I can’t remember where I saw this link, but Slate has a fascinating article about an economics paper about insider trading prior to CIA-orchestrated coups. Because of finals coming up I might have to read the paper later, but the article has quite a bit of juicy information.
In 1951, Jacobo Árbenz Gúzman became Guatemala’s second democratically elected president. Árbenz’s authoritarian predecessors had been very sympathetic to American business interests, particularly those of the United Fruit Co. (now Chiquita), which had bought up land titles on the cheap from Guatemala’s corrupt elite for its ever-expanding banana empire. Once in office, Presidente Árbenz sought to take it all back, nationalizing UFC’s Guatemalan assets and redistributing them to the poor.
But UFC had friends in very high places—the assistant secretary of state for inter-American affairs, John Moor Cabot, was the brother of UFC President Thomas Cabot. The secretary of state himself, John Foster Dulles, had done legal work for UFC, and his brother Allen Dulles was director of the CIA and also on UFC’s board. Thanks to the Freedom of Information Act, we now know that the various Cabots and Dulleses had a series of top-secret meetings in which they decided that Árbenz had to go and sponsored a coup that drove Árbenz from office in 1954.
With a U.S. puppet back in the president’s mansion, UFC’s profits were safe. But it appears the company wasn’t the only beneficiary of this Cold War cloak-and-dagger diplomacy: A recent study by economists Arindrajit Dube, Ethan Kaplan, and Suresh Naidu argues that those in on the planning process also profited handsomely. By tracking the stock prices of UFC and other politically vulnerable firms in the months leading up to CIA-staged coups in Guatemala, Chile, Cuba, and Iran, the researchers provide evidence that someone—perhaps one of the Dulleses, Cabots, or others in the know—was trading stocks based on classified information of these coups-in-the-making.
Government aid to business comes in many forms. Recently there’s that whole $7.7 trillion to the banks, 90.9% of which was hidden from the public. But it’s not always so direct. There are also licensure requirements, the National Labor Relations Board, subsidies, patents, and a slew of other methods by which the government favors already-powerful firms.
There’s a very popular view out there that the government is really in the employ of powerful business interests, but I think this misses the main point. The government obviously supports them, but they couldn’t exist without the government. I can’t think of any large-scale situation in which some malevolent concentration of corporate power existed without a government behind it, although I can think of situations in which there was a malevolent government without powerful corporations. This in itself is not proof but it points in that direction.
Moreover, what’s the point of all that power? For some, wielding power is everything. For the slightly more crafty, it’s also a way to get rich. Once a person is in a position like the Dulles brothers were in, it’s natural to use the advantages to extend favors to your friends, relatives, and former (and possibly future) business associates. A man would help his family and friends out of simple human feeling. And a man would help people who could be called on to support him.
If the CIA didn’t have the power to overthrow foreign leaders, this wouldn’t be an issue.