Thursday, April 28, 2005

The Corporation : The Pathological Pursuit of Profit and Power -- Democracy Ltd. (Chapter 4)

The Corporation : The Pathological Pursuit of Profit and Power -- Democracy Ltd. (Chapter 4)

They were willing to put up $300,000,000 to overthrow Democracy in the US in 1934...

The Corporation
The Pathological Pursuit of Profit and Power

by Joel Bakan

* Hardcover: 240 pages
* Publisher: Free Press (March 10, 2004)
* ISBN: 0743247442

Democracy Ltd. (Chapter 4)

As institutional psychopaths, corporations are wont to remove obstacles that get into their way. Regulations that limit their freedom to exploit people and the natural environment are such obstacles, and corporations have fought, with considerable success over the last twenty years, to remove them. Through lobbying, political contributions, and sophisticated public relations campaigns, they and their leaders have turned the political system and much public opinion against regulation. The law's ability to protect people and the environment from corporate harm has suffered as a result. Business opposition to regulation did not begin in the current era, however. It can be traced back to the origins of the regulatory state itself. Surely, the most bizarre moment in its history was when a group of leading bankers and corporate executives conspired to overthrow President Franklin D. Roosevelt, who they believed had gone too far with his regulatory ambitions, and replace him with a fascist dictator. The story reads like a pulp fiction thriller, but it really happened. Shortly after becoming president of the United States in the spring of 1933, Franklin D. Roosevelt created the New Deal, a sweeping and

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unprecedented set of regulatory laws and agencies that aimed to strengthen government's control of big corporations and banks. The New Deal reflected Roosevelt's conviction that the Great Depression would end only once the market's invisible hand was replaced by the very visible, and benevolent, hand of government. In that spirit, Roosevelt signed into law, among other things, new rights and protections for workers, debt relief for farmers, and fairness and transparency guarantees for investors. He later described his creation as follows:

The word "Deal" implied that the Government itself was going to use affirmative action to bring about its avowed objectives rather than stand by and hope that general economic laws would attain them. The word "New" implied that a new order of things designed to benefit the great mass of our farmers, workers and business men would replace the old order of special privilege in a nation which was completely and thoroughly disgusted with the existing dispensation . . . we were not to be content with merely hoping for . . . [constitutional] ideals. We were to use the instrumentalities and powers of Government actively to fight for them . . . because the American system visualized protection of the individual against the misuse of private economic power, the New Deal would insist on curbing such power.[1]

Inevitably the New Deal did just that -- it curbed corporations' freedoms and powers. Though many business leaders agreed with Roosevelt that the New Deal was necessary to save capitalism from itself, especially at a time of rising labor militancy and a collapsing economy, others were enraged, and believed that Roosevelt's plan would undermine American capitalism. Which is why a group of them plotted to overthrow his government.

On August 22, 1934, a little more than a year into Roosevelt's presidency and three days after Adolf Hitler had officially become

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Fuhrer of Germany, Smedley Darlington Butler, a former U.S. Marines general, and one of the nation's most honored and decorated military men, entered the lobby of the Bellevue Hotel in Philadelphia. A man named Gerald MacGuire, a World War I veteran who sold bonds for a living, was waiting to meet him. After a brief exchange of pleasantries, MacGuire told Butler he had been sent by a group of businessmen to ask the general to raise an army, seize the White House, and install himself as fascist dictator of the United States.[2]

Many business leaders at the time found fascism attractive, especially when they compared it to the "class hatred . . . preached from the White House," as Herbert Hoover characterized Roosevelt's New Deal. Benito Mussolini and Hitler had slashed the public debt, curbed inflation, driven down wages, and taken control of the trade unions in Italy and Germany, respectively. Roosevelt, on the other hand, had turned traitor to his class, they believed, and was now bent on destroying American capitalism. In its luly 1934 issue. Fortune magazine extolled the virtues of fascism and the economic miracles wrought by Mussolini. Laird Goldsborough, the man who produced the issue, wrote, "The good journalist must recognize in Fascism certain ancient virtues of the race, whether or not they happen to be momentarily fashionable in his own country.[3]

