Date: Fri, 17 Jun 2005 00:26:13 -0700 From: Norm Matloff To: Norm Matloff Subject: a reluctant comment on Thomas Friedman To: H-1B/L-1/offshoring e-newsletter I used the word "reluctant" in my Subject: line here, not because I am reluctant to criticize New York Times journalist Thomas Friedman, but because I am reluctant to give him any publicity. I don't mind people who disagree with me, of course, but I get irritated if their views are based on snap judgements rather than careful, thorough examination of the facts. I get even more irritated if they hide the fact that they stand to gain financially from those views which they present as being for the public good. All of that is why I really don't want to give Friedman any publicity (even if my "contribution" is tiny compared to what he already has). Friedman has always gotten lots of publicity, especially with his latest big theme, which is basically, "Globalization is good, and its downsides can be compensated by improving our educational system." He is one of those who, for example, hold the Alice in Wonderland view that we can solve our current problem of unemployed engineers and scientists by producing MORE engineers and scientists. Friedman just came out with a book on globalization, "THE WORLD IS FLAT: A Brief History of the Twenty-First Century," which is being heavily promoted. I've received quite a bit of e-mail from readers, suggesting I comment on the book, but originally I didn't want to waste my time on such drivel. However, this week two events made me change my mind: (a) I found that someone whom I respect highly and is very knowledgeable about IT offshoring was unaware of Friedman's book, and (b) an excerpt from his book appears in Blueprint (formerly The New Democrat), a publication of the Democratic Leadership Council (DLC). The DLC is the Clinton wing of the Democratic Party (and for that matter, the Gore/Kerry wing). Their philosophy is basically to out-pro-business the pro-business Republicans, and take a centrist line on social issues. I've been quite critical of the DLC in the past in this e-newsletter, for claiming to be pro-labor when in fact they are just as anxious to please Big Business as the Republicans are. See my posting at http://heather.cs.ucdavis.edu/Archive/DemocraticParty.txt In that posting, made during the presidential election campaign last year, I pointed out the DLC's in-house think tank, the Progressive Policy Institute, was espousing a pro-H-1B, pro-offshoring viewpoint. Yet even I, in spite of my cynical view of the DLC, was surprised to find that Friedman's book is excerpted in this month's issue of Blueprint, the DLC magazine. You can read it at http://www.ndol.org/ndol_ci.cfm?contentid=253354&kaid=107&subid=175 A few weeks ago a reader sent me e-mail saying that Friedman had been exposed as being on Enron's payroll. That reader now believes that his source was wrong, and I couldn't find confirmation of the claim. A 2002 Counterpunch article made a claim along these lines, but it apparently was mistaken in its citing of a Washington Post article (enclosed below) which reported that that Friedman's fellow NYT columnist Princeton professor Paul Krugman (an offshoring advocate) did indeed formerly have a $50,000-per-year retainer from Enron. Nevertheless, Friedman does reportedly do a lot of speaking to business groups, and I suppose it is likely that he does derive some income as a consultant to firms. But even more interestingly, When I checked the Web page of Intellibridge, the consulting firm which allegedly wanted to hire Friedman to help with Enron's PR efforts, guess who I discovered on Intellibridge's list of consultants--Al From, founder and head of the DLC! Speaking of H-1B, Friedman has a section in that Blueprint excerpt on immigration of technical (and other) professionals: Immigration. While we need to redouble our efforts to build the muscles of each individual American, we have to continue to import muscles from abroad as well. Most of the Indian, Chinese, Russian, Japanese, Korean, Iranian, Arab, and Israeli engineers, physicists, and scientists who come to work or study in the United States make great citizens. They are family-oriented, educated, and hardworking, and most would jump at the chance to become an American. They are exactly the type of people this country needs, and we cannot let the FBI, CIA, and Homeland Security, in their zeal to keep out the next Mohammed Atta, also keep out the next Sergey Brin, one of the cofounders of Google, who was born in Russia. This is typical of the attitudes of Friedman's class. To begin with, there is the (rather racist) notion that all the world would just love to immigrate to the U.S., the place where, as the Chinese saying used to go, "Even the stars are bigger." Well, guess what--the American stars have gotten pretty tiny lately, and engineers in most of those countries Friedman lists are not so anxious to come here now, precisely because people like Friedman have ruined the American job market for engineers. Second, the Brin example is way out of line. First of all, Brin was a family immigrant, not someone