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Reconstructing Disaster

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Issue: 32 Section: Business Geography: USA New Orleans Topics: corporate

November 22, 2005

Reconstructing Disaster

Profiteers and Pink Slips Ravage the Gulf Coast

by Rob Maguire

George Bush and Joe Allbaugh in 2001. Formerly Bush's campaign manager and FEMA head, Allbaugh now works as a lobbyist. photo: FEMA
Three months have passed since Hurricane Katrina, and the high drama of disaster has been replaced by the less glamorous task of rebuilding lives and communities. While the people of New Orleans struggle to adjust, wealthy corporations are reaping the rewards of reconstruction.

The US Congress has already approved US$62 billion for reconstruction in the Gulf Coast, with earmarked funds expected to exceed $200 billion. Much of this money has already found its way into the hands of corporations with close ties to the Bush administration. This has come as no surprise to critics, including Federal Communications Commission Inspector General H. Walker Feaster. "When so much money is available, it draws people of less than perfect character," said Feaster.

Soon after funding was approved, contractors gathered in Washington for a "Katrina Reconstruction Summit." Hosted by Republican Senator Mel Martinez and sponsored by Halliburton, the conference brought together some 200 corporate representatives, lobbyists and government bureaucrats to network and receive advice on "opportunities for private sector involvement" in the reconstruction efforts.

Several well-connected multinationals have already cashed in, securing lucrative reconstruction contracts. Two such corporations are the Shaw Group and Halliburton. Both firms currently employ the services of lobbyist Joe Allbaugh, George W. Bush's former campaign manager, past head of the Federal Emergency Management Agency, and, according to a headline in the online magazine Slate, America's foremost "disaster pimp."

Allbaugh's Shaw Group stands to receive at least $200 million in contracts from FEMA and the Army Corps of Engineers for housing management, construction and engineering services. News of the reconstruction contracts propelled Shaw's stock to a three-year high. It also spurred the following announcement on their web site: "Hurricane Recovery Projects: Apply Here!"

Halliburton subsidiary Kellogg, Brown & Root has been contracted to rebuild navy bases at three separate Mississippi facilities. The work is part of a $500 million contract signed between Halliburton KBR and the US Navy. Since the storm, Halliburton shares have risen over 10 percent to $65. US Vice President Dick Cheney, who formerly served as Halliburton's CEO and received nearly $200,000 in deferred pay from the company in 2004, is the official in charge of evaluating the Bush administration's response to the disaster.

Other corporate beneficiaries include California-based Bechtel Corporation, which has received a $100 million FEMA contract to provide short-term housing. Bush named Bechtel's current CEO to his Export Council and placed its former chief executive in charge of the Overseas Private Investment Corporation. AshBritt Environmental secured the largest Katrina contract thus far, worth up to $1 billion, for debris removal. AshBritt head Randal Perkins has donated tens of thousands of dollars to Republican politicians, including the host of the Katrina Reconstruction Summit, Florida Senator Mel Martinez.

carnival_lines_web.jpgOne of the Carnival cruise ships paid for by a no-bid $236 million FEMA contract. It is housing displaced New Orleans residents. photo: FEMA
A particularly poor deal for taxpayers came in the form of a $236 million no-bid contract that FEMA signed with Carnival Cruise Lines to house evacuees on ships for six months. Assuming the ships will be filled to capacity with 7116 people, this works out to $1275 per person per week--entertainment notwithstanding. This far surpasses the cost of an actual seven-day cruise from Carnival, which can be had for $599.

While these deals have left shareholders smiling, Washington has done little for the 53,000 families still displaced from the storm. For example, FEMA refuses to pay shelter costs beyond December 1 for most evacuees. Unemployment is another critical problem. Forty percent of Louisiana's businesses have been damaged or destroyed, leaving nearly half a million people without work.

With the massive amount of reconstruction work to be done, and billions in federal funds at play, the potential for economic growth and job creation is tremendous. Rather than ensuring that federal funds support local businesses and create decent jobs, the Bush administration has focused on paying political dividends to their powerful corporate backers by helping them maximize profits during the reconstruction phase.

Bush unilaterally repealed the Davis-Bacon Act, legislation requiring federal contractors to pay workers "prevailing" wages for the region. Although the prevailing wage in New Orleans is a mere $9 an hour for construction work, contractors may now pay as little as the federal minimum wage, currently five dollars and fifteen cents.

Other government departments have played along, dropping sanctions for companies who hire illegal workers, suspending requirements concerning the employment of women and minorities and exempting industries in the region from environmental regulations. Bush also plans $2 billion in tax breaks for corporations operating in the "Gulf Opportunity Zone."

Edward Sullivan, president of the Building and Construction Trades Department of the AFL-CIO, the largest labour union federation in the US, called the measures "legalized looting of these workers who will be cleaning up toxic sites and struggling to rebuild their communities, while favoured contractors rake in huge profits from FEMA reconstruction contracts."

In its handling of the Gulf Coast reconstruction efforts, the Bush administration has successfully facilitated a significant transfer of wealth from workers to well-connected multinationals. By favouring subsidies and high profit margins for its corporate allies, the White House has exacerbated the suffering of those affected by Hurricane Katrina and is jeopardizing the region's chances of a successful recovery.

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