Indeed, at the time, some major American corporations were reaping substantial profits by working for Adolf Hitler. Adam Opel AG, a German automobile maker owned and controlled by General Motors (which, at the time, was controlled by the Du Pont family), was, with the help of GM executives, transformed in 1937 into an armaments concern. If manufactured trucks for the German Army, including three-ton "Opel Blitz" trucks, a crucial part of the blitzkrieg attacks on Poland, France, and the Soviet Union. It also built aircraft components, including engines for the Luftwaffe's Junker "Wunderbomber".[4] A recent GM television commercial boasts of the role of GM trucks in building roads and bridges to support the Allied

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campaigns during World War II -- "some people say we were paving the road to victory," the ad states -- but neglects to mention that the company helped build trucks for the enemy's armies as well.

IBM-a company where "if your customer needs help, you jump," according to lrving Wladawsky-Berger, vice president, technology and strategy -- jumped when Hitler sought its technical assistance in running the Nazi extermination and slave-labor programs. IBM provided the Nazis with Hollerith tabulation machines, early ancestors of computers that used punch cards to do their calculations. Edwin Black, author of IBM and the Holocaust, says, "The head office in New York had a complete understanding of everything that was going on in the Third Reich with its machines . . . that their machines were in concentration camps generally, and they knew that Jews were being exterminated." IBM technicians serviced the machines, IBM engineers trained their users, and IBM supplied punch cards for the machines, according to Black, at least until 1941, when the United States declared war on Germany.[5]

IBM's motivation for working with the Nazis, says Black, "was never about Nazism . . . it was always about profit," which is consistent with the corporation's amoral nature. Corporations have no capacity to value political systems, fascist or democratic, for reasons of principle or ideology. The only legitimate question for a corporation is whether a political system serves or impedes its self-interested purposes. According to Peter Drucker -- who says he "discussed it more than once with old Mr. Watson," the head of IBM at the time -- Thomas Watson had reservations about working with the Nazis'. "Not because he thought it was immoral," says Drucker, but "because Watson, with a very keen sense of public relations, thought it was risky" from a business perspective. In a similar spirit, Alfred Sloan, Jr., chairman of General Motors in 1939, seemed morally unconcerned about his company's work for the Nazis. The German subsidiaries were "highly profitable," he noted in defense of GM's investments in

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Germany, and Germany's internal political affairs "should not be considered the business of the management of General Motors."[6] Though the assistance provided to the Nazis by U.S. corporations may seem shocking in retrospect, it should not be forgotten that many U.S. corporations today regularly do business with totalitarian and authoritarian regimes-again, because it is profitable to do so.[7]

Looking back on the 1930s, a time when some top American corporations unabashedly worked with fascist dictators and many businesspeople believed that the federal government was threatening the capitalist system, one can at least comprehend why a cabal of leading businessmen would hatch a plot to turn the country into a fascist dictatorship. Removing democracy likely seemed a defensible business plan, from their perspective, because democracy threatened to undermine the corporation's mission. And Smedley Butler was the obvious person for the fob of removing it-or at least that is what MacGuire and his backers thought.

Butler had been a lifelong Republican and was a charismatic public speaker. A celebrated military hero-one of only four men to be decorated with the coveted Congressional Medal of Honor twice -- the general had spent most of his military career protecting American business interests throughout Asia and Central America. He was also adored by veterans, for whom he had fought for better treatment and more generous benefits from government. Butler seemed ideally positioned to raise an army of veterans and lead them on a campaign to seize the White House.

MacGuire and Butler had already met several times before the Bellevue Hotel meeting. A year earlier, MacGuire had invited himself to Butler's Philadelphia home, claiming to be a representative of concerned veterans, and asked the general to deliver a speech at an upcoming American Legion convention. The speech, a copy of which MacGuire had with him, was designed to rally the veterans against Roosevelt's decision to abandon the gold standard, which,

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once done, would cost the banks dearly. Butler, confused about why veterans should be concerned with the gold standard, had refused MacGuire's request. A few months later, in September 1933, MacGuire had found Butler again, this time in New Jersey, where the general was delivering a speech to a Legion branch. The two men had met in Butler's hotel room, where MacGuire had once again pleaded with the general to deliver the gold standard speech at the Chicago convention. According to Butler, MacGuire scattered a mass of $1,000 bills on the bed and invited him to use them to finance his trip to Chicago. "You put that money away before somebody walks in here and sees that money around," Butler recalled telling MacGuire, "because I do not want to be tied up with it at all."[8]

