minerals needed in the green energy transition. “The Biden administration is trying to combat fossil fuels at the cost of communities that live around the deposits of critical minerals like lithium and cobalt,” Perez Rocha explains. “There are a lot of concerns among native populations about how to make this transition to a so-called clean economy without violating human rights and destroying the environment.”

Trade has been a mechanism to make deals around these minerals. “These efforts at near-shoring and friend-shoring have been ways to control the supply chains around minerals and metals,” notes Jen Moore. “The United States in particular but also Canada have made themselves clear: to be identified as a ‘friend’ is to have an FTA or a bilateral investment treaty.”

There have been other actions at the global level related to climate issues and jobs. For instance, the United States brought action against India in the WTO in 2014 over domestic content provisions in its effort to boost solar energy. India returned the favor two years later over similar domestic content provisions in state-level solar policy. “The WTO deemed both rules illegal,” Karen Hansen-Kuhn recalls. “In the United States, the programs continued, I don’t think any changes were made. But when we think of a just transition, it has to be about not just reducing emissions but about creating jobs.”

Resistance to Business as Usual

Resistance to the corporate-friendly trade architecture has come from many corners of the globe. “From the perspective of my work with mining-affected people,” Jen Moore reports, “there’s been a rise in resistance from farmers, indigenous peoples, and other communities facing the detrimental Impacts of this highly destructive model of capitalist development that’s been accompanied by violent repression and militarization and often targeted violence against land and environment defenders.”

For example, after buttressing the fossil-fuel status quo for three decades, the Energy Charter Treaty is no longer unassailable. In November, the German cabinet announced that the country would withdraw from the ECT. It joins a number of European countries—Italy, France, the Netherlands, Poland, Spain, Slovenia, and Luxembourg—that have made similar announcements. “In times of climate crisis, it is absurd that companies can sue for lost profits from fossil investments and compensation for coal and nuclear phase-outs,” points out the deputy leader of the parliamentary group of the Greens in the German parliament.

The treaty has a surprise for countries that want out: signatories withdrawing from the ECT are still bound by the treaty for 20 years. There’s also a related problem involving the provisions of other trade treaties.

“European countries are pushing to update treaties with Mexico, Chile, and others to include clauses like the investor-state dispute mechanism, which also allow energy corporations to sue governments,” notes Manuel Perez Rocha. “This is nothing short of neocolonialism being exercised against countries on the periphery.” In response, he urges the “strengthening of national judicial systems so that companies will feel more protected by national systems and not pursue options at the supranational level.”

The backlash to the ECT is nothing new. “The system has created a lot of resistance and critiques since practically day one,” Luciana Ghiotto adds. “I was raised in the spotlight of the battle of Seattle in 1999 against the WTO and the struggles against the Free Trade Area of the Americas.”

Karen Hansen-Kuhn agrees that it’s necessary to claim victories. “Civil society helped weaken the ISDS system,” she notes. “With the Transatlantic Trade and Investment Partnership, massive opposition to ISDS was a major reason it fell apart..”

Another form of pushback comes from the field itself. “On our website, we’ve started tracking the adoption of agroecological approaches, which are not just about the inputs but instead look at the fuller picture including food sovereignty, namely each community’s right to choose the food systems it wants,” Hansen-Kuhn continues. She points to Mexico phasing out GMO corn, which relies heavily on the pesticide glyphosate. The government made that decision because of input from civic movements. After objections from the U.S. government, Mexico backtracked somewhat on that commitment by applying the phase-out only to corn for human consumption.

“Mexico is making some concessions, for example allowing GMO for animal feed, but otherwise it’s standing firm despite enormous pressure,” she concludes. “That’s not a complete transition to agroecology, but here’s a country deciding that it will make a change in a food system regardless of what the trade deals say.”

“It’s important to recall the totality of the system supporting corporate control around the world,” Jen Moore says. “Sometimes it feels like we make only piecemeal attempts to go after it.”

Manuel Perez Rocha agrees. “We need to discuss alternatives from different perspectives, which would put an end to the patriarchal, neocolonial capitalist system,” he suggests. “But while we strive for a utopian vision, we also should discuss more realistic, more feasible, and more concrete alternatives. For instance, companies can sue states. Why shouldn’t states have the right to sue companies? Affected communities should also have access to dispute resolutions. We should eliminate the privileges of foreign investors, like the ‘national treatment’ clause, that tie governments down in their efforts to promote local, regional, and national development.”

The Global South has begun to develop a unified voice in the debate on a just energy transition. “In Latin America, we have said that there is no new green deal with FTAs and bilateral investment treaties,” Luciana Ghiotto reports. The region has seen the rise of a number of dynamic organizations from the rural activists in Via Campesina to various indigenous movements and feminist movements articulating a feminist economy. Meanwhile, certain countries have taken the lead. “In its constitution, Ecuador prohibited entry into any international agreements that include international arbitration that compromises the country’s sovereignty,” she adds. “The new neoliberal government is struggling with dozens of lawyers to find a way around it, but they still can’t.”

