Louis Proyect: The Unrepentant Marxist

June 12, 2016

Behind every great fortune there is a crime

Filed under: crime,economics — louisproyect @ 8:38 pm

Reports in the NY Times, the Wall Street Journal and USA Today this week document Donald Trump’s refusal to pay debts owed to the small businesses that supplied him goods and services over the years, in some cases forcing them into bankruptcy.

In today’s NY Times, there’s an article about how Trump deceived investors into buying shares in his Atlantic City hotels at inflated prices and then used much of the capital raised for his personal luxurious tastes. It also points out how one small company nearly went under because Trump refused to pay his bills even as he was siphoning off millions from the gambling casinos that relied on companies such as Triad Building Specialties to keep going:

Beth Rosser of West Chester, Pa., is still bitter over what happened to her father, whose company Triad Building Specialties nearly collapsed when Mr. Trump took the Taj into bankruptcy. It took three years to recover any money owed for his work on the casino, she said, and her father received only 30 cents on the dollar.

“Trump crawled his way to the top on the back of little guys, one of them being my father,” said Ms. Rosser, who runs Triad today. “He had no regard for thousands of men and women who worked on those projects. He says he’ll make America great again, but his past shows the complete opposite of that.”

Titled “Donald Trump’s Business Plan Left a Trail of Unpaid Bills”, the WSJ article describes a scenario in which the capitalist state took the side of rich bastard who was very good at stiffing the same kinds of people as the Rossers.

A review of court filings from jurisdictions in 33 states, along with interviews with business people, real-estate executives and others, shows a pattern over Mr. Trump’s 40-year career of his sometimes refusing to pay what some business owners said Trump companies owed them.

A chandelier shop, a curtain maker, a lawyer and others have said Mr. Trump’s companies agreed to buy goods and services, then reneged when some or all were delivered.

Larry Walters, whose Las Vegas drapery factory supplied Mr. Trump’s hotel there eight years ago, said the developer, Trump Ruffin, wouldn’t pay for additional work it demanded beyond the original contract. When Mr. Walters then refused to turn over some fabric, sheriff’s deputies burst into his factory after Trump Ruffin sued him. Trucks took the fabric away.

Finally, there’s the USA Today article titled “USA TODAY exclusive: Hundreds allege Donald Trump doesn’t pay his bills”

During the Atlantic City casino boom in the 1980s, Philadelphia cabinet-builder Edward Friel Jr. landed a $400,000 contract to build the bases for slot machines, registration desks, bars and other cabinets at Harrah’s at Trump Plaza.

The family cabinetry business, founded in the 1940s by Edward’s father, finished its work in 1984 and submitted its final bill to the general contractor for the Trump Organization, the resort’s builder.

Edward’s son, Paul, who was the firm’s accountant, still remembers the amount of that bill more than 30 years later: $83,600. The reason: the money never came. “That began the demise of the Edward J. Friel Company… which has been around since my grandfather,” he said.

You’ll note that in both the WSJ and USA Today article, there’s a reference to a contract that was apparently not worth the paper it was written on. It evokes the words that some attribute to Balzac in “Le Père Goriot”: “Behind every great fortune there is a crime.” The novel doesn’t actually contain this exact formulation but it seems to have achieved a lofty but apocryphal status as good as if it were written by the French royalist who certainly understood what made people like Trump tick. In fact, in many ways Trump seems to have stepped out of this Balzac novel in which a young man in tutored in the art of pursuing money and women as instruments for social climbing as Wikipedia puts it.

Now you would think that a contract legally binds you to pay what you owe. For example, what would happen after you signed a lease for an apartment in Manhattan that rents for $6000 per month and then after you moved in, you told the landlord that it was only worth $4000 per month and intended not to pay a penny more. Not only would you be evicted, it would be difficult to find a landlord willing to lease you an apartment ever again.

I say this as someone who knows a Turk who has run into the same situation as the small proprietors described in the articles above. This was a guy who went to work for a company in Turkey based on a contract that gave him 10 percent of the ownership. After more than a decade working for the company, he came to the USA to look for a new position here. After settling in to a new apartment, he discovered that the people he used to work for had no intention of living up to the contract. There is one law that favors the Donald Trumps of Turkey and another law that applies to the Turk who will not be able to shrug off what he now owes to the landlord.

The USA article describes how Trump gets away with it:

The actions in total paint a portrait of Trump’s sprawling organization frequently failing to pay small businesses and individuals, then sometimes tying them up in court and other negotiations for years. In some cases, the Trump teams financially overpower and outlast much smaller opponents, draining their resources. Some just give up the fight, or settle for less; some have ended up in bankruptcy or out of business altogether.

