Dam Shame

Activists Target Global Financiers of Chinese Eco Disaster

What will you do when you learn your Discover Card is indirectly bankrolling an environmental disaster?

The people at the International Rivers Network, a California group, hope you will cut it up and mail it back to its owners at Morgan Stanley Dean Witter, along with a statement expressing your concern about Morgan's financial role in China's Three Gorges Dam. Scheduled for completion in 2009, the dam is a behemoth to rival the Great Wall: It is by far the largest hydroelectric dam any country has ever built. According to activists, it is also one of the most socially and ecologically devastating projects humans have ever undertaken.

IRN's Discover Card boycott, the culmination of years of protest against the dam, marks a significant shift in environmentalist strategy. After years of focus on the builders of exploitative industries and infrastructure in developing nations, activists have a new target: the projects' financiers, many of them huge U.S. investment banks that have never before been called to account for the damaging enterprises they help to underwrite. Thanks to sweeping changes in world financial markets, those banks are unprecedentedly vulnerable to such attacks. Not only have they been swept up in vast conglomerates—whose consumer operations, like Discover Card, provide a ready focus for boycotts—but most are publicly held, which means they can be challenged internally, through shareholder actions.

illustration: Brad Kendall

"This is the beginning of a movement, " says Ricardo Bayon, a Washington, D.C.-based consultant who helps demystify global economics for environmental groups.

IRN is timing its boycott to coincide with Morgan Stanley Dean Witter's April 6 annual meeting in Jersey City. The action will lend muscle to a two-year-old shareholder campaign led by Trillium Asset Management, a Boston firm that specializes in socially responsible investments. Using Three Gorges as its rationale, Trillium asked the bank to review its underwriting policies, "with the view to incorporating and fully disclosing" any transaction's impact on the environment and human rights.

Morgan's board of directors says such candor would limit the company's flexibility and damage its business, particularly since "competitors do not disclose this information." But one large firm, Bank of America, has already held talks with Trillium and agreed not to invest in Three Gorges directly. A resolution similar to the one at Morgan is pending at Chase Manhattan, and resolutions at Merrill Lynch (filed by Domini Social Investments) and Citigroup have been provisionally withdrawn, since the companies have agreed to discuss their stance on Three Gorges.

"This is the first time an environmental and social issue has hit the Wall Street investment banks," says Doris Shen, IRN's China campaigner. "Usually investment banks stay amorphous and out of the picture."

The two-pronged attack is a clear sign of the environmental movement's growing sophistication about global finance. Much of that awareness has developed during a decade of struggle against the Three Gorges Dam. This massive public works project—575 feet tall and running roughly a mile across the Yangtze River—is intended to provide flood control and to generate electricity for people and industry. It has been a dream of Chinese leaders since 1919, when it was first proposed by Sun Yat-sen. But construction did not actually begin until 1994, under Chinese premier Li Peng, the man behind the brutal 1989 crackdown on students at Tiananmen Square.

Six years later, the river is still flowing. But when Three Gorges is finally finished, it will create a reservoir the size of Lake Superior—about 400 miles long. It will force the relocation of up to 1.9 million people. It will swamp ancient archaeological sites. It could eliminate the Chinese river dolphin from the face of the earth. According to The Lancet, a British medical journal, an array of public health risks associated with the dam and its construction could make it the "Chernobyl of hydropower." Some engineers fear the dam itself could one day collapse from the buildup of silt behind its walls. And there are 10 million people in its path.

Chinese activists tried to raise these issues, but Li Peng banned all criticism of the project. A journalist who wrote a book of protest was jailed for 10 months. As a result, dam opponents were forced to mobilize in new areas. "They got nowhere in China, so they had to move upstream, to the financiers," says Bayon.

China originally hoped to build the dam entirely on its own—"to show how great socialism is," says Shen. But it needed Western technical expertise. Moreover, the dam was incredibly expensive. Estimates vary widely, but Shen says it was originally supposed to cost $9 billion, has already hit $18 billion, and could eventually top out at a mind-boggling $75 billion, including resettlement costs.

Such astronomical figures forced China to reach far and wide for money. Wherever the government has turned, dam opponents have followed. China's only major remaining funding hope is private investment banks, which issue stocks and bonds that are sold to investors around the world. The banks are staggering in size and power; but their involvement also gives environmentalists new avenues of protest—whether or not they know it yet, thousands of impressionable investors have forked over some tiny portion of their retirement savings portfolios for China-related bonds. Dozens of financial institutions around the world have participated in issuing those bonds, and each has a public image to protect. If capitalism is global, activism can be global, too.

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