- In July 1944, the IMF and Bank for Reconstruction and
Development (now the World Bank) were established to integrate developing
nations into the Global North-dominated world economy in ways other than
- Under a new post-war monetary system, the IMF was created
to stabilize exchange rates linked to the dollar and bridge temporary payment
imbalances. The World Bank was to provide credit to war-torn developing
countries. Both bodies, in fact, proved hugely exploitive, using debt entrapment
to transfer public wealth to Western bankers and other corporate predators.
- On a grander scale today, the scheme destructively obligates
indebted nations to take new loans to service old ones, assuring rising
indebtedness and structural adjustment harshness, including:
- -- privatization of state enterprises, many sold for
a fraction of their real worth;
- -- mass layoffs;
- -- deregulation;
- -- deep social spending cuts;
- -- wage freezes or cuts;
- -- unrestricted free market access for western corporations;
- -- corporate-friendly tax cuts;
- -- tax increases for working households;
- -- crushing trade unionism; and
- -- harsh repression against opposition to a system incompatible
with social democracy, civil and human rights.
- As a result, bankers and other corporate predators strip
mine countries of their material wealth and resources, shift them from
public to private hands, crush democratic values, hollow out nations into
backwaters, destroy middle class societies, and turn workers into serfs
if they manage to have any means of employment.
- In other words, perpetual debt bondage substitutes for
freedom. A race to the bottom follows. An elite few benefit at the expense
of the many, entrapped nations henceforth forced to pay homage to their
money masters, effectively handing over their sovereignty.
- As a result, neoliberalism is neo-Malthusianism writ
large, destroying humanity to save it. Its holy trinity, in fact, mandates
no public sphere, unrestrained corporate empowerment, and eliminating social
spending to devote all state resources for bottom line profits, national
security and internal control.
- Except for the privileged few, it's the worst, not the
best, of all possible worlds, financializing economies into debt bondage,
transforming them into hollow shell dystopian backwaters.
- For example, in the 1980s, 187 IMF loans caused poverty,
hunger, malnutrition, disease and death for many developing countries,
including all sub-Saharan ones entrapped by structural adjustment harshness.
Their growth, in fact, declined on average by 2.2% per year, and per capita
income dropped below pre-independence levels.
- Debt service required health expenditures cut 50% and
education by 25%. Moreover, as indebtedness rises, so does forced austerity,
what, in fact, becomes a death spiral requiring new loans to service old
ones, a never-ending cycle to oblivion for many nations in hock to IMF
- In Latin America, the 1980s was a lost decade. Loans
to Chile required 40% wage cuts. During Mexico's 1982 debt crisis, wages
as well as spending for health, education, and basic infrastructure dropped
by half. As a result, infant mortality tripled and vital human needs were
unmet to assure bankers got paid.
- By decade's end, developing nations overall, in fact,
were worse off, not better, deeper than ever in debt the way IMF officials
planned. Devaluations followed. Debts burgeoned. Growth fell. Earlier from
1976 to 1982, Latin American borrowing doubled, 70% of new loans needed
to service old ones.
- Yet Article I of the IMF's Articles of Agreement audaciously
says it lends:
- "to give confidence to members by making the general
resources of the Fund temporarily available to them under adequate safeguards,
thus providing them with opportunity to correct maladjustments in their
balance of payments without resorting to measures destructive of national
or international prosperity."
- The IMF's web site states it provides loans to reduce
poverty and increase economic development, adding that "(i)n difficult
economic times, (it) helps countries to protect the most vulnerable in
- It fact, it does precisely the opposite, entrapping them
in debt, poverty and depravation, operating as a global loan shark, demanding
not a pound of flesh but all of it no matter the pain and suffering caused.
- Once shock therapy entrapped Chile under Pinochet, unemployment
rose from 9.1 to 18.7% between 1974 and 1975. At the same time, output
fell 12.9% as cheap imports flooded the country. As a result, local businesses
closed, hunger grew, and so did mass disenchantment with economic harshness
followed by repressive crackdowns against challenges to regime control.
- A decade later, growth resumed, but only after conditions
worsened, including 45% of Chileans impoverished while the nation's richest
10% saw their incomes rise by 83%.
- It works the same way everywhere under IMF mandates,
including mass impoverishment, public wealth transferred to private hands,
out-of-control corruption and cronyism, and nations transformed into hollow
shells to benefit super-rich elitists already with too much.
- In 1980s Bolivia under Victor Paz Estenssoro, austerity
included wage freezes, ending food subsidies, lifting price controls, hiking
oil prices 300%, imposing deep social spending cuts, permitting unrestricted
imports, downsizing state enterprises before privatizing them, and letting
unemployment rise sharply.
- The decade through the early 1990s saw Latin American
debt rise from $110 billion in 1980 to $473 in 1992, accompanied by interest
payments growing from $6.4 billion to $18.3 billion. As a result, worker
livelihoods, health and welfare suffered. Globally, in fact, many millions
lucky enough to have work endure sub-poverty wages to let foreign predators
cash in, profiting enormously on their misery.