Another example of successful resistance is the growth of the climate justice movement, which goes well beyond environmental protection and has linked activists across struggles from economic justice and human rights to agroecology and post-growth economics.

“After the disruptions of the last couple years, we can come together more in person,” Karen Hansen-Kuhn notes. “Movements require building relationships in person. We need to come together to build these alternatives.”

Via Foreign Policy in Focus

So Neoliberal economists will say, so what? Everybody gets richer with unfettered market capitalism. Why should we care if some people get really richer? Is it just envy?

See, the problem is that not everybody got richer. Some 1.7 billion workers, about half of the 3.32 billion people employed worldwide, saw their real incomes slip as inflation raced ahead of their wages. Some of the families of the workers at the bottom of the pile went to bed hungry in 2022 — 800 million of them.

Oxfam doesn’t say so, but the problem with this concentration of wealth in a few hands, those of the world’s 2,668 billionaires, is that they are not only hogging resources but they are way too powerful. It is from among this group that propaganda originates against our taking firm and swift steps to halt carbon dioxide emissions. They just want their piles of gold to grow, like Smaug the dragon in Tolkien. They don’t seem to care that their grandchildren will drown, or burn up in wildfires, or drop dead from heat exhaustion. Maybe they think their family wealth will protect them. But billionaires can die in sudden fires like anyone else.

Billionaires also distort democracy in menacing ways. They attempt to gut workers’ unions, as with Jeff Bezos at Amazon. In the absence of strong unions, workers’ real income declines over time, forcing some into poverty. The billionaires corrupt the courts. They engage in legislative capture, buying the very politicians who regulate their industries. They also form a powerful standing lobby for bad tax policy, i.e. tax breaks for the rich and the starvation of government in provision of services. Donald Trump should not have been allowed to use his personal fortune to buy the presidency. People like Trump are proof positive that making a lot of money is no guarantee of soundness of mind.

Oxfam’s conclusions are as follows:

“Since 2020, the richest 1% have captured almost two-thirds of all new wealth – nearly twice as much
money as the bottom 99% of the world’s population.
• Billionaire fortunes are increasing by $2.7bn a day, even as inflation outpaces the wages of at least
1.7 billion workers, more than the population of India.
• Food and energy companies more than doubled their profits in 2022, paying out $257bn to wealthy
shareholders, while over 800 million people went to bed hungry.
• Only 4 cents in every dollar of tax revenue comes from wealth taxes, and half the world’s billionaires
live in countries with no inheritance tax on money they give to their children.
• A tax of up to 5% on the world’s multi-millionaires and billionaires could raise $1.7 trillion a year,
enough to lift 2 billion people out of poverty, and fund a global plan to end hunger.”

H/t Oxfam.

The billionaires got rich off of the COVID-19 pandemic, indirectly. Wealthy countries such as the U.S., faced a deflationary situation brought on by the shut-down of businesses and the reluctance of many in the public to go out for shopping, dining and entertainment. They responded correctly, by pumping government stimulus monies into the economy. The extra money supply, however, drove up asset values, held disproportionately by the rich, who scooped up literally trillions of dollars in profits. Since in most wealthy countries you only pay taxes on securities when you sell them, this vast new amalgamation of filthy lucre remained beyond the grasp of the tax official.

In 2022, even as the pandemic was lightening, 95 food and energy corporations doubled their profits, Oxfam says.

Even more horrible, during the COVID crisis, the progress the nations of the world had made since 1990 in lifting people out of extreme poverty was reversed, with 500 million persons falling back into it The proportion of the world living in extreme poverty in 2000 was 14.3%. The amazing programs coordinated by the UN were able to reduce that percentage to 7.1% in 2019. There is no prospect of most of those in extreme poverty getting out of it in this decade.

All tax policy is a redistribution scheme. Low taxes on the rich result in gobs of money being thrown at them, and in a reduction of state support for education, infrastructure, and other key services that allow people at the bottom to be upwardly mobile.

It is like the government is a person with a snowblower cleaning their driveway. If the person consistently aims the snowblower at a particular spot, that spot will end up with a big mound of snow, and the rest of the area around the driveway will be flat. The snowblower’s direction is tax policy.

Oxfam suggests a sensible solution to these problems. Tax the rich more, and the super-rich most.

The U.S. in the 1950s was a Republican paradise, with strong economic growth in the corporate sector. The highest tax rate then was 90%, and taxes were progressive. We don’t need a radical solution. We just need Republican President Ike Eisenhower’s tax policies back.