When the two men met at the Bellevue Hotel several weeks later, Butler had already acquired the names and affiliations of the men MacGuire purported to represent, mainly from MacGuire himself. There was, Butler later stated, Grayson Murphy, head of a leading Wall Street brokerage firm and a director of Morgan Guaranty Trust, as well as of Anaconda Copper, Goodyear Tire, and Bethlehem Steel. Robert dark, a wealthy banker whom Butler had actually met after demanding MacGuire produce some of his backers and who had told Butler that he was prepared to spend half of his $30 million fortune to protect the other half from Roosevelt, was another alleged backer of the plot, as was John Davis, the unsuccessful Democratic candidate for president in the 1924 election and later an attorney at J. P. Morgan & Co.

The meeting at the Bellevue Hotel took place in the closed-down hotel cafe at a table tucked away in a remote corner. MacGuire began by telling Butler that he had spent the past six months in Europe.

Butler recalled the rest of the conversation as follows:

He said, "I went abroad to study the part that the veteran plays in the various set-ups of the governments that they have abroad. I

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went to Italy for two or three months and studied the position that the veterans of Italy occupy and the Fascist set-up of government, and I discovered that they are the background of Mussolini. . . . I then went to Germany to see what Hitler was doing, and his whole strength lies in organizations of soldiers, too. . . . Then I went to France, and I found fust exactly the organization we are going to have. It is an organization of super soldiers." He gave me the French name for it, but I do not recall what it is. I never could have pronounced it anyhow. But I do know that it is a superorganization of members of all the other soldiers' organizations of France, composed of non-commissioned officers and officers. He told me that they had about 500,000, and that each one was a leader of ten others, so that it gave them 5,000,000 votes. And he said, "Now, that is our idea here in America -- to get up an organization of that kind."[9]

MacGuire told Butler that his backers' plan was to create an American version of the Croix de Feu, the French soldiers' organization whose name Butler was unable to recall, and install the general at the head of it. With a powerful army behind him, the plotters anticipated, Butler could demand that Roosevelt make him a secretary of general affairs, a new position where he would serve as a kind of assistant president. From there, Butler could assume real power over the nation and the president would become a mere figurehead, on the contrived pretext that Roosevelt's health was failing. If Roosevelt refused to cooperate with the scheme, according to MacGuire, Butler's army would overthrow him.

Journalist Paul Comly French, who also spoke with MacGuire, corroborated Butler's story:

During the course of the conversation he continually discussed the need of a man on a white horse, as he called it, a dictator who would

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come galloping in on his white horse. He said that was the only way; either through the threat of armed force or the delegation of power, and the use of a group of organized veterans, to save the capitalist system.

He warmed up considerably after we got under way and he said, "We might go along with Roosevelt and then do with him what Mussolini did with the King of Italy."

It fits in with what he told the General, that we would have a Secretary of General Affairs, and if Roosevelt played ball, swell; and if he did not, they would push him out."[10]

The money was there, MacGuire boasted to Butler during their meeting, to raise and equip a veterans' army, $3 million in place and $300 million available if needed. His backers were already on the move, he said, putting together a front organization that would provide secret financial and practical support for the plot. The formation of the American Liberty League, an organization "to combat radicalism, to teach the necessity of respect for the rights of person and property, and generally to foster free private enterprise," was announced three weeks later. The league's treasurer, Grayson Murphy, was MacGuire's boss. Robert Clark was a major financial contributor, and men from J. P. Morgan and DuPont were the league's executives. John Davis was a member of the national executive committee. Financial backers included some of corporate America's major concerns: the Pitcairn family, Andrew Mellon Associates, Rockefeller Associates, E. F. Hutton Associates, William Knudsen of General Motors, and the V. Pew family.[11]

MacGuire and the plotters had made a fatal mistake in their choice of a leader, however. "With incredible ineptitude," states Jules Archer in The Plot to Seize the White House, "they had selected the wrong man."[12] The plot, and the men behind it, represented everything Smedley Butler now despised. Over the years his youthful pas-

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sion for battles abroad had given way to an equally fierce desire to fight hypocrisy at home. He had come to believe that war was a product of corporate greed, that his men had fought for no higher ideal than profit. On August 21, 1931 -- a full two years before MacGuire first approached him -- Butler had stunned an audience at an American Legion convention in Connecticut when he had said:

I spent 33 years . . . being a high-class muscle man for Big Business, for Wall Street and the bankers. In short, I was a racketeer for capitalism. . . .