- The scenario replicated from sub-Saharan Africa to Latin
America to Russia and Asian Tiger countries in 1997/98, looting them one
at a time or in combination, turning Asia's miracle, in fact, into disaster.
- The International Labor Organization estimated 24 million
lost jobs as a result of selling state enterprises at fire sale prices,
replacing local brands with Western ones, and letting foreign predators
benefit from what The New York Times called "the world's biggest going-out-of-business
- At the same time, Asian workers became human wreckage,
the fallout IMF policy statements never explain, perpetuating the myth
they offer help as a lender of last resort when, in fact, their mandate
is plunder for profit, no matter the damage caused.
- Mandated Austerity in Greece
- In his June 7 article titled, "Will Greece let EU
Central Bankers Destroy Democracy," Michael Hudson discusses proposed
bailout terms, calling them "an opportunity for privatization grabs,"
what local voters didn't bargain for with 2000 Euroland membership.
- They didn't understand its unintended consequences, including
agreeing to foreign-controlled central bank authority running Greece like
a colony, substituting its will over national sovereignty.
- According to Professor William Black (former senior bank
regulator and Savings and Loan prosecutor), Eurozone membership has strings,
including foregoing rights to:
- -- to devalue currencies to make exports more competitive;
- -- sovereignty over members' own money or (for "periphery
nations") influence over European Central Bank (ECB) policies; and
- -- expansive fiscal policies to stimulate growth.
- In fact, mandated bondage "is a double oxymoron
- preventing effective counter-cyclical fiscal policies harm(ing) growth
and stability throughout the Eurozone," weak members hurting stronger
- Moreover, like all debt-entrapped countries, Greece's
bailout price is structural adjustment harshness, making a bad situation
worse. It requires new infusions during hard times, causing rising indebtedness
- the familiar IMF-imposed death spiral no responsible leader should accept.
- Last year, however, in return for a $150 billion loan,
Greek Prime Minister Georgios Papandreou imposed earlier cuts, including:
- -- large public worker layoffs;
- -- public sector 10% wage cuts, including a 30% reduction
in salary entitlements;
- -- cutting civil service bonuses 20%;
- -- freezing pensions;
- -- raising the average retirement age two years;
- -- higher fuel, alcohol, tobacco, and luxury goods taxes
with much more to come given Greece's worsening debt problem.
- Euroland officials now demand them in return for more
bailout help, Eurogroup President Jean-Claude Juncker expecting Greek political
consensus to agree, saying:
- "In the case of countries with difficulties, it
would be wise for the principal political forces of those countries to
agree on the path to follow. That's what happened in Ireland, and that's
what we would like to happen between the political parties in Greece,"
no matter the economic wreckage or human cost.
- Undeterred, on June 8, Papandreou announced new tax increases
and over $9 billion in spending cuts. Earlier he divulged plans to raise
nearly $75 billion by privatizing state enterprises, including water companies,
Piraeus and Thessalonika port facilities, the Athens racecourse, Greece's
Postbank, a casino, the OPAP lottery company, and state rail system.
- However, Brussels demands more, including deeper cuts
and selling off Greece's crown jewels at fire sale prices, effectively
ceding its entire sovereignty to foreign buyers able to strip mine its
wealth, no matter the human cost.
- Greek public assets are worth an estimated $440 billion.
Brussels wants at least the best of them sold as well as no restructuring
to assure full debt repayment in return for another $125 billion loan.
- However, given Greece's rising burden, no amount is enough
as greater austerity impedes economic growth and recovery, compounding
its current crisis.
- The Argentina Solution
- On May 31, Irish Times.com headlined, "Ireland 'may
try to restructure debt,' " saying:
- According to Ernst and Young, "Ireland may try to
restructure its debt to lower interest payments or extend the maturity
on its borrowings as the economy contracts again this year."
- Like Greece, Portugal, Spain, Italy, and troubled Eastern
European countries, Ireland's burden shows no signs of abating, perhaps
heading it either for restructuring or default as the most sensible step
- In December 2001, Argentina halted all debt payments
to domestic and foreign creditors. Months earlier, an IMF loan didn't help.
Nearly $100 billion in debt was restructured, completed in 2005 on a take
it or leave it basis, imposing stiff haircuts to bondholders agreeing to
terms of around 65%, deciding something was better than nothing. Most holdouts
out finally capitulated in 2010 on similar terms.
- Sustained economic growth followed from 2003 through
2007, helped by debt restructuring and a devalued currency. Eurozone countries
can relieve their burdens with a similar option, reclaiming their sovereignty
by reinstating their pre-euro currencies, what they never should have sacrificed
in the first place.
- Stephen Lendman lives in Chicago and can be reached at
firstname.lastname@example.org. Also visit his blog site at sjlendman.blogspot.com
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