Oxfam points out that Costa Rica has already raised taxes on the wealthy by 5%, and some other countries are also rethinking their tax policy. In the wealthy countries, however, I fear that the marriage of the billionaires and the corrupt politicians is so immutable that the political will simply doesn’t exist to implement such steps.

Sooner or later, a billionaire (or trillionaire) is going to decide to dispense with the politicians and just take over, as Bonaparte defenestrated the members of the French parliament before summarily making himself emperor. We’ve already seen strong moves in that direction in the U.S. and Brazil.

That fuming — from would-be passengers of Southwest Airlines and their families — filled airports throughout this past holiday week. For good reason. At the height of the travel-heavy holidays, Southwest was canceling 60 percent of the airline’s daily flights. Over 15,000 Southwest planes never lifted off.

Late December’s heavy dose of stormy weather certainly did set the stage for Southwest’s holiday meltdown. But Southwest can’t put the blame for the airline’s massive melt on the cold, wind, and snow. Other airlines delivered, amid the same winter weather, far better service.

So what did Southwest in? The airline’s top execs, analysts point out, have spent years underinvesting in needed new tech. One telling example: This past November, a generation into the electronic age, Southwest officials acknowledged that the airline was still delivering weather and baggage reports to pilots and gate managers on paper.

“It almost became a running joke around the company,” says Southwest flight attendant union president Lyn Montgomery, “that we aren’t able to make certain changes because it would involve technology.”

During the holiday storm crisis, some Southwest employees phoning in for instructions from the airline found themselves on hold for over five hours. Some even went to sleep with their phones — still on hold — next to their bedsides. They awoke the next morning, reports the Dallas Morning News, to find their phones still holding.

Why didn’t Southwest invest in new tech?

“Modifications and refinements to systems,” last year’s Southwest annual report explained, “have been and are expected to continue to be expensive to implement and can divert management’s attention from other matters.”

What sort of “matters” struck Southwest execs as more important than keeping their planes on time? Keeping shareholders happy — and themselves richer in the process. Everything else could wait.

Top management has readily admitted as much. In one pre-Covid “earnings call” with stock analysts, the Washington Post noted last week, then-CEO Gary Kelly explained that the airline had been delaying the tech upgrades his operations team had been seeking.

“We have starved them a little bit over the last decade,” he explained, “because again, our focus was more on the commercial side.”

Money that should have been going into upgrading Southwest’s operations has gone instead into dividends and stock buybacks. Since 2015, the Los Angeles Times analyst Michael Hiltzik reported last week, the airline “has paid out about $1.6 billion in dividends and repurchased more than $8 billion in shares.”

Those moves have worked out exceedingly well for top Southwest execs like CEO Kelly, the airline’s chief exec until early last year. In 2020, Kelly pulled down a “record $9.2 million” at the same time the Covid outbreak had the airline $3.1 billion in the red and a quarter of the Southwest workforce taking voluntary leave. CEO Kelly then took home another $5.8 million in 2021 before retiring early in 2022.

“Southwest’s well-compensated executives could have prioritized its workers and customers by preparing for the worst, but greed trumped all as they put a small group of wealthy investors first,” charges Kyle Herrig, the president of the corporate watchdog Accountable.US. “Consumers shouldn’t be the ones stuck holding the bag for Southwest’s greedy management decisions, but here we are.”

Southwest took in a $7-billion federal bailout during the Covid crisis, then showed its appreciation to America’s taxpayers by becoming, early last month, the first Covid-subsidized airline to announce plans to resume paying out dividends to shareholders, to the tune of $428 million in 2023.

“The reinstatement of our quarterly dividend,” Bob Jordan, Southwest’s new CEO, proudly noted during this dividend announcement, “reflects our balance sheet strength and continued focus on generating consistently healthy earnings, margins, and long-term capital returns.”

Missing from that focus: the well-being of Southwest workers. Just a few weeks after announcing the upcoming new dividends, the “bomb cyclone” hit wide swatches of the United States the day before Christmas. Southwest ground workers soon found themselves working 16-to-18 hour days, with some, says  their union president Randy Barns, ending up frostbitten.

Some lawmakers in Congress are now calling for a serious overhaul of how the United States goes about its airborne business. America’s airlines have essentially been calling the shots, notes a Washington Post analysis, ever since the Airline Deregulation Act of 1978 iced state regulators out of the picture and “left airline companies accountable only” to the federal Department of Transportation, an agency that’s never prioritized consumer protection.

“Southwest simply has failed to prepare for the worst and that’s a fundamental breach of trust,” charges Connecticut U.S. Senator Richard Blumenthal, who wants to see Congress enact a passenger bill of rights. “They said to passengers, in effect, if things go south, you are the ones who will bear the burden.”