I helped purify Nicaragua for the international banking house of Brown Brothers in 1909-1912. I helped make Mexico and especially Tampico safe for American oil interests in 1916. I brought light to the Dominican Republic for American sugar interests in 1916. I helped make Haiti and Cuba a decent place for the National City [Bank] boys to collect revenue in. I helped m the rape of half a dozen Central American republics for the benefit of Wall Street. . . .

In China in 1927 I helped see to it that Standard Oil went its way unmolested. . . . I had . . . a swell racket. I was rewarded with honours, medals, promotions. . . . I might have given Al Capone a few hints. The best he could do was to operate a racket in three cities. The Marines operated on three continents.[13]

Butler was not about to add the United States to the list of countries where he had used military force to defend U.S. corporate interests from populist threats. On November 20, 1934, he revealed the plot to the House Un-American Activities Committee in a secret executive session in New York City. By that time the general had collected as much information as he could about the plot and had made sure his story was corroborated by the work of Paul French, who also testified before the committee. The committee vindicated Butler's story in all

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of its essential elements and submitted its findings to the House of Representatives on February 13, 1935:

In the last few weeks of the committee's official life it received evidence showing that certain persons had made an attempt to establish a fascist organization in this country. . . .

There is no question that these attempts were discussed, were planned, and might have been placed in execution when and if the financial backers deemed it expedient.

This Committee received evidence from Maj. Gen. Smedley D. Butler (retired), twice decorated by the Congress of the United States. He testified before the committee as to conversations with one Gerald C. MacGuire in which the latter is alleged to have suggested the formation of a fascist army under the leadership of General Butler. . . .

MacGuire denied these allegations under oath, but your committee was able to verify all the pertinent statements made by General Butler, with the exception of the direct statement suggesting the creation of the organization. This, however, was corroborated in the correspondence of MacGuire with his principal, Robert Sterling Clark, of New York City, while MacGuire was abroad studying the various forms of veterans organizations of Fascist character."[14]

With Butler having refused to cooperate with MacGuire and his backers and the committee's unwavering vindication of the general's story, the plot to seize the White House quickly unraveled.

"There was no doubt that General Butler was telling the truth," committee cochair John McCormack later recalled in a 1971 interview with Archer. "The plotters definitely hated the New Deal because it was for the people, not for the moneyed interests, and they were willing to spend a lot of their money to dump Mr. Roosevelt out of the White House." McCormack stated, "those fellows got desper-

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ate and decided to look into European methods, with the idea of introducing them into America. They sent MacGuire to Europe to study the Fascist organizations." How close was America's brush with fascism? Archer wanted to know. "Well," said McCormack,

if General Butler had not been the patriot he was, and if they had been able to maintain secrecy, the plot certainly might very well have succeeded, having in mind the conditions existing at that time. . . . If the plotters had got rid of Roosevelt, there is no telling what might have taken place. They wouldn't have told the people what they were doing, of course. They were going to make it all sound constitutional, of course, with a high-sounding name for the dictator and a plan to make it all sound like a good American program. A well-organized minority can always outmaneuver an unorganized majority, as Adolf Hitler did.[15]

Today, seventy years after the failed coup, a well-organized minority again threatens democracy. Corporate America's long and patient campaign to gain control of government over the last few decades, much quieter and ultimately more effective than the plotters' clumsy attempts, is now succeeding. Without bloodshed, armies, or fascist strongmen, and using dollars rather than bullets, corporations are now poised to win what the plotters so desperately wanted: freedom from democratic control. On July 24, 2002, nine desperate coal miners waited to be rescued from a watery hell 240 feet below a Pennsylvania cow pasture. Miraculously, they had escaped a torrent of water that had flooded their mine after they had mistakenly drilled into an adjacent mine shaft that was filled with water. The miners were finally rescued after spending seventy-eight hours in a cramped air pocket. President Bush proclaimed, when he flew into town one week later, that the miners' courage and perseverance reflected that of all

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Americans in the aftermath of September 11, 2001. "It was their determination to stick together and to comfort each other," he said, "that really defines kind of a new spirit that's prevalent in our country-that when one of us suffers, all of us suffer; that in order to succeed, we've got to be united; that by working together, we can achieve big objectives and big goals."16 It was, ironically as it turns out, similar sentiments that had originally animated Roosevelt's belief in the virtues of government regulation, including the regulation of coal mine safety.

