THiNKTaNK THE RISK PREMIUM A Shell oil employee gets kidnapped by African rebels.
I want my old America back. pg.5
ADVERTISEMENT
FEATURES ch s Wat view at r e os om int videnk.c a d an inkt th
THE RISK PREMIUM pg22
THE WOLRD AT 7 BILLION by Brian Walsh This month, the 7 billionth person will be born on a planet already strapped for resources. To mark this extraordinary milestone, explores the most pressing population issues of the day, from the quest for sustainable energy sources to a look at what our biggest cities could look like.
pg33
AMERICAS NEXT WAR by Nate Rawlings America’s next fight will take place thousands of miles away from the battlefields of Iraq, in special cities where some of the wars’ most grievously wounded troops begin their journeys to their new normal. Nate Rawlings takes an inside look at Brooke Army Medical Center.
pg28
WAS THE GOVERNMENT BAILOUT OF AIG ILLEGAL?
NOBEL PRIZE CONTROVERSIES
by Paula Pfieffer
This week we’ve already had accusations of insularity, Brits betting on Bob Dylan and the unfortunate case of a winner dying without the Nobel Committee realizing it. TIME takes a look at the most controversial moments in the 110-year history of the prize
Here’s what we have learned for sure during the past three years: No one likes bailouts. Not even, apparently, the people being bailed out.
pg22
by Jak Phillips
pg37
THiNKTaNK 3
ADVERTISEMENT
DEPARTMENTS APPLE’S MAC PRO MAY FADE AWAY. Apple has little reason to continue selling its pricey machine
pg 11 APPLE’S MAC PRO MAY FADE AWAY. Apple has little reason to continue selling its pricey machine
pg 11 APPLE’S MAC PRO MAY FADE AWAY.
pg7
pg40
pg11
Apple has little reason to continue selling its pricey machine
pg 11 APPLE’S MAC PRO MAY FADE AWAY.
The R e t r o s p e c t i v e s
The Currents
The Futures
Apple has little reason to continue selling its pricey machine
pg 11 WHERES FDR WHEN YOU NEED HIM?
AMERICA’S ‘OH SH*T’ MOMENT.
APPLE’S MAC PRO MAY FADE AWAY.
What can we learn from Franklin Deleanor Roosevelt
Has the U.S. deleted the very things that made it great?
pg 5
pg 8
Apple has little reason to continue selling its pricey machine
ITS THE END OF THE WORLD AS WE KNOW IT
THE CLEANEST CITIES IN THE U.S.
Harold Camping predicts the world will end today — he’s said that before.
A new World Health Organization report details air-pollution rates around the globe.
pg 7
pg 10
pg 11 CHINA’S CENTURY OR INDIA’S? The combined might of China and India could spearhead global growth in the coming decades.
pg 13
APPLE’S MAC PRO MAY FADE AWAY. Apple has little reason to continue selling its pricey machine
pg 11 APPLE’S MAC PRO MAY FADE AWAY. Apple has little reason to continue selling its pricey machine
pg 11
THiNKTaNK 5
THE RETROSPECTIVES
TIMELINE 1933 Anti commo moloreperis ad
1934 Anti commo moloreperis ad
1935 Anti commo moloreperis ad
1940
Where’s F.D.R when you need him? HISTORIC INSIGHTS INTO A RESSURECTED ECONOMY By David M. Kennedy
A
las for countless pundits and inspirational speakers, it is appar-
egy pushed
was
Anti commo moloreperis ad
ently not the case that the Chinese
through
word for crisis is spelled by joining
policies that
1945
the characters for danger and op-
aimed not just to deal
portunity. But that common fallacy
with the immediate challenge of the
fabled springtime gave a stricken
nevertheless captures an important
Great Depression but also to benefit
nation a valuable psychological
metaphorical truth: whatever the
generations of Americans to come.
boost, but many of its initiatives did
perils it brings with it, a crisis can be
Pulling off a similar feat will require
not survive the Depression decade.
a grand opportunity. Among those
Obama to persuade Americans to
F.D.R.’s greatest achievements came
who have understood that truth was
see opportunities in the present
later. Their essence can be summed
Franklin D. Roosevelt.
crisis as well.
up in a single word: security.