Outside the United States, in nations ranging from Argentina and Malaysia to Finland and Fiji, airlines essentially operate as a public utility, not an opportunity for big CEO paydays. Scores of nations, points out journalist Joe Mayall, currently “either own airlines outright” or hold majority-shareholder status.

The United States could join that camp, Mayall notes, if Congress chose to charter a state-owned enterprise  to start up a new national airline. Or Congress could go the nationalization route by buying up enough stock “in publicly traded airlines to acquire a controlling share.”

Could the United States afford to take that sort of nationalizing step? The four most dominant U.S. airlines — Delta, American, United, and Southwest — last summer held a combined market value of $77.5 billion, Mayall points out, just $5 billion less than the $72.6 billion in our tax dollars that funded the federal government’s airline bailouts after 9/11 and during Covid.

Via ) Inequality.org

Congratulations to everyone who worked to move the country and the world towards greater equity in 2022. Herewith are 10 of the most inspiring economic inequality victories of the year.

1. The Union Boom 

No question. The union organizing surge has been this year’s top story. Petitions for union representation jumped 53 percent over 2021. What made the surge truly historic? The explosion of activity in workplaces once considered hopeless for unionization.

Warehouse workers shook the foundation of Amazon, prevailing against harsh intimidation tactics to win the first U.S. union election at the e-commerce giant and building campaigns in several other states, most recently in Minnesota.

Via Pixabay

A survey commissioned by the Institute for Policy Studies found that nearly two-thirds of local residents support the ongoing Black worker-led union drive at an Amazon warehouse in Bessemer, Alabama – a remarkable shift in what’s been historically a fiercely anti-union state.

Starbucks baristas busted the myth that fast food workers are impossible to organize. They voted union in at least 260 stores and inspired comrades at Chipotle and elsewhere.

Now the overpaid CEOs at Amazon and Starbucks need to negotiate fair contracts with these employees. The top execs at both companies grabbed far more than 1,000 times as much as their company’s median worker pay in 2021.

Union power can both raise worker wages – and rein in excessive wealth at the top. In the middle of the 20th century, as our Sam Pizzigati points out, unions helped “flatten grand private plutocratic fortunes.”

2. Taxing the Rich 

Remember the heady days of 2021 when the Build Back Better negotiations had a billionaire tax and other bold inequality-busting tax proposals in play, all with strong public support? When Republicans and two Democratic Senators blocked that deal, I thought we’d have to wait until 2024 before seeing any progress on the fair taxation front. But 2022 saw some important victories – at the federal, state, and municipal levels.

Via Pixabay.

In a piece for CNN, Rebekah Entralgo and I run down the tax wins in the Inflation Reduction Act, the Democrats’ $700 billion climate and social spending bill. The law’s biggest revenue-raiser: a 15 percent minimum tax on big corporations that will help curb rampant tax dodging.

The new law will also boost IRS enforcement so the ultra-rich pay what they owe instead of getting away with hiding their wealth through complex accounting tricks. Republicans have over recent years squeezed the agency’s funding to the point where today the IRS actually has fewer expert staff to audit the complex tax returns of the wealthy and big corporations than the agency had in the 1950s.

Fair tax advocates also notched big wins this year through ballot initiatives. In Massachusetts, voters approved an income surtax of 4 percent on annual individual income above $1 million, with revenue going mostly towards public education and transportation. Can we get similar campaigns going in other Democratic trifecta states?

Two California cities passed ballot measure taxes to fund affordable housing. San Franciscans approved a groundbreaking tax on vacant buildings and Los Angeles voters backed a “mansion tax.”

3. Cracking Down on a CEO Pay Scam

As consumers have struggled with rising costs, corporate CEOs have splurged on stock buyback sprees. This legal form of stock manipulation artificially inflates the value of executive stock-based pay – while doing nothing for workers.

Get this: We calculated that Lowe’s could’ve given every one of its 325,000 employees a $40,000 raise with the $13 billion they blew on buybacks in 2021. Instead, the company’s median worker pay fell 7.6 percent to $22,697. The Lowe’s CEO, meanwhile, pocketed $17.9 million.

In 2022, we started to see some blowback against buybacks. The Inflation Reduction Act introduced a 1 percent excise tax on such share repurchases. Biden officials have also started wielding the power of the public purse against this CEO pay inflation scam. The administration is giving a leg up in the awarding of new semiconductor manufacturing subsidies to companies that agree to forego buybacks.

Content licensed under a Creative Commons 3.0 License

What is Private Equity?

A private equity fund is a large unregulated pool of money run by financiers who use that money to invest in and/or buy companies and restructure them. They seek to recoup gains through dividend pay-outs or later sales of the companies to strategic acquirers or back to the public markets through initial public offerings. But that doesn’t capture the scale of the model. There are also private equity-like businesses who scour the landscape for companies, buy them, and then use extractive techniques such as price gouging or legalized forms of complex fraud to generate cash by moving debt and assets like real estate among shell companies. PE funds also lend money and act as brokers, and are morphing into investment bank-like institutions. Some of them are public companies.