In 1941, with Roosevelt in the White House, Congress substantially strengthened the regulatory regime for protecting coal miners' safety by granting to the federal Bureau of Mines the authority to enter and inspect mines for possible safety hazards. Though the bureau was almost thirty years old, its jurisdiction had previously been limited to collecting information and conducting research. Now, for the first time, it could actually enforce legislated safety standards. Further improvements would soon follow. In 1952, Congress enacted the Federal Coal Mine Safety Act, which gave the bureau new powers to issue and enforce violation notices, to close mines where inspectors found imminent dangers, and to require that mines be inspected on an annual basis. The act was strengthened in the late 1960s, and then replaced in 1977 with a new act, the Federal Mine Safety and Health Act, that consolidated protections for all types of mining, and created a new enforcement agency, the Mine Safety and Health Administration (MSHA), to take over from the Bureau of Mines. Annual mining fatalities dropped from 272 to 86 during the first decade of the new agency's operations.[17]

More recently, the Bush administration introduced measures that could have had the effect of rolling back protection of coal miners' safety. In his first budget George W. Bush sought cuts to staffing levels at the MSHA, but these were defeated by the then Democratic majority in ...

NOTES page 184-187

Chapter 4: Democracy Ltd.

1. Samuel Rosenman, ed„ The Public Papers and Addresses of Franklin D. Roosevelt, Volume Two: The Year of Crisis, 1933 (New York: Random House, 1938), as cited in Cass Sunstein, The Partial Constitution (Cambridge, Mass.: Harvard University Press, 1993), 57-58.
2. The following account of this story is based primarily on Jules Archer, The Plot to Seize the White House (New York: Hawthorn Books, 1973).
3. Archer, The Plot, 21.
4. National Archives, "U.S. Strategic Bombing Surveys" 243/190/62- Box 696, August 14, 1944; Box 697, August 23, 194?; Box 946. Ford Werke, the Ford Motor Company's German subsidiary, also contributed to the Nazi war effort, providing nearly a third of the German Army's trucks. For discussions of GM and Ford's alleged involvement with the Nazis, see Bradford C. Snell, "American Ground Transport: A Proposal for Restructuring the Automobile, Truck, Bus and Rail Industries," report presented to the Committee of the Judiciary, Subcommittee on Antitrust and Monopoly, United States Senate, February 26, 1974 (Washington, D.C.: U.S. Government Printing Office, 1974), 16-24; Michael Dobbs, "Ford and GM Scrutinized for Alleged Nazi Collaboration," The Washington Post, November 30,1998.
5. Interview with Edwin Black. Also see Edwin Black, IBM and the Holocaust: The Strategic Alliance Between Nazi Germany and America's Most Powerful Corporation (New York: Crown Publishers, 2001).
6. Interviews with Edwin Black and Peter Drucker. Quotes from Dobbs, "Ford and GM Scrutinized," who reports as follows: "Less than three weeks after the Nazi occupation of Czechoslovakia in March 1939, GM Chairman Alfred P. Sloan defended this strategy [GM not divesting its German assets] as sound business practice, given the fact that the company's German operations were 'highly profitable.' "The internal politics of Nazi Germany 'should not be considered the business of the management of General Motors,' Sloan explained in a letter to a concerned shareholder dated April 6, 1939. 'We must conduct ourselves [in Germany] as a German organization. . . . We have no right to shut down the plant.' "
7. According to David Jessup, executive director of New Economy Information Service, an organization whose survey data found a disturbing trend by U.S. corporations to invest in authoritarian countries, "I doubt that the issue of democracy-or-no-democracy is on businessmen's minds when they make an investment decision. But maybe it's an unconscious preference [for authoritarian countries]." Quoted in R. C. Longworth, "Globalization Survey Reveals U.S. Corporations Prefer Dictatorships" November 19, 1999, available at The Wall Street Journal recently reported that eighty-six companies, among them IKEA, Goodyear, First Union Bank, and CAN Financial, had been fined under the Trading with the Enemy Act between 1998 and the date of its article. The act makes it an offense to trade with a list of countries that includes Iran, Iraq, Cuba, North Korea, and Taliban-controlled Afghanistan. When Vice President Dick Cheney was CEO of Halliburton in 2000, the company opened an office in Tehran, though it was not among the group of companies fined under the act. See Stephanie M. Horvath, "U.S. Slaps 86 Firms with Fines for Deals Made with 'Enemies,'" The Wall Street Journal, July 3, 2002. On July 23, 2001, ABC News reported that most of Iraq's UN-approved oil exports were being bought by U.S. oil companies from Russian middlemen and refined in Louisiana and Texas. John K. Cooley, "Trading with the Enemy: U.S. Refiners Reportedly Buying Most of Iraq's Oil," June 20, 2002, available at For further examples, see Guy Dinmore and Najmeh Bozorgmehr, "US Companies Skirt Ban on Trade with Iran," Financial Times, February 27, 2002.
8. Archer, The Plot, 146.
9. Butler's testimony to the House Un-American Activities Committee, as quoted in Archer, The Plot, 153.
10. Archer, The Plot, 156.
11. Ibid., 30 ("combat").
12. Ibid., 198.
13. Ibid., 118-119.
14. Ibid., 192-193.
15. Ibid., 213 ("doubt," "plotters," "fellows"), 214 ("patriot").
16. Quoted in Hendrik Hertzberg, "Comment: Mine Shaft," The New Yorker, August 19 and 26, 2002,5S.
17. History from U.S. Department of Labor, Mine Safety and Health Administration, History of Mine Safety and Health Legislation, available at