Writing to his fellow Democrats in
A More Secure America
All the major New Deal reforms that
the 1920s, Roosevelt noted that
It’s old news that F.D.R.’s New Deal
endured had a common purpose:
their party could not hope to return
did not end the Depression. On that
not simply to end the immediate
to power until the Republicans led
score, there was little difference
crisis of the Depression but also to
the nation “into a serious period of
between Roosevelt and Herbert
make America in the future a less
depression and unemployment.” The
Hoover. But unlike Hoover, F.D.R.
risky place, to temper for genera-
Great Depression soon brought a
seized the occasion to shape a
tions thereafter what F.D.R. called
far longer and deeper period of woe
legacy of du-
than F.D.R. foresaw. But the crisis of
rable reforms.
the 1930s also provided an object
For that ac-
lesson in the relationship between
complishment
economic danger and political op-
— along with
portunity — a lesson Barack Obama
winning World
is now trying to follow. Obama, too,
War II — histo-
came to office in the midst of an
rians routinely
economic crisis, and in the solu-
rank him among the
the “hazards and vicissitudes” of
tions he has offered, it appears he
greatest Presidents.
life. By creating the Federal Deposit
has often looked to the example of
So what did Roosevelt’s greatness
Insurance Corporatiomation for in-
F.D.R., whose presidency — and the
consist of, and how did he attain it?
vestors.
very idea of activist government that
Forget about the Hundred Days
it represents — is very much back in
of 1933, the legendary crucible in
the public mind this year. Roosevelt
which F.D.R.’s anti-Depression strat-
Anti commo moloreperis ad
THiNKTaNK 6
supposedly forged. The legislative frenzy of that
Democracy cannot succeed unless those who express their choice are prepared to choose wisely. The real safeguard of democracy, therefore, is education.
ADVERTISEMENT
ADVERTISEMENT
THE CURRENTS
America’s ‘Oh Sh*t!’ Moment
HAS THE U.S. DELETED THE VERY THINGS THAT MADE IT GREAT? By Niall Ferguson
D
took little more than a decade.
is a familiar one to students of
A more recent and familiar example
financial markets. Even as I write, it
of precipitous decline is, of course,
is far from clear that the European
the collapse of the Soviet Union.
Monetary Union can be salvaged
And, if you still doubt that collapse
from the dramatic collapse of
comes suddenly, just think of how
confidence in the fiscal policies of
the postcolonial dictatorships of
its peripheral member states. In the
North Africa and the Middle East
realm of power, as in the domain of
imploded this year. Twelve months
the bond vigilantes, you’re fine until
ago, Messrs. Ben Ali, Mubarak,
you’re not fine—and when you’re not
on’t call me
ists gawp at the ruins that remain.
and Gaddafi seemed secure in their
fine, you’re suddenly in a terrifying
a “declin-
The notion that civilizations don’t
gaudy palaces. Here yesterday, gone
death spiral.
ist.” I really
decline but collapse inspired the
today.
don’t believe
anthropologist Jared Diamond’s
What all these collapsed powers
the United
2005 book, Collapse. But Diamond
have in common is that the complex
States—or
focused, fashionably, on man-made
social systems that underpinned
Western civi-
environmental disasters as the
them suddenly ceased to function.
lization, more generally—is in some
causes of collapse. As a historian, I
One minute rulers had legitimacy
kind of gradual, inexorable decline.
take a broader view. My point is that
in the eyes of their people; the next
But that’s not because I am one of
when you look back on the history of
they didn’t.
those incorrigible optimists who
past civilizations, a striking feature is
This pro-
agree with Winston Churchill that the
the speed with which most of them
cess
United States will always do the right
collapsed, regardless of the cause.
thing, albeit when all other possibili-
The Roman Empire didn’t decline
ties have been exhausted.
and fall sedately, as historians
In my view, civilizations don’t rise,
used to claim. It collapsed
fall, and then gently decline, as
within a few decades in
inevitably and predictably as the four
the early fifth century,
seasons or the seven ages of man.
tipped over the edge
History isn’t one smooth, parabolic
of chaos by barbarian
curve after another. Its shape is more
invaders and internal divi-
like an exponentially steepening
sions. In the space of a
slope that quite suddenly drops off
generation, the vast impe-
like a cliff. If you don’t know what I
rial metropolis of Rome fell
mean, pay a visit to Machu Picchu, the lost
into disrepair,
One minute rulers had legitimacy in the eyes of their people; the next they didn’t.
city of the
the aqueducts broken, the splendid marketplaces
Incas. In 1530 the Incas were the
deserted.