While the movement is couched in the language of business, using terms like strategy, business models returns of equity, innovation, and so forth, and proponents refer to it as an industry, private equity is not business. On a deeper level, private equity is the ultimate example of the collapse of the enlightenment concept of what ownership means. Ownership used to mean dominion over a resource, and responsibility for caretaking that resource. PE is a political movement whose goal is extend deep managerial controls from a small group of financiers over the producers in the economy. Private equity transforms corporations from institutions that house people and capital for the purpose of production into extractive institutions designed solely to shift cash to owners and leave the rest behind as trash. Like much of our political economy, the ideas behind it were developed in the 1970s and the actual implementation was operationalized during the Reagan era.

Matt Stoller, distinguished journalist, describes the essential business plan of private equity:
Financial engineers… raise large amounts of money and borrow even more to buy firms and loot them. These kinds of private equity barons aren’t healthcare specialists who help finance useful health products and services, they do cookie cutter deals targeting firms/practices/hospitals they believe have market power to raise prices, who can lay off workers or sell assets, and/or have some sort of legal loophole advantage. Often, they will destroy the underlying business. The giants of the industry, from Blackstone to Apollo to Bain, are the children of 1980s junk bond king and fraudster Michael Milken. They are essentially super-sized mobsters.

Economists Akerloff, Romer, Public Health Professor McDonough elaborate:

The classic description of this looting-for-profit practice process is presented by economists George Akerloff and Paul Romer : “Firms have an incentive to go broke for profit at society’s expense (to loot) instead of to go for broke (to gamble on success). Bankruptcy for profit will occur if poor accounting, lax regulation, or low penalties for abuse give owners an incentive to pay themselves more than their firms are worth and then default on their debt obligations.” The fact that paper gains from stock prices can be wiped out when financial storms occur makes financial capitalism less resilient than the industrial base of tangible capital investment.

 Professor McDonough notes that in the past 45 years the US economy has become heavily financialized more rapidly and decisively than in our peer nations. “Just as General Electric’s Jack Welch transformed (ruined) his company from a goods manufacturer to a financial services company, so have financial flood waters now penetrated every corner of American health care. Private equity is winning, and any health care organization is a potential takeover target. Patients and patient visits become commodities and data points to be exploited for high profits by private equity’s “financial intermediaries who view healthcare organizations as vehicles for extracting wealth.”

Don McCanne, M.D., Physicians for a Nation Health Program (PNHP) describes private equity modus operandi:
All around us we see private equity firms moving into health care by clustering specific specialties into new corporate entities. These equity firms may profess to infuse quality and efficiency into the systems they create, but their true objective is not altruism. Their interest is found in their label: equity, the more ($$) the better. Distinguished California physician, Don McCanne, M.D. of PNHP, describes private equity modus operandi:
1) acquire a relatively large platform practice in a given specialty
2) then acquire smaller practices in the same geographic area and merge them into the platform practice
3) use debt to finance the acquisitions and assign that debt to the acquired practices,
4) find ways to increase net revenue from the agglomerated practices
5) sell the agglomerated practices within 3 to 5 years for considerably more than the price paid by the private equity company.

Via Pixabay.

Conveniently, Dr. McCanne notes, the debt is left with the practices they purchased, and the equity investors walk away with the money. How does this benefit the patients? How does this benefit the health care professionals? We know how it benefits the equity firm investors, but does anyone seriously contend that this is what health care should be about? But that’s what it has become.

Consequences:
 1).Consider Noble Health, a private equity-backed Kansas City startup launched in 2019. In rural Missouri, Noble acquired Audrain and Callaway Community Hospitals in the early days of the COVID-19 pandemic. 
 2). In March 2022, all hospital services ceased with the furlough of 181 employees. 
 3). Notes Kaiser Health News, “…venture capital and private equity firm Nueterra Capital launched Noble in December 2019 with executives who had never run a hospital, including Donald R. Peterson, a co-founder who prior to joining Noble had been accused of Medicare fraud.”
4). St. Joseph’s Home for the Aged in Richmond, Virginia, as retold in The New Yorker. 
5). A New Jersey private equity firm called the Portopiccolo Group bought the home, 
a).“reduced stuff, cut amenities, and 
b). set the stage for a deadly outbreak of COVID-19” that included a doubling in patient deaths.
6). The numbers of stories of private equity-generated health system harm grows rapidly. And if the health part of the business goes bust, as occurred in 2019 at Philadelphia’s now closed Hahnemann Hospital, the underlying real estate still offers rich rewards.
7). Patients at North Carolina-based Atrium Health get what looks like an enticing pitch when they go to the nonprofit hospital system’s website: a payment plan from lender AccessOne. The plans offer “easy ways to make monthly payments” on medical bills, the website says. You don’t need good credit to get a loan. Everyone is approved. Nothing is reported to credit agencies. Very high interest rates are standard however
8). In Minnesota, Allina Health encourages its patients to sign up for an account with MedCredit Financial Services to “consolidate your health expenses.” Very high interest.
9). In Southern California, Chino Valley Medical Center, part of the Prime Healthcare chain, touts “promotional financing options with the CareCredit credit card to help you get the care you need, when you need it.” As usual, very high interest rates.

