- The World Bank's former Chief Economist's
accusations are eye-popping - including how the IMF and US Treasury fixed
the Russian elections
-
- "It has condemned people to death,"
the former apparatchik told me. This was like a scene out of Le Carre.
The brilliant old agent comes in from the cold, crosses to our side, and
in hours of debriefing, empties his memory of horrors committed in the
name of a political ideology he now realizes has gone rotten.
-
- And here before me was a far bigger catch
than some used Cold War spy. Joseph Stiglitz was Chief Economist of the
World Bank. To a great extent, the new world economic order was his theory
come to life.
-
- I "debriefed" Stigltiz over
several days, at Cambridge University, in a London hotel and finally in
Washington in April 2001 during the big confab of the World Bank and the
International Monetary Fund. But instead of chairing the meetings of ministers
and central bankers, Stiglitz was kept exiled safely behind the blue police
cordons, the same as the nuns carrying a large wooden cross, the Bolivian
union leaders, the parents of AIDS victims and the other 'anti-globalization'
protesters. The ultimate insider was now on the outside.
-
- In 1999 the World Bank fired Stiglitz.
He was not allowed quiet retirement; US Treasury Secretary Larry Summers,
I'm told, demanded a public excommunication for Stiglitz' having expressed
his first mild dissent from globalization World Bank style.
-
- Here in Washington we completed the last
of several hours of exclusive interviews for The Observer and BBC TV's
Newsnight about the real, often hidden, workings of the IMF, World Bank,
and the bank's 51% owner, the US Treasury.
-
- And here, from sources unnamable (not
Stiglitz), we obtained a cache of documents marked, "confidential,"
"restricted," and "not otherwise (to be) disclosed without
World Bank authorization."
-
- Stiglitz helped translate one from bureaucratise,
a "Country Assistance Strategy." There's an Assistance Strategy
for every poorer nation, designed, says the World Bank, after careful in-country
investigation. But according to insider Stiglitz, the Bank's staff 'investigation'
consists of close inspection of a nation's 5-star hotels. It concludes
with the Bank staff meeting some begging, busted finance minister who is
handed a 'restructuring agreement' pre-drafted for his 'voluntary' signature
(I have a selection of these).
-
- Each nation's economy is individually
analyzed, then, says Stiglitz, the Bank hands every minister the same exact
four-step program.
-
- Step One is Privatization - which Stiglitz
said could more accurately be called, 'Briberization.' Rather than object
to the sell-offs of state industries, he said national leaders - using
the World Bank's demands to silence local critics - happily flogged their
electricity and water companies. "You could see their eyes widen"
at the prospect of 10% commissions paid to Swiss bank accounts for simply
shaving a few billion off the sale price of national assets.
-
- And the US government knew it, charges
Stiglitz, at least in the case of the biggest 'briberization' of all, the
1995 Russian sell-off. "The US Treasury view was this was great as
we wanted Yeltsin re-elected. We don't care if it's a corrupt election.
We want the money to go to Yeltzin" via kick-backs for his campaign.
-
- Stiglitz is no conspiracy nutter ranting
about Black Helicopters. The man was inside the game, a member of Bill
Clinton's cabinet as Chairman of the President's council of economic advisors.
-
- Most ill-making for Stiglitz is that
the US-backed oligarchs stripped Russia's industrial assets, with the effect
that the corruption scheme cut national output nearly in half causing depression
and starvation.
-
- After briberization, Step Two of the
IMF/World Bank one-size-fits-all rescue-your-economy plan is 'Capital Market
Liberalization.' In theory, capital market deregulation allows investment
capital to flow in and out. Unfortunately, as in Indonesia and Brazil,
the money simply flowed out and out. Stiglitz calls this the "Hot
Money" cycle. Cash comes in for speculation in real estate and currency,
then flees at the first whiff of trouble. A nation's reserves can drain
in days, hours. And when that happens, to seduce speculators into returning
a nation's own capital funds, the IMF demands these nations raise interest
rates to 30%, 50% and 80%.
-
- "The result was predictable,"
said Stiglitz of the Hot Money tidal waves in Asia and Latin America. Higher
interest rates demolished property values, savaged industrial production
and drained national treasuries.
-
- At this point, the IMF drags the gasping
nation to Step Three: Market-Based Pricing, a fancy term for raising prices
on food, water and cooking gas. This leads, predictably, to Step-Three-and-a-Half:
what Stiglitz calls, 'The IMF riot.'
-
- The IMF riot is painfully predictable.
When a nation is, "down and out, [the IMF] takes advantage and squeezes
the last pound of blood out of them. They turn up the heat until, finally,
the whole cauldron blows up," as when the IMF eliminated food and
fuel subsidies for the poor in Indonesia in 1998. Indonesia exploded into
riots, but there are other examples - the Bolivian riots over water prices
last year and this February, the riots in Ecuador over the rise in cooking
gas prices imposed by the World Bank. You'd almost get the impression that
the riot is written into the plan.
-
- And it is. What Stiglitz did not know
is that, while in the States, BBC and The Observer obtained several documents
from inside the World Bank, stamped over with those pesky warnings, "confidential,"
"restricted," "not to be disclosed." Let's get back
to one: the "Interim Country Assistance Strategy" for Ecuador,
in it the Bank several times states - with cold accuracy - that they expected
their plans to spark, "social unrest," to use their bureaucratic
term for a nation in flames.