masters of all they surveyed from
The
the heights of the Peruvian Andes.
rule in China also fell apart with
Within less than a decade, foreign in-
extraordinary speed in the mid–17th
vaders with horses, gunpowder, and
century, succumbing to internal strife
lethal diseases had smashed their
and external invasion. Again, the
empire to smithereens. Today tour-
transition from equipoise to anarchy
THiNKTaNK 9
Ming dynasty’s
Read more at thinktank.com
ADVERTISEMENT
THE FUTURES
Apple’s Mac Pro May Fade Away WITH FEW BUYERS FOR THE PROFESSIONAL-GRADE MAC PRO AND THE ONSET OF THUNDERBOLT TECHNOLOGY THAT CAN HELP ADDRESS THEIR NEEDS, APPLE HAS LITTLE REASON TO CONTINUE SELLING ITS PRICEY MACHINE By Darrell Etherington
M
acbook
ing a computer around when it isn’t
using Thunderbolt technology—a
Pro has
profitable; consider the fate of the
further point reportedly raised in
long
G4 Cube, for example, which was
discussion among Apple execs.
remained
introduced to the world in July 2000
a profes-
and discontinued a year later after it
will soon allow video-capture cards
sional
failed to impress the buying public.
and other devices that use PCI
tool in an
Desktop sales in general have been
Express expansion connectors to be
otherwise consumer-focused line
flagging, with notebooks and tablets
plugged, outside the case, into an
of Apple (AAPL) computers. With
picking up the slack.
iMac, MacBook, or Mac mini. Thun-
Thunderbolt expansion devices
a significantly higher starting price
Apple has been cited as buck-
derbolt also allows direct connection
tag than its iMac cousin and a wide
ing the downward trend in desktop
of much faster RAID storage devices
range of upgrade options that most
sales, but the Mac Pro isn’t the
and multiple displays, something the
Apple products lack, it makes sense
computer whose sales we hear bro-
internal PCI Express slots in the Pro
that a report Monday (via AppleIn-
ken out during conference calls or
once provided exclusive access to.
sider) claimed the Mac Pro might
at Apple special events. That honor
soon be put out to pasture. Would
is reserved for the iMac, Apple’s
demanding set of niche customers,
Apple really close the door on its
all-in-one that proves there’s still a
but those buyers have become less
most muscular and expandable Mac
market for affordable, sleek, desktop
integral to Apple’s target market.
model?
computers.
Apple showed that it wants to keep
First, there are the reasons
The reason the Mac Pro doesn’t
The Mac Pro could still serve a
focusing on the consumer end of
Apple executives themselves gave
get a shout-out during Apple’s
its business when it discontinued
for considering shelving the Pro.
events is probably because Apple
the Xserve in November 2010 and
Reportedly, the sales of these
has nothing to crow about. If there’s
redesigned Final Cut Pro with non-
expensive computers have dwindled
good reason to talk about how well a
professional end users in mind. In
to the point where making them isn’t
product is selling, Apple usually isn’t
both cases, it eventually made con-
nearly as profitable for Apple as it
shy about doing so.
cessions to try to ease the blow.
once was. Apple has never been particularly sentimental about keep-
THiNKTaNK 11
Apple may also be able to serve demand for added expandability by
T HTHEERISK PREMIUM RISK
PREMIUM by Paula Pfieffer
RUSSELL SPELL THOUGHT HE KNEW WHAT HE WAS GETTING INTO WHEN HE SIGNED ON WITH A HOUSTON COMPANY TO BUILD A PIPELINE IN NIGERIA, WHERE CORRUPTION AND VIOLENCE ARE COMMONPLACE AND THE SAFETY OF WORKERS CANNOT BE GUARANTEED. BUT HE NEVER IMAGINED HE WOULD BECOME A HOSTAGE—LITERALLY—TO AMERICA’S DEPENDENCE ON FOREIGN OIL.