As Americans are overwhelmed with medical bills, patient financing is now a multibillion-dollar business, with private equity and big banks lined up to cash in when patients and their families can’t pay for care. By one estimate from research firm IBISWorld, profit margins top 29% in the patient financing industry, seven times what is considered a solid hospital margin.

Mental health services controlled by a buyout king:

The Private Equity Newsletter reports that psychiatrists, psychologists, clinical social workers once ran their own practices. Now the local therapist office could be controlled by a buyout king. Venture capitalists and private-equity firms are pouring billions of dollars into mental-health businesses, including psychology offices, psychiatric facilities, telehealth platforms for online therapy, new drugs, meditation apps and other digital tools. Nine mental-health startups have reached private valuations exceeding $1 billion last year, including Cerebral Inc. and BetterUp Inc.

Demand for these services is rising as more people deal with grief, anxiety and loneliness amid lockdowns and the rising death toll of the Covid-19 pandemic, making the sector ripe for investment, according to bankers, consultants and investors. They say the sector has become more attractive because health plans and insurers are paying higher rates than in the past for mental-health care, and virtual platforms have made it easier for clinicians to provide remote care.

“Since Covid, the need has gone through the roof,” said Kevin Taggart, managing partner at Mertz Taggart, a mergers-and-acquisitions firm focused on the behavioral-health sector. “Every mental-health company we are working for is busy. A lot of them have wait lists.”

In the first year of the pandemic, prevalence of anxiety and depression increased by 25%, the World Health Organization said in March. About one-third of Americans are reporting symptoms of anxiety or depression, according to the Centers for Disease Control and Prevention.

The number of behavioral-health acquisitions jumped more than 35% to 153 in 2021 versus the previous year, and of those, 123 involved private-equity firms, according to Mertz Taggart. In the first quarter of this year, there were 41 acquisitions, of which 30 involved PE firms.

The push into mental health carries risks. A rush of private-equity firms could send prices for practices higher, reducing potential profits. A risk for patients and clinicians is that new owners could focus on profits rather than outcomes, perhaps by pressuring clinicians to see more patients than they can handle. If care becomes less personal and private, patient care might also suffer.

Online mental-health company Cerebral and other telehealth startups have begun to face scrutiny over their prescribing practices. The Wall Street Journal has reported that some of Cerebral’s nurse practitioners said they felt pressure to prescribe stimulants. This past week, Cerebral said it would pause prescribing controlled substances such as Adderall to treat ADHD in new patients. Last year, Cerebral logged a $4.8 billion valuation.

Investors poured $5.5 billion into mental-health technology startups globally last year, up 139% from 2020, according to a report by CB Insights, an analytics firm. Of that, $4.5 billion was spent on U.S. firms. They range from platforms like SonderMind that match people with clinicians to meditation apps like Calm.

How bad has it gotten?
Private equity-owned healthcare companies have also seen the following issues:
    * Reduced staffing, or filling beds without adequate staffing ratios
    * Over-reliance on unlicensed staff to reduce labor costs
    * Failure to provide adequate training
    * Pressure on providers to provide unnecessary and potentially costly services
    * Violation of regulations required for participants in Medicare and Medicaid such as anti-kickback provisions, creating litigation risk

Dentristry:
Kaiser Health News (KHC) reports that private equity business tactics have been linked to scandalously bad care at some dental clinics that treated children from low-income families.

