World on Fire - Brownstein, Michael [133]
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Enron, much in the news these days, fared considerably worse in India. As late as 1991, India’s power sector was a state-owned economic nightmare. Almost half of the electricity produced in the country was given away free, and roughly another quarter was stolen. Meanwhile, India’s economy was plodding along at almost zero growth. Pushed by the World Bank, India’s new pro-market government came up with a familiar solution: jump-start the power sector through privatization and foreign investment.
In 1993, in what seemed like a match made in heaven, Enron entered into a contract with the state government of Maharashtra to build the $2.8 billion Dabhol power plant, representing by far India’s largest foreign investment. But like Coca-Cola and IBM, who were “persuaded” by Indira Gandhi in the 1970s to close down their operations in India, Enron ran into intense anti-American, antimultinational sentiment. Shortly after the deal was signed, Hindu nationalist parties rode to power in elections in Maharashtra. The new leaders condemned the terms of the contract as theft and “neo-colonialism,” favorable only to Enron and its corrupt local cronies while forcing the already impoverished local Maharashtrians to pay higher, survival-threatening prices.
“Why do we need foreigners when we have so many Indian industrialists?” demanded the new leaders as they “reviewed the legitimacy” of the contract. “Kill the Dabhol project!” “America out!” and “Enron into the sea!” became popular slogans. In what many Westerners view as a form of confiscation, Enron eventually had to renegotiate the terms of the contract.
38 (Critics of Enron say its willingness to renegotiate merely confirms how outrageous their original profit margin must have been; Enron’s defenders argue that Enron, having already sunk $300 million in construction costs, was basically held up and extorted.)
Enron’s troubles in India were far from over. Even after the new contract was signed in 1995, with reduced electricity rates for the Maharashtrians, Enron stood as a hated symbol of American exploitation. Anti-Enron demonstrations, vandalism, and threats to storm the power plant persisted through spring of 2001. Enron ended up paying for local police to provide additional security, then got entangled in further scandal when New York–based Human Rights Watch issued a 166-page report charging the police with beating and illegally detaining anti-Enron protesters. At one point, the report said, “the pregnant wife of a village activist was dragged naked from her home and beaten in the street.”
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But the Lomonosov Porcelain and Enron cases are exceptional. The truth is that while American multinationals are more resented than ever, and often the subject of sporadic local protest or retaliation, they are also more confident and powerful in the developing world than ever, backed by the strongest nation in the world. In India, for example, despite the Enron fiasco and seething popular antimultinational hostility, recent economic liberalizations have brought American giants like Coca-Cola and IBM charging back in. Because of the United States’ “hyperpower” status, developing-country governments—at least for now—no longer view expropriation of American assets as a viable option. As one developing-country commentator put it, “Developing countries are entirely dependent on, and controlled by, the international financial system. In short, we are at the mercy of the United States.”
Thus, even as anti-American hostility in developing countries mounts, one outlet for its expression—expropriation of American holdings—has essentially been closed off. On one level this is a cause for celebration: Perhaps what Westerners call “the rule of law”—meaning basically the sanctity of contract and protection