-
- That's not surprising. The secret report
notes that the plan to make the US dollar Ecuador's currency has pushed
51% of the population below the poverty line. The World Bank "Assistance"
plan simply calls for facing down civil strife and suffering with, "political
resolve" - and still higher prices.
-
- The IMF riots (and by riots I mean peaceful
demonstrations dispersed by bullets, tanks and teargas) cause new panicked
flights of capital and government bankruptcies. This economic arson has
it's bright side - for foreign corporations, who can then pick off remaining
assets, such as the odd mining concession or port, at fire sale prices.
-
- Stiglitz notes that the IMF and World
Bank are not heartless adherents to market economics. At the same time
the IMF stopped Indonesia 'subsidizing' food purchases, "when the
banks need a bail-out, intervention (in the market) is welcome." The
IMF scrounged up tens of billions of dollars to save Indonesia's financiers
and, by extension, the US and European banks from which they had borrowed.
-
- A pattern emerges. There are lots of
losers in this system but one clear winner: the Western banks and US Treasury,
making the big bucks off this crazy new international capital churn. Stiglitz
told me about his unhappy meeting, early in his World Bank tenure, with
Ethopia's new president in the nation's first democratic election. The
World Bank and IMF had ordered Ethiopia to divert aid money to its reserve
account at the US Treasury, which pays a pitiful 4% return, while the nation
borrowed US dollars at 12% to feed its population. The new president begged
Stiglitz to let him use the aid money to rebuild the nation. But no, the
loot went straight off to the US Treasury's vault in Washington.
-
- Now we arrive at Step Four of what the
IMF and World Bank call their "poverty reduction strategy": Free
Trade. This is free trade by the rules of the World Trade Organization
and World Bank, Stiglitz the insider likens free trade WTO-style to the
Opium Wars. "That too was about opening markets," he said. As
in the 19th century, Europeans and Americans today are kicking down the
barriers to sales in Asia, Latin American and Africa, while barricading
our own markets against Third World agriculture.
-
- In the Opium Wars, the West used military
blockades to force open markets for their unbalanced trade. Today, the
World Bank can order a financial blockade just as effective - and sometimes
just as deadly.
-
- Stiglitz is particularly emotional over
the WTO's intellectual property rights treaty (it goes by the acronym TRIPS,
more on that in the next chapters). It is here, says the economist, that
the new global order has "condemned people to death" by imposing
impossible tariffs and tributes to pay to pharmaceutical companies for
branded medicines. "They don't care," said the professor of the
corporations and bank loans he worked with, "if people live or die."
-
- By the way, don't be confused by the
mix in this discussion of the IMF, World Bank and WTO. They are interchangeable
masks of a single governance system. They have locked themselves together
by what are unpleasantly called, "triggers." Taking a World Bank
loan for a school 'triggers' a requirement to accept every 'conditionality'
- they average 111 per nation - laid down by both the World Bank and IMF.
In fact, said Stiglitz the IMF requires nations to accept trade policies
more punitive than the official WTO rules.
-
- Stiglitz greatest concern is that World
Bank plans, devised in secrecy and driven by an absolutist ideology, are
never open for discourse or dissent. Despite the West's push for elections
throughout the developing world, the so-called Poverty Reduction Programs
"undermine democracy."
-
- And they don't work. Black Africa's productivity
under the guiding hand of IMF structural "assistance" has gone
to hell in a handbag. Did any nation avoid this fate? Yes, said Stiglitz,
identifying Botswana. Their trick? "They told the IMF to go packing."
-
- So then I turned on Stiglitz. OK, Mr
Smart-Guy Professor, how would you help developing nations? Stiglitz proposed
radical land reform, an attack at the heart of "landlordism,"
on the usurious rents charged by the propertied oligarchies worldwide,
typically 50% of a tenant's crops. So I had to ask the professor: as you
were top economist at the World Bank, why didn't the Bank follow your advice?
-
- "If you challenge [land ownership],
that would be a change in the power of the elites. That's not high on their
agenda." Apparently not.
-
- Ultimately, what drove him to put his
job on the line was the failure of the banks and US Treasury to change
course when confronted with the crises - failures and suffering perpetrated
by their four-step monetarist mambo. Every time their free market solutions
failed, the IMF simply demanded more free market policies.
-
- "It's a little like the Middle Ages,"
the insider told me, "When the patient died they would say, 'well,
he stopped the bloodletting too soon, he still had a little blood in him.'"
-
- I took away from my talks with the professor
that the solution to world poverty and crisis is simple: remove the bloodsuckers.
___
-
- A version of this was first published
as "The IMF's Four Steps to Damnation" in The Observer (London)
in April and another version in The Big Issue - that's the magazine that
the homeless flog on platforms in the London Underground. Big Issue offered
equal space to the IMF, whose "deputy chief media officer" wrote:
-
- "... I find it impossible to respond
given the depth and breadth of hearsay and misinformation in [Palast's]
report."
-
- Of course it was difficult for the Deputy
Chief to respond. The information (and documents) came from the unhappy
lot inside his agency and the World Bank.
-
-
- http://sf.indymedia.org/news/2002/02/115110.php
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