IMF - World Bank - Blood Suckers
World Bank Former Chief Economist's Amazing Accusations By Greg Palast
The Globalizer Who Came In From the Cold The Observer - London
Originally published 10-10-01
2-5-2
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.
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