This is exactly the asymmetric economic warfare that the Turk is facing now. His former employer is worth hundreds of millions of dollars and would have no problem tying him up  in court with legal fees he can ill afford right now. His future is uncertain.

Over the years when I have written about economic inequality and corruption, it is mostly set within a broad social and political fabric such as, for example, how Assad’s cousin Rami Makhlouf uses his sixty percent control of the Syrian economy to screw people left and right. I can easily understand how if you have been fucked over by Makhlouf or Trump, you’d have blood in your eyes—to evoke Trump’s sexist jibe against Megan Kelly. But when you know somebody who has been such a victim, you feel doubly outraged. If I had worked for Columbia University for 21 years as I had and discovered that they decided not to pay me my six month’s severance pay, there would have been hell to pay.

Isn’t it ironic that the man running as the Republican Party candidate for president is a deadbeat who thinks a contract is a piece of paper he can wipe his ass with? The contract is supposed to be a cornerstone of capitalist property relations and here’s someone who believes in the superiority of capitalism to any other economic system now making a mockery of it.

If you Google “contract law” and capitalism, the first item to show up is an online book titled “Law for Entrepreneurs” (it doesn’t indicate who the author is.) Chapter 8 is titled “Introduction to Contract Law” and states:

Contract law did not develop according to a conscious plan, however. It was a response to changing conditions, and the judges who created it frequently resisted, preferring the imagined quieter pastoral life of their forefathers. Not until the nineteenth century, in both the United States and England, did a full-fledged law of contracts arise together with, and help create, modern capitalism.

Modern capitalism, indeed, would not be possible without contract law. So it is that in planned economies, like those of the former Soviet Union and precapitalistic China, the contract did not determine the nature of an economic transaction. That transaction was first set forth by the state’s planning authorities; only thereafter were the predetermined provisions set down in a written contract. Modern capitalism has demanded new contract regimes in Russia and China; the latter adopted its Revised Contract Law in 1999.

Contract law may be viewed economically as well as culturally. In An Economic Analysis of Law, Judge Richard A. Posner (a former University of Chicago law professor) suggests that contract law performs three significant economic functions. First, it helps maintain incentives for individuals to exchange goods and services efficiently. Second, it reduces the costs of economic transactions because its very existence means that the parties need not go to the trouble of negotiating a variety of rules and terms already spelled out. Third, the law of contracts alerts the parties to troubles that have arisen in the past, thus making it easier to plan the transactions more intelligently and avoid potential pitfalls.

Posner is one of the country’s most influential law professors, a liberal Republican ideologically. You can bet that when he teaches a class on contract law, he will stress the sanctity of the contract without which capitalism descends into anarchy.

In fact capitalism has been anarchic from the very beginning (I am using the word in its original sense as “without rules” rather than Bakunin’s political philosophy). Despite what libertarians argue, capitalists always use political power to dominate the classes below them. The less economic power you have, the less political power. In the case of Trump’s victims, they simply lack the power to influence the judge and the cops who took away the fabric of a man who made the mistake of signing a contract with Donald Trump.

In societies where the bourgeoisie has the most power over the subordinate classes and which corruption runs rampant, the pieties of contract law are especially irrelevant. While not exactly a contract, the agreed upon wage when you become an employee is about as binding as Trump’s deal with the fabric company. In Ukraine, back pay is often treated as an inconvenience by the owner of a coal mine or a steel mill and simply ignored.

When ordinary people rise up against oppression in a place like Syria or Ukraine, their fondest hope is simply to live in a “normal society” where the individual is not vulnerable to the predations of oligarchs like Rihat Akmetov who was one of Ukraine’s richest men and a close associate of the deposed pro-Russian president Viktor Yanukovych. Guess who ran Yanukovych’s campaign for president? None other than Donald Trump’s chief campaign adviser Paul Manafort, as the Guardian reported in April 2016:

For almost four decades, Donald Trump’s newly installed senior campaign adviser, Paul Manafort, has managed to juggle two different worlds: well known during US election season as a shrewd and tough political operative, he also boasts a hefty résumé as a consultant to or lobbyist for controversial foreign leaders and oligarchs with unsavory reputations.

The controversial clients Manafort has represented have paid him and his firms millions of dollars and form a who’s who of authoritarian leaders and scandal-plagued businessmen in Ukraine, Russia, the Philippines and more. On some occasions, Manafort has become involved in business deals that have sparked litigation and allegations of impropriety.

In 1985, Manafort and his first lobbying firm, Black Manafort Stone & Kelly, signed a $1m contract with a Philippine business group to promote dictator Ferdinand Marcos just a few months before his regime was overthrown and he fled the country.