R
ussell Spell was sleeping on a barge off the Nigerian
generously greased for what he called “community relations.” But he had
coast when he awoke to the sound of gunfire. A long-
never had any trouble personally. He liked the Nigerian people and loved the
time employee of Willbros Group, an international oil
routine and camaraderie of being offshore with longtime friends. And working
and gas contractor, Spell supervised workers laying
in Nigeria was steady; you weren’t shut down for weather, like in the Gulf of
an offshore pipeline for Shell. His shift was noon to
Mexico. Spell was scheduled for three months on and one month off and
midnight, so he was still in his bunk when he heard
made good money—$80,000 a year. It was enough to buy his family a brick
the sound of bullets exploding into metal, a commo-
house on a cul-de-sac within walking distance of Lake Conroe. His front door
tion so loud it seemed as if a helicopter was landing inside his cabin. The day
had a leaded-glass window that sparkled with rainbows in the afternoon sun;
had dawned placid and sweet, the barge an offshore oasis from the fetid air
his living room featured a big-screen TV. Spell had never finished college, but
and roiling gas flares visible on the coast at Shell’s Forcados export terminal.
his kids were in gifted-and-talented programs at good schools. His wife didn’t
Spell had no idea he was about to become a pawn in the increasingly violent
have to work. He never asked himself whether the job was worth the risk
war for control of the world’s diminishing petroleum resources.
because the answer seemed self-evident.
Spell, then 41, was pale and impish, a small, shy man with a wry sense of
Now, as the gunfire drew closer, Spell jumped out of his berth and ran to the
humor who still had the broad shoulders and bowed arms of the welder he
door of his tiny cabin to look outside. He saw a motorboat full of men shoot-
had been for much of his adult life. Born and raised in the East Texas oil field
ing as they approached the port side of the barge; shots came from starboard
town of Silsbee, he didn’t want for much and generally took what came his
as well. Spell thought about running, but there wasn’t any place to run to. The
way with equanimity. By 2006, he had worked in Nigeria for almost a decade.
attackers were swarming aboard, shooting all the while.
He knew the country posed its share of dangers to foreign workers, but he
“Get into cover!” It was John Hudspith, the Brit who was the security coor-
left the worry about kidnappings, robberies, and killings to his company
dinator on the barge. He was racing toward the bridge, trying to organize an
and to his wife, Regina. Spell did not, for instance, pay much mind to State
armed response.
Department travel advisories, like the one that, just a day before the attack
Footsteps pounded on the deck below, and someone—not someone from
on his barge, warned American citizens to stay away. “The lack of law and
Willbros—screamed orders. Spell could hear the continuous rat-a-tat-tat of
order in Nigeria poses considerable risks to travelers,” it said. “Violent crime
automatic weapons. Looking down the walkway, he saw powerfully built men
committed by ordinary criminals, as well as by persons in police and military
dressed in camouflage vests, ammunition belts draped around their necks
uniforms, can occur throughout the country.”
and shoulders. Black stocking masks covered their faces. They were com-
Spell knew the people of the Niger Delta were desperately poor, while corrupt
ing toward him, firing into doors that wouldn’t give way to swift kicks. Spell
officials lived like Saudi princes. He knew the air and water were poisoned
backed into the cabin, slamming the wooden door behind him. He and his
because multinational oil companies had exploited the region’s rich reserves
roommate, a baby-faced 23-year-old from Mississippi named Cody Oswalt,
for many years without a care. He understood that certain palms were
locked the door and hoped for the best. “What do we do?” Oswalt cried.
THiNKTaNK 13
“Man, I don’t know,” Spell told him dryly. “But I hope we win.” They held their breath, pinned to the wall, while the men stormed past. Where were the security guards Willbros kept on the payroll? Spell wondered. Supposedly, Willbros had three security boats and Shell had two—both armed with .50-caliber machine guns. What happened to them? Why hadn’t anyone sounded an alarm? WB 318 was Willbros’ largest and most profitable barge. Both Willbros and Shell paid handsomely for protection against surprises like this. Suddenly the attackers came back. Spell heard them dragging one of his co-workers as they approached, beating him and demanding the whereabouts of the Americans. At Spell’s door, they stopped. “Open up! Open up!” They pounded on the door and kicked at it with their boots. Finally, someone fired an automatic weapon at the door handle, and four or five men pushed inside. They kicked Spell in the ribs and stomped on his stomach, cursing him and screaming for him to get up and out of his cabin. Oswalt got the same treatment. In the melee, someone knocked Spell’s glasses off his face, and he didn’t have time to recover them before his
whizzed by. Glancing around, he
speedboat motor dropped to a purr.
fourth-largest ethnic group, who are
attackers hoisted him up and shoved
spied a crate of ammo and found
The boatmen went left, then right,
known for their fishing prowess and
him down the walkway, toward
himself grateful that the kidnappers’
then north, then south, following the
maintain an almost mystical mastery
the deck and some waiting boats.
speedboats were easily outrunning
thinning tributaries that spread like
of these waters and the mangrove
When Spell hesitated on a stairway, someone hit him in the back of the head with the butt of a rifle, and he tumbled down the rest of the way. Another attacker crowed that they had the Americans. They were loading barge workers into boats—nine men in all. Spell was shoved in with three other men, a knife at his back. One of the captors pushed him to the floor. “We are going to barbecue you,” one of the
swamps surrounding them.