who came here as an H-1B or a foreign student. But much more importantly, Google is not the only search engine. There are lots of them. Friedman's implication that without Brin we couldn't do Web searches is just plain false. Friedman continues: I would favor an immigration policy that gives a five-year work visa to any foreign student who completes a Ph.D. at an accredited American university in any subject. I don't care if it is Greek mythology or mathematics. If we can cream off the first-round intellectual draft choices from around the world, it will always end up a net plus for America. I myself have always supported a policy of rolling out the immigration red carpet for "the best and the brightest" in the world. But where did Friedman get the ridiculous idea that anyone who completes a PhD is a "first-round intellectual draft choice"? A few people who get a PhD are indeed brilliant, but most PhDs are not, whether in mythology (a category I can't help but say Friedman's work belongs to) or mathematics or anything else. Now consider this comment of Friedman's: My friends Judy Estrin and Bill Carrico have started several networking companies in Silicon Valley. "When I was eleven years old," said Bill, "I knew I was going to be an engineer. I dare you to find an eleven-year-old in America who wants to be an engineer today. We've turned down the ambition level." Added Judy, "Ambition comes from the parents. People have to get it. It will probably take a crisis [to get us refocused]." The fact is that any ambitious kid would be crazy to want to go into engineering today, again because people like Friedman have ruined the engineering job market. Norm February 10, 2002, Sunday, Final Edition Correction Appended Copyright 2002 The Washington Post The Washington Post Hard Money, Strong Arms And 'Matrix'; How Enron Dealt With Congress, Bureaucracy Joe Stephens, Washington Post Staff Writer They called it "the matrix" -- a computer program that brought a scientific dimension to Enron's effort to seduce politicians and sway bureaucrats. With each proposed change in federal regulations, lobbyists punched details into a computer, allowing Enron economists in Houston to calculate just how much a rule change would cost. If the final figure was too high, executives used it as the cue to stoke their vast influence machine, mobilizing lobbyists and dialing up politicians who had accepted some of Enron's millions in campaign contributions. "It was a new thing to be able to quantify the regulatory risk," said economist Gia Maisashvili, who helped Enron develop the system. "We were the pioneers." The matrix illustrates the brash, calculating methods that Enron managers used to play Washington politics. The company that made headlines by erasing rules and ignoring convention in the business world applied the same principles in Congress, state capitals and the administration, bragging that its shrewd political tactics blew past customary constraints. Enron's lobbying techniques grew so aggressive that a key member of Congress reportedly exploded in anger when the company's chief executive pressed him on deregulation matters. They began, however, with a vigorous application of the most time-proven method: lavishing campaign money on politicians. At Enron, it was understood that executives receiving astronomical salaries would turn part of the money back to the company's smooth political operation. Executives raised vast sums through tactics that some considered subtle coercion; the cash went to the campaigns of Republican nominee George W. Bush and a slew of Republican and Democratic lawmakers willing to help Enron bulldoze regulatory barriers. Other strategies were more imaginative. As one participant described it, Enron "collected visible people" by gathering up pundits, journalists and politicians and placing them on lucrative retainers. For a couple days spent chatting about current events with executives at Enron's Houston headquarters, advisers could walk away with five-figure payments. In Washington, Enron relied on high technology while planning its attacks on Capitol Hill and executive agencies. To gauge a particular bill's effect on the company's bottom line, Washington staffers spent hours filling in boxes in the matrix. Maisashvili and his fellow economists projected the costs of any rule change into the future, adjusting for inflation and growth. "I would tell [senior executives], 'This is your exposure. You decide whether it is worth it to use the lobbying machinery,' " Maisashvili said. But Enron's tenacious approach ultimately backfired with many key figures inside and outside corporate headquarters, according to interviews with more than two dozen former and current Enron executives and with Capitol Hill staffers. The rise and collapse of Enron's political machine parallels the arc of the corporation's financial fortunes. Maisashvili blames Enron's political arrogance for his decision to leave the company last year. "They could have cared less if that was a good thing [for the public] or not. They cared only if this was good for Enron," he said. Sally Ison didn't realize