Maverick Marine: General Smedley D. Butler and the Contradictions of American Military History
by Hans Schmidt

* Paperback: 292 pages
* Publisher: University Press of Kentucky; Reprint edition (September 1, 1998)
* ISBN: 0813109574

8 pages with references to MacGuire in this book
11 pages with references to fascist in this book
5 pages with references to overthrow in this book
4. on Page 223:
"... had raised $3 million, with more in the offing, and approached Butler to lead an army of 500,000 veterans to overthrow the government in a bloodless coup. FDR would be persuaded to put Butler in charge of Civilian Conservation Corps camps ..."
5. on Page 227:
"... These significant disclosures tended to be lost, however, in the confusion surrounding the larger issue of an alleged plot to overthrow the government. In the HUAC proceedings, the grandiose conspiracy to mobilize 500,000 veterans reduced simply to what Butler and French ..."

War Is a Racket: The Anti-War Classic by America's Most Decorated General, Two Other Anti=Interventionist Tracts, and Photographs from the Horror of It
by Smedley D. Butler, Adam Parfrey (Introduction)

* Paperback: 66 pages
* Publisher: Feral House; Reprint edition (April, 2003)
* ISBN: 0922915865

The plot to seize the White House
by Jules Archer

* Unknown Binding: 256 pages
* Publisher: Hawthorn Books (1973)

The Banana Wars: A History of United States Military Intervention in Latin America from the Spanish-American War to the Invasion of Panama
by Ivan Musicant

* Hardcover: 470 pages
* Publisher: Macmillan Pub Co (August 1, 1990)
* ISBN: 0025882104

The Banana Wars: United States Intervention in the Caribbean, 1898-1934 (Latin American Silhouettes)
by Lester D. Langley

* Hardcover: 265 pages
* Publisher: SR Books; 2nd Ed edition (December 1, 2001)
* ISBN: 0842050469

The Banana Men: American Mercenaries and Entrepreneurs in Central America, 1880-1930
by Lester D. Langley, Thomas D. Schoonover

* Paperback
* Publisher: University Press of Kentucky; Reprint edition (February 1, 1996)
* ISBN: 0813108365

Confessions of an Economic Hit Man
by John Perkins

* Hardcover: 264 pages
* Publisher: Berrett-Koehler Publishers (November 9, 2004)
* ISBN: 1576753018

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