The cost of everything that can go wrong in a destabilized country rich in oil—gets figured into the price of every barrel. The cost of doing business in this dangerous world—a cost all of us pay at the gas pump—is called the risk premium.
men taunted.
caught sight of red cloths tied to some mangrove trees. His captors jumped out and pushed the boat toward a tiny compound, splashing themselves with water. Spell started wading toward shore. One of the men pointed his automatic weapon and called him back. Anointing Spell with water, he explained: The Ijaws took their power from the water; Spell needed purification before he
Finally, Shell’s Nigerian military
could be among them.
protectors appeared in a boat with a
the
crew firing shots that widely missed
forces.
their targets. The captors began to
They
traveled from the
fire back, and for five or so minutes,
open
sea into the Forcados
Spell felt the concussion of the bullets pounding his ears as they
THiNKTaNK 15
After about an hour and a half, Spell
security
tiny branches below the jungle
The old world vanished, and the
canopy. The captors removed their
new one closed in: heavy, warm air;
masks and showed Spell the charms
putrid water; leafy mangrove trees
that they believed kept bullets from
sinking their long, witchy fingers into
River, which was glazed with patch-
penetrating their bodies. The men
the shore; angry masked men and
es of oil. The river narrowed; the
were Ijaws, members of Nigeria’s
their guns. Russell Spell had no idea
where he was; all he knew was that
other pictures MEND members show
That same year—MEND’s first in op-
he could, quite possibly, be lost for
their ostensible handiwork: pipelines
eration—the organization and similar
the rest of his days.
and oil fields exploding in flames.
groups kidnapped 128 foreign
SPELL AND HIS FELLOW HOS-
The video notes correctly that
nationals, shut down 25 percent of
TAGES would easily recognize the
Nigeria is second to Iraq as the most
Nigeria’s oil production, and helped
men who appear in a YouTube video
unstable oil producer in the world.
drive crude oil prices close to $80 a
titled “The Countdown.” Dated Janu-
Words on the screen declare that
barrel, according to the Norwegian-
ary 2008, nearly two years after their
since 1995, when the government
based international security consul-
capture, it is a recruiting tool, a slide
executed Ken Saro-Wiwa, an author
tants Bergen Risk Solutions.
show set to a rousing Nigerian pop
and environmentalist who became a
Most American consumers under-
beat and displaying a number of
national hero for battling to end gov-
stand that the invasion of Iraq has
photos of buff, heavily armed men in
ernment corruption, the Niger Delta
contributed to the skyrocketing cost
T-shirts and camouflage gear point-
has become “hell on earth,” a land
of crude. It’s the war premium, what
ing menacing fingers at the camera
devastated by industrial pollution
the market adds to the price of a
and riding in speedboats as they
and increasingly violent protests, fol-
barrel of oil because the crude that
proudly brandish their automatic
lowed by equally violent government
once flowed from Saddam Hus-
weapons. They claim to belong to a
retributions—which many in the
sein’s fields is now less dependably
group called MEND, the Movement
delta believe to be wholeheartedly
available. Americans are less aware,
for the Emancipation of the Niger
supported by the oil companies that
however, that there is another reason
Delta. In many photos the members
operate here.
why the price of oil has blown past
wear stocking masks; in others, they
Members of MEND were the very
$100 a barrel and gasoline is ap-
have painted their faces and bodies
people who kidnapped Russell Spell
proaching $4 a gallon: The countries
white, partly in honor of ancient
and eight co-workers and have since
around the globe where oil remains
traditions and partly because they
claimed responsibility for still more
available in abundance are increas-
know it frightens oil field workers. In
kidnappings and acts of sabotage.