the presidential race had begun until April 1999, when a letter arrived bearing the signature of Enron Corp. Chairman Kenneth L. Lay. The letter asked for contributions to the Bush campaign and included what she recalls as a menacing reference to her husband Jerry's compensation as a highly paid vice president. "We didn't even know if we liked this guy," she said of Bush. "I didn't know if I was going to vote Republican." Yet there was no debate. Nearing 50, Jerry Ison felt vulnerable in Enron's crushingly competitive culture. The Isons gave $ 2,000. More than 100 other Enron executives, and many spouses, also gave "hard money" contributions to Bush, much of it during the campaign's critical early money phase. Some acknowledged in interviews that they gave solely because they got Lay's pointed letter. An Enron spokesman said there was nothing unethical in the solicitations. Fred Wertheimer, head of a nonpartisan watchdog group, Democracy 21, disagreed, saying such a pitch left workers and their spouses little choice. "It is symbolic of the incredibly aggressive approach that Enron and Ken Lay took to playing the political money game -- and to building influence," Wertheimer said. "It is wrong. You are crossing the line from voluntary contributions to implicit coercion." The contributions helped Lay fulfill his commitment as a Bush "Pioneer," the campaign's term for its top rainmakers. Bush collected nearly $ 114,000 in individual and political action committee contributions from Enron in 1999-2000, according to an analysis by the nonpartisan Center for Responsive Politics. At Enron, senior managers understood that "donations mean access," acknowledged one former Enron executive who contributed to Bush. Said another: "Everybody knows that's what you make contributions for." Lay had cultivated access since founding the company in 1985. He was a top fundraiser for President George H.W. Bush and chairman of the Houston host committee for the GOP convention where Bush was nominated for reelection. When Bill Clinton bested Bush, Lay began working on a new friendship and the company greased the way with political contributions to Democrats. Lay was a longtime pal of Clinton's first chief of staff, Thomas F. "Mack" McLarty, according to former Clinton administration officials. Seven months after the inauguration, Lay had found a place in the commander-in-chief's golf foursome (along with golf legend Jack Nicklaus and former president Gerald R. Ford) in Vail, Colo., where Clinton first vacationed as president. To raise campaign cash, Enron relied not just on individual contributions but also on a well-funded political action committee that distributed money to candidates from both parties. The committee supported candidates who vowed to champion deregulation and leaned toward incumbents and conservatives, insiders said. Since 1990, Enron's political committees have given federal candidates and parties more than $ 1 million. "It was more or less required that you participate in the political action committee if you were an officer," said former Enron executive Alberto Gude Jr. "You would do it, period." Lay's strategy of bringing influential public figures into the company's fold was resisted by some of the company's own executives, who feared it could backfire and lead to public embarrassment. To earn their $ 50,000 annual retainers, the company's clutch of pundits and commentators only had to make two brief visits a year to Houston, an arrangement that some Enron officials privately suggested did not pass the smell test. Among those agreeing to the arrangement were pundits William Kristol, editor of the Weekly Standard, and Paul Krugman, now a New York Times columnist. ("correction") Lay called the group his advisory council, and he and then-chief executive Jeffrey K. Skilling attended their gatherings, held in a boardroom adjacent to Lay's office on Enron's 50th floor. "These are exciting times, and we need all the ideas we can get," Lay wrote to council members in December 2000. Commentator Larry Kudlow of CNBC and the National Review said he attended one council session as a guest, and received a $ 15,000 payment, in addition to a $ 20,000 consulting fee to his firm. The company hired Republican pollster Frank Luntz after an executive saw him on MSNBC and thought he looked smart, according to a former Enron consultant. Ralph Reed, the former Christian Coalition executive director and now chairman of the Georgia Republican Party, worked for the company for about 18 months, spread out between 1997 and 2001. He was brought into the Enron fold on the advice of Bush strategist Karl Rove, an Enron stockholder. Most of Reed's work -- in Pennsylvania and two or more other states -- was for direct mail and telephone banks to promote greater choice in electricity service, a source said. Lawrence B. Lindsey, Bush's chief economic adviser, also was a paid consultant. Enron approached James Carville, the Democratic strategist, in 1997, after his Cajun shrewdness had helped return Clinton to the White House. But Carville was interested in campaigns and Enron wanted him to lobby for electricity