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.