ingly dangerous places to
falls victim to an incident such as kidnap, extortion, illegal detention of employees, or product tampering, Control Risks will deploy consultants to advise on negotiation strategies and liaise with law enforcement, families, and the media. We have handled more than 1,400 such crises.” A company called Worldwide Employee Assistance Programs now offers treatment for oil company kidnap victims suffering from post-traumatic stress disorder. Chevron has an in-house attorney who specializes in lawsuits brought by employees who have been kidnapped. Because oil is often found in remote places, contractors have always had to construct entire cities—with roads and airports and sewage treatment plants—in order to keep their people comfortable. Now compounds and job sites also have to be secure, which means the cost of construction and protection has gone up. Workers must be ferried to and from job sites in armored vehicles with (hopefully) trained guards. operate, with corrupt governments
limb in the case of the latter—are
penalties of the Foreign Corrupt
The complexities of the Federal Cor-
that are indifferent to the welfare of
disproportionately Texan. The expe-
Practices Act (FCPA), and the po-
rupt Practices Act can also ensnare
their citizens, in turn inspiring the
rience of Russell Spell and others
tential for lawsuits from employees
oil companies. The rule of thumb is
proliferation of guerrilla groups like
like him influences the employment
who find themselves unprotected in
that bribes to smooth the way for
MEND. The cost of drilling in these
practices and business decisions of
life-threatening situations. As long
operations do not bring the FCPA
venues—of attracting and protect-
major Texas companies, shapes the
ago as 1998, in Cabinda, Angola, a
into play, but companies that pay to
ing workers, of losing work time due
rulings of Texas courts, and affects
four-car motorcade containing thirty
win or extend contracts can end up
to sabotage, of paying ever higher
the costs of Texas medicine.
employees of a major oil company
as defendants in a major lawsuit or
insurance premiums, of making
In oil, as in war, the job of protecting
was attacked near the local airport
criminal prosecution, with legal fees
quasi-legal payoffs that are part of
vital American interests has been
by a rocket-propelled grenade.
that start at $3 million. As an execu-
doing business, of providing medical
contracted out to private companies,
Today, radicals who once sabotaged
tive for one major contractor told
treatment for kidnap victims like
whose employees can find them-
pipelines in Colombia have moved
me, a pipeline that might take two
Spell, of defending lawsuits, in short,
selves in harm’s way. In war-torn
on to Venezuela. Every such incident
months and cost $60 million to build
the cost of everything that can go
Iraq, more than a thousand workers
adds to the cost of producing oil.
in the U.S. would take at least six to
wrong in a destabilized country rich
for Halliburton and other contrac-
Not surprisingly, Exxon Mobil recent-
eight months and cost a minimum
in oil—gets figured into the price of
tors have been killed while trying to
ly announced that it would spend $1
of $150 million in Nigeria. “Your
every barrel. The cost of doing busi-
deliver toiletries or packaged foods
billion a year on exploration in safer,
imagination isn’t big enough to figure
ness in this dangerous world—a cost
to American soldiers. In oil-produc-
if less promising, locales like Ger-
out how Nigerians can separate you
all of us pay at the gas pump—is
ing countries like Iraq, Venezuela,
many, Greenland, and New Zealand.
from your money,” he said. Still,
called the risk premium.
Mexico, Nigeria, and those parts of
The private security business has
the delta’s sweet, cheaply refinable
No one likes to discuss oil’s risk
the former Soviet Union that have
burgeoned as the threats grow.
crude is a siren song to Big Oil,
premium very much, particularly in
been corrupted by the Russian mob,
“It’s become a number one priority.
especially because it can be shipped
Texas, because the talk is believed
American workers similarly find
Companies have to protect their
easily to markets in Western Europe.
to encourage violence and increase
themselves caught up in resource
most precious commodity, which is
Nigeria pumps more than two mil-
costs, not to mention scare off po-
wars. These countries may be rich
personnel,” says security expert and
lion barrels a day, worth about $84
tential employees. In the big picture,
in oil and gas, but they are rent by
former Bush confidant Joe Allbaugh,
billion a year. It provides a crucial 14
the risk premium is a worldwide
social inequities. American compa-
the CEO of the Allbaugh Company.
percent of American imports.