    * In early 2008, a Washington, D.C., television station aired a shocking report about a local branch of the dental chain Small Smiles that included video of screaming children strapped to straightjacket-like “papoose boards” before being anesthetized to undergo needless operations like baby root canals.
    * Five years later, a U.S. Senate report cited the TV exposé in voicing alarm at the “corporate practice of dentistry in the Medicaid program.” The Senate report stressed that most dentists turned away kids enrolled in Medicaid because of low payments and posed the question: How could private equity make money providing that care when others could not?
    * “The answer is ‘volume,’” according to the report.
    * Small Smiles settled several whistleblower cases in 2010 by paying the government $24 million. At the time, it was providing “business management and administrative services” to 69 clinics nationwide, according to the Justice Department. It later declared bankruptcy.
According to the 2018 lawsuit filed by his parents, Zion Gastelum was hooked up to an oxygen tank after questionable root canals and crowns “that was empty or not operating properly” and put under the watch of poorly trained staffers who didn’t recognize the blunder until it was too late.
    * Zion never regained consciousness and died four days later at Phoenix Children’s Hospital, the suit states. The cause of death was “undetermined,” according to the Maricopa County medical examiner’s office. An Arizona state dental board investigation later concluded that the toddler’s care fell below standards, according to the suit.
    * Less than a month after Zion’s death in December 2017, the dental management company Benevis LLC and its affiliated Kool Smiles clinics agreed to pay the Justice Department $24 million to settle False Claims Act lawsuits. 
    * The government alleged that the chain performed “medically unnecessary” dental services, including baby root canals, from January 2009 through December 2011.
    * In their lawsuit, Zion’s parents blamed his death on corporate billing policies that enforced “production quotas for invasive procedures such as root canals and crowns” and threatened to fire or discipline dental staff “for generating less than a set dollar amount per patient.”
    * Kool Smiles billed Medicaid $2,604 for Zion’s care, according to the suit. FFL Partners did not respond to requests for comment. In court filings, it denied liability, arguing it did not provide “any medical services that harmed the patient.”

Professor Olson concludes that private equity does not belong in medicine/health care:
Laura Katz Olson . Distinguished Professor of Political Science at Lehigh University, author of : “Ethically Challenged: Private Equity Storms U.S. Health Care”, concludes, private equity does not belong in medicine at all and should it be banned.

We really need to prohibit, I think, the corporate practice of medicine, period. If you look at the private equity playbook, its only goal is to make outsized profits – they can’t make ordinary profits. If they make ordinary, respectable profits, their investors will go somewhere else because of the risk.

Private equity doesn’t care whether the product is Roto-Rooter or hospice. That’s one of the major differences between PE and a regular company, which may care about the community, the reputation of the company, and the quality of the product. They want to keep their customers. They care about the future. 

But private equity doesn’t work like that. Because private equity often aims to sell a company after four or five months, they don’t care about the future. They don’t care about the product at all. Private equity is antithetical to our health care system.

So yes, we need to ban private equity from health care. But given that it’s not going to happen, I would say that we need to prohibit the corporate practice of medicine – anybody can make a case for that. 

You can eliminate their tax advantages. 

You can limit the debt imposed on companies, especially in the health sector. You could easily control consolidation and monopolies in the health sector. 

You could use specific anti-trust laws. I would definitely forbid investment by retail customers such as their 401(k)s. 

I would forbid non-disclosure and non-disparagement agreements, which make it so difficult to obtain information. I had such a hard time interviewing people. When I could get people to talk to me – and that was really hard — they were extraordinarily careful. 

I would also prohibit “stealth branding” – where the PE firm buys a chain, like a dental chain, but gives each office its own name, like Marilyn’s Happy Dental Care. It’s very deceptive.

 PE players and firms don’t tend to be household names. They’ve really managed to fly under the radar. Here are some names that came up frequently in the research. Folks to look out for:

 Bain Capital, the PE company that Mitt Romney still profits from, is one. 

The Carlyle Group has really been involved in recruiting high-ranking people from the government – one of its co-founders, David Rubenstein, served as Deputy Assistant to the President for Domestic Policy during the Carter administration. 

George H.W. Bush became a senior member of its Asia advisory, and so on. 

KKR, of course, is one of the biggest. They control a lot in health care.

Dr. Olson concludes with concerns that can effect all communities. “As PE gets more and more money – with these pension funds, and especially if they get their hands into the 401(k)s – they’re just going to keep buying up anything and everything. And it’s not just health care. More and more of these firms are appearing and getting into more and more industries. As young people, or even older people involved in the well-established financial firms, realize how much money is involved, they just start a PE firm. Look at Jared Kushner [Affinity Partners]. It’s a very worrisome situation”.

( Otherwords.org ) – After a nightmare ticket sale, monopolies made a powerful enemy. That’s good news for all of us. By Bella DeVaan | November 23, 2022

As the cost of food, travel, and gifts complicate holiday plans across the country, millions of Americans have been awakened to the sinister power of monopolies.

But now there are exciting new possibilities to rein them in.

This November, legions of new anti-monopolists were born. They’re Taylor Swift’s superfans — and they just might be the reason the government breaks up Ticketmaster.

Hoping to get pre-sale tickets to their favorite pop star’s upcoming tour, millions of “Swifties” waited in endless electronic queues, only to be hit with sky-high prices and exorbitant fees — if they were able to snag a ticket at all.

“Ticket prices may fluctuate, upon demand, at any time,” read an ominous warning on the Ticketmaster website.

And they did: Under Ticketmaster’s “dynamic pricing” system, fans reported ticket prices running up to thousands of dollars — not including hefty fees. Prices spiked even higher on the secondary resale market. On StubHub, ticket listings reached upwards of $95,000.