In the mid-1990s, Manafort reportedly received almost $90,000 from a Lebanese-born businessman and arms merchant to advise French presidential candidate and then prime minister Edouard Balladur, a controversial payment that surfaced as part of a long running French investigation – dubbed the Karachi affair – into allegations that funds, including those Manafort received, came from an arms sale of French submarines to Pakistan and were illegally funneled into the French presidential campaign.

And in 2010, Manafort helped pro-Russian candidate Viktor Yanukovych remake his tarnished image and win a presidential election in Ukraine. The effort was arguably the high point in a decade of political and business consulting in that country involving figures such as gas tycoon Dmytro Firtash, who was separately charged in 2014 by US officials with being part of a bribery scheme in India. The US has sought to have him extradited from Austria, where he was arrested. Firtash and a billionaire Russian oligarch, Oleg Deripaska, also worked with Manafort on separate byzantine investment deals in New York and Ukraine, respectively, that have led to lawsuits.

1 Comment »

  1. Trump is not a IMHO a fascist in any historically meaningful sense (see past discussions), but perhaps the danger of a Trump presidency would lie less in any coherent plan of action on his part than in the combination of his intrinsic corruption and a certain weakness as an executive, leading to arrogation of power by scum like Manafort, who really is a scary bastard.

    Trump has made his billions by wheeling and dealing, apparently on both sides of whatever laws effectively constrain the sacred “entrepreneur” in neoliberal America–it’s all a matter of financing a deal, seeing it through to the end, taking a profit and moving on to something new and more exciting. Where enterprises are profitable or can be milked for profits, he may retain an interest or even control, but he is always ready to cut his losses and cut bad deals loose. Without ever newer and bigger deals to make, this “business model” is doomed like the parasite who lives off it..

    A president of the U.S. is stuck with the federal government for the duration of his term. In that circumstance bankruptcy is not an option and the number of deals to be made and new businesses to get into is very low. Would Trump gratify his “entrepreneurial” impulse through war? I suppose this is possible–both the example and the advisers of Bush II are available to lead him that way–but I don’t think he necessarily would. I’d be more inclined to think he would simply try to use his office to further his business interests.

    My diagnosis of Trump is that he would soon lose interest in actually governing and allow power to slip into the hands of his “advisers”–Manafort and God knows what other subhuman filth he would have summoned forth from the sewer of human potential. This might lead to a kind of mafia presidency, with individual gangsters contending for power against the weak controlling force. A lot of bastards would no doubt hear “You’re fired,” and a lot of other bastards would replace them, but the pattern would continue.

    Given the weakness of the central organization, this would not be fascism, but it could be very, very bad both politically and economically, as it would further attenuate the already questionable legitimacy of the central government without offering any kind of alternative, and would at the same time create little Caesars all over the country who would be able to do as they wished in whatever domains they could claw out. Overt corruption might begin to reach levels not seen in any “advanced” capitalist nation within recent memory. It would erode the already tenuous claim of the central government to democratic legitimacy. (Indeed, it is difficult to imagine Trump’s winning the election except by virtue mass abstention from the vote itself, thus making any conceivable Trump presidency even more of an undemocratic minority affair than most of them already are.)

    In such a scenario, police and military organizations would increasingly become the guarantors of legitimacy. There too, careers would begin to open up to those with the right talents. The sacred fetish of “security” would only get stronger, as it as one of the few lies left to today’s power structure that elicits much of a response from large numbers of people. There would not need to be a really coherent federal policy on this to make it effectively terrifying and dangerous.

    It’s a fact that Donald Trump as far as we know has never murdered anybody, let alone done so with a drone aircraft. Unlike that former darling of the Clintons, Rahm Emanuel, he has never set up a network of secret torture chambers all over a major city and lied about it without suffering any consequences. What are a few swindles compared with these crimes? The Democrats have a solid track record in these matters.

    But we should be under no illusion that Trump would be a Lesser Evil or a merely routine executive, even if he does not lead the nation down another Afghanistan or Iraq rathole–or into the war with Russia that the Putinolaters insist is Hillary’s true Grail. In Trump’s own inimitable way, I think a Trump presidency absent all these things would be, as Chomsky says, a calamity–at least, a calamity of a variety taxonomically distinct from that of the “business as usual” Democratic Party disaster.

    The path to that peculiar evil would not be Trump as dictator, but Trump as anarch.

    All this may be moot, as it seems unlikely at present that Trump stands any serious chance of being elected, even against the not-much-beloved Hillary, and will merely serve to frighten the gullible into the deadly constricting embrace of the Democratic Party. If I were more of the Alex Jones stripe, I might almost think he had been recruited especially for that purpose.

    Comment by Pete Glosser — June 13, 2016 @ 3:38 pm


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