concern, but it also hits close to
nies that undertake the exploration
Willbros at one time had a group that
That is pretty much the extent of
home, because what affects oil af-
and exploitation of these resources
did nothing but repair damaged and
the good news. Nigeria is the poster
fects Texas. The companies and the
can easily find themselves grappling
sabotaged pipelines in Nigeria. The
child for high-risk oil exploration and
workers who bear the risk—financial
with civil strife, growing anti-Amer-
promotional materials for London-
production, a living testament to the
in the case of the former, life and
icanism, the constraints and stark
based Control Risks state, “If a client
so-called oil curse. This holds that
THiNKTaNK 16
countries rich in oil wealth tend to have stunted economic growth— agriculture and industry wither and corruption thrives—because all the focus is on one incredibly lucrative business. “Everything is extracted and nothing is produced,” explains University of Houston history professor Kairn Klieman, who offers the only course in the U.S. on Africa and oil. “The political culture is, ‘I don’t have to produce.’ ” According to Bergen Risk Solutions, oil accounts for 90 percent of Nigeria’s export earnings and fully 80 percent of the government’s rev-
tinderbox in which the Nigerian gov-
killed while trying to deliver toiletries
enues—but somehow 85 percent of
ernment is located in the north and
or packaged foods to American
the money ends up in the hands of 1
the oil is located in the south; the
soldiers. In oil-producing countries
percent of the population. Twice the
wealth is shipped north, while the
like Iraq, Venezuela, Mexico, Nigeria,
size of California, with an estimated
people who live in the south get vir-
and those parts of the former Soviet
148 million people, Nigeria is the
tually nothing. There, millions of des-
Union that have been corrupted by
most populous country in Africa and
perately poor people live in primitive
the Russian mob, American workers
eighth in the world, but 70 percent of
villages with no electricity or running
similarly find themselves caught up
its people live on less than $1 a day.
water. In the urban wasteland that
in resource wars. These countries
It is one of the most corrupt coun-
is Lagos, Nigeria’s largest city, they
may be rich in oil and gas, but they
tries on earth, rated 2.2 out of a best
live under the freeways in shanties,
are rent by social inequities. Ameri-
possible score of 10 on Transpar-
their cook fires coating the air with
can companies that undertake the
ency International’s 2007 Corruption
a sticky brownish haze. If you blow
exploration and exploitation of these
Perception Index. An estimated $400
your nose in the polluted air, your
resources can easily find themselves
mucus will be black. The govern-
grappling with civil strife, growing
In a sense, we’ve all been kidnapped by Nigeria.
ment enjoys an enviable split with
anti-Americanism, the constraints
its multinational oil partners—taking
and stark penalties of the Foreign
anywhere from 50 to 80 percent of
Corrupt Practices Act (FCPA), and
the revenues—but public services
the potential for lawsuits from em-
are few to nonexistent; the govern-
ployees who find themselves unpro-
ment functions primarily to enrich
tected in life-threatening situations.
the officials who collect money from
As long ago as 1998, in Cabinda,
billion has been lost to
the foreigners who come to extract
Angola, a four-car motorcade con-
corruption since the country gained
oil. A former governor of Delta State,
taining thirty employees of a major
independence from Britain, in 1960,
James Ibori, managed to accrue his
oil company was attacked near the
and 14,000 people have been killed
own jet, his own Mercedes May-
local airport by a rocket-propelled
in violent outbreaks since military
bach, and some pricey London real
grenade. Today, radicals who once
rule supposedly ended, in 1999.
estate. Not only do foreign compa-
sabotaged pipelines in Colombia
In other words, oil and oil field
nies have to pay. limb in the case
have moved on to Venezuela. Every
service companies must operate in a
of the latter—are disproportionately
such incident adds to the cost of
Texan. The experience of Russell
producing oil. Not surprisingly, Exx-
Spell and others like him influenc-
on Mobil recently announced that
es the employment practices and
it would spend $1 billion a year on
business decisions of major Texas
exploration in safer, if less promising,
companies, shapes the rulings of
locales like Germany, Greenland,
Texas courts, and affects the costs
and New Zealand.
of Texas medicine.
The private security business has
In oil, as in war, the job of protect-
burgeoned as the threats grow.
ing vital American interests has
“It’s become a number one priority.
been contracted out to private
Companies have to protect their
companies, whose employees
most precious commodity, which is
can find themselves in harm’s
personnel,” says security expert and
way. In war-torn Iraq, more than a
former Bush confidant Joe Allbaugh,
thousand workers for Halliburton
the CEO of the Allbaugh Company.
and other contractors have been
Willbros at one time had.
THiNKTaNK 17