Finally, Ticketmaster threw in the towel and canceled subsequent presale windows. Their site crashed thousands of times. It was mayhem — and thanks to an unchecked monopoly, fans had no other option.

But the Swifties struck back. Hours after Taylor Swift released a statement apologizing to fans and chastising Ticketmaster, the Department of Justice (DOJ) announced an investigation of Live Nation Entertainment, which owns Ticketmaster.

While their investigation wasn’t prompted by Swift, reported the New York Times, Swifties’ wave of discontent was overwhelming enough to warrant the Department’s public disclosure. Immediately after, the company that had been bragging about a record-smashing 2022 saw its stock plummet.

How did we get here? When it comes to antitrust issues, the U.S. government has essentially been asleep at the wheel, allowing Ticketmaster’s monopoly to crush its competition for over a decade.

In 2010, Ticketmaster and Live Nation merged into Live Nation Entertainment. The merger was subject to a relatively weak consent decree, which asked the merged companies not to abuse their live venue dominance. But it’s been easy for Live Nation Entertainment to intimidate their naysayers and flout guidelines.

“Ticketmaster bullies venues into not working with their competitors,” explains Chokepoint Capitalism author Cory Doctorow. “They bully smaller artists by denying them management. They bully big artists by controlling their ticket prices and letting their fans down. And they bully their customers into paying exorbitant prices for tickets.”

Well before the Swift fiasco, a coalition of research organizations and live event workers launched the Break Up Ticketmaster campaign asking the Department of Justice to “investigate and unwind” the live events monopoly. The campaign quickly gained ground, generating tens of thousands of signatures on an advocacy letter.

Policy makers are now echoing that call.

“Consumers deserve better than this anti-hero behavior,” tweeted Senator Richard Blumenthal (D-CT), punning off a song from Swift’s latest album, Midnights.

And on MSNBC, Senate Antitrust Committee chair Amy Klobuchar (D-MN) promised a Senate hearing. She’s also co-authored bills with Senators Chuck Grassley (R-IA) and Mike Lee (R-UT) to facilitate antitrust enforcement with new filing, funding, and state empowerment rules.

The attorney general of Tennessee — home to the “angriest Swifties” — opened an investigation into Ticketmaster’s misconduct, too.

President Biden recently directed his administration to “reduce or eliminate” junk fees like Ticketmasters’ infamous extra charges, which sometimes total up to 78 percent of the cost of a ticket. He’s also appointed a passel of antitrust enforcers and signed a robust, competition-oriented executive order in his first months in the Oval Office.

Monopolies aren’t just fleecing concert-goers. All of us experience the villainy of monopolies — in the high price of a tight seat on a plane, in the destruction of local journalism, in skyrocketing monthly rent and food prices, or in the marginalization of small online businesses.

So, present day monopolists, steel yourselves and remember: When you provoke a superfan, they’ll come for you.

Bella DeVaan

Bella DeVaan is a Program Associate at the Institute for Policy Studies and a co-editor of Inequality.org. This op-ed was adapted from Inequality.org and distributed for syndication by OtherWords.org.

Via Otherwords.org

( Otherwords.org) – My newspaper died. Well, technically it still appears. But it has no life, no news, and barely a pulse. It’s a mere semblance of a real paper, one of the hundreds of local journalism zombies staggering along in cities and towns that had long relied on them.

Each one has a bare number of subscribers keeping it going, mostly longtime readers like me clinging to a memory of what used to be and a flickering hope that, surely, the thing won’t get worse. Then it does.

Our papers are getting worse at a time we desperately need them to get better. Why? Because they are no longer mediums of journalism, civic purpose, or local identity.

Rather, they’ve been reduced to little more than profit siphons, steadily piping local money to a handful of distant, high-finance syndicates that have bought out our hometown journals. My daily, the Austin American-Statesman, was swallowed up in 2019 by the nationwide Gannett chain, becoming one of more than 1,000 local papers Gannett presently mass produces under its corporate banner, “the USA Today Network.”

But even that reference is a deception. The publication doesn’t confide to readers that it’s actually a product of SoftBank Group, a multibillion-dollar Japanese financial consortium that owns and controls Gannett.

SoftBank has no interest in Austin as a place, a community, or even as a newspaper market, nor does it care one whit about advancing the principles of journalism. It’s in the profit business, extracting maximum short-term payouts from the properties it owns.

This has rapidly become the standard business model for American newspapering. Today, more than half of all daily papers in America are in the grip of just 10 of these money syndicates. That’s why our “local” papers are dying.

It’s not a failure of journalism. It’s a plunder of journalism by absentee corporate owners.

OtherWords columnist Jim Hightower is a radio commentator, writer, and public speaker.

Via Otherwords.org