deregulation in Pennsylvania, where he had masterminded an upset Senate victory. Carville rejected the job. Less well known is that Enron, which has at times sparred with environmentalists, extended a retainer to the head of a Washington think tank that focuses on energy and the environment. Paul Portney, president of Resources for the Future, said he attended five council sessions. Also participating, he said, was the foundation's vice chairman, Robert Grady, a senior aide to the first President Bush and a drafter of the 1990 Clean Air Act amendments. In June 2001, Grady wrote a column for Time magazine that endorsed the trading of greenhouse gas emissions rights, a business from which Enron hoped to profit. Grady did not respond to requests for an interview. Enron gave Resources for the Future annual gifts of up to $ 45,000, and Lay's family foundation pledged $ 2 million to endow a research chair. Portney called the stipend granted to advisers a "dream," but said the money did not influence his views -- or his foundation's decision in April 2000 to name Lay to its governing board. "I am pretty cantankerous; I say what I want," Portney said. The advisory panel fed Lay's ego and was "consistent with the idea that you buy your way to success," said a former Enron political operative. "It was clumsy and the joke was these people took the money and ran. They accomplished little." Kristol said he saw no conflict in collecting $ 100,000 from Enron, likening it to pocketing a "regular and generous" honorarium for speaking before a trade association. "Enron senior executives wanted to broaden their horizons and hear about interesting trends," Kristol said. "In late 1999, I explained how [Sen. John] McCain had a real shot at beating Bush. I think Ken Lay winced a little bit at that." A council meeting scheduled for October 2001 was to include an expense-paid trip to London. But as the date drew near, Enron reported a third-quarter loss of $ 618 million and the Securities and Exchange Commission opened an inquiry. The advisers' free tickets never arrived. Enron's tough approach to Washington evolved as Skilling and his lieutenants ascended, insiders said. It was during Skilling's tenure that the matrix was devised. Known for his abrasive style, Skilling and those around him stepped up lobbying and sought out creative strategies. Historically, Enron operated with a lean Washington staff. It had two full-time senior employees in the capital for years and used relatively few outside consultants. That changed in the late 1990s, and by last spring Enron's directory listed more than 150 staffers working on state and federal government affairs. In recent years major decisions -- including which public figures to approach and hire -- were made in Houston without direct input from the Washington office, former executives said. "I don't think anybody in Washington came in contact with these advisory boards," said Tom Briggs, a former Enron staffer in Washington. "Ken Lay often came to town, and we didn't even know it." Instead, he said, the Washington office dealt with Capitol Hill staffers, dissecting the finer points of energy regulation. Tales of dust-ups with lawmakers and their aides have circulated since Enron's collapse. Most notably, during an October 1999 meeting on an energy deregulation bill, Rep. Joe Barton (R-Tex.) reportedly exploded in anger at Skilling, saying, "I may not have your millions of dollars, but I am not an idiot." "They were sophisticated enough to hire good people but then not disciplined enough to hide their disdain for policymakers who did not agree with them from the beginning," one lobbyist said. "When Enron executives were advocating a certain policy and a member of Congress tried to explain the votes weren't there, they became very frustrated that he wasn't smart enough to understand the wisdom of their policy." Enron staffers in Texas pushed the Washington office to abandon its Beltway manners in favor of a more creative style. One former executive recalls being chided to adopt a "South Park attitude," in reference to Comedy Central's animated series populated with profane and irreverent third-graders. The idea, the executive said, was to push hard and not worry about making friends. "The ingrained philosophy was, me first, money counts and the government should eliminate my taxes," said another former manager. "That's all they cared about -- what impacted them personally." Staff writer Mike Allen, database editor Sarah Cohen and researcher Lucy Shackelford contributed to this report. CORRECTION-DATE: February 14, 2002 CORRECTION: A Feb. 10 article on Enron Corp. said that Paul Krugman, now a New York Times columnist, served on an Enron advisory panel. The panel on which Krugman served in mid-1999 was composed of economists and strategists as well as journalists. Krugman was not a full-time journalist at the time but was an economist who contributed to Fortune, Foreign Affairs, Time, the New York Times Magazine and the online magazine Slate. Krugman signed a contract as a New York Times columnist in the fall of 1999. LOAD-DATE: February 10, 2002