IMF'S FOUR STEPS
failures, and suffering finally drove a Presidential adviser to the
wrong side of the barricades
BY Gregory Palast
It was like a scene out of Le Carré: the brilliant agent comes
in from the cold and, in hours of debriefing, empties his memory of
horrors committed in the name of an ideology gone rotten.
But this was a far bigger
catch than some used-up Cold War spy. The former apparatchik was Joseph
Stiglitz, ex-chief economist of the World Bank. The new world economic
order was his theory come to life.
He was in Washington for
the big confab of the World Bank and International Monetary Fund. But
instead of chairing meetings of ministers and central bankers, he was
outside the police cordons. The World Bank fired Stiglitz two years
ago. He was not allowed a quiet retirement: he was excommunicated purely
for expressing mild dissent from globalisation World Bank-style.
helped translate one, 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 'investigation' involves little more than close
inspection of five-star hotels. It concludes with a meeting with a begging
finance minister, who is handed a 'restructuring agreement' pre-drafted
for 'voluntary' signature.
Each nation's economy is
analysed, says Stiglitz, then the Bank hands every minister the same
Step One is privatisation.
Stiglitz said that rather than objecting to the sell-offs of state industries,
some politicians - 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 possibility of commissions for shaving
a few billion off the sale price.
And the US government knew
it, charges Stiglitz, at least in the case of the biggest privatisation
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." '
Stiglitz cannot simply be
dismissed as a conspiracy nutter. The man was inside the game - a member
of Bill Clinton's cabinet, chairman of the President's council of economic
Most sick-making for Stiglitz
is that the US-backed oligarchs stripped Russia's industrial assets,
with the effect that national output was cut nearly in half.
After privatisation, Step
Two is capital market liberalisation. In theory this allows investment
capital to flow in and out. Unfortunately, as in Indonesia and Brazil,
the money often simply flows 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.
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. Higher interest rates demolish property values, savage
industrial production and drain national treasuries.
At this point, according
to Stiglitz, 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] squeezes the
last drop 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
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 believe the riot was expected.
And it is. What Stiglitz
did not know is that Newsnight obtained several documents from inside
the World Bank. In one, last year's Interim Country Assistance Strategy
for Ecuador, the Bank several times suggests - with cold accuracy -
that the plans could be expected to spark 'social unrest'.
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 IMF riots (and by riots
I mean peaceful demonstrations dispersed by bullets, tanks and tear
gas) cause new flights of capital and government bankruptcies This economic
arson has its bright side - for foreigners, who can then pick off remaining
assets at fire sale prices.
A pattern emerges. There
are lots of losers but the clear winners seem to be the western banks
and US Treasury.
Now we arrive at Step Four:
free trade. This is free trade by the rules of the World Trade Organisation
and the World Bank, which Stiglitz likens to the Opium Wars. 'That too
was about "opening markets",' he said. As in the nineteenth
century, Europeans and Americans today are kicking down barriers to
sales in Asia, Latin American and Africa while barricading our own markets
against the Third World 's agriculture.
In the Opium Wars, the West
used military blockades. Today, the World Bank can order a financial
blockade, which is just as effective and sometimes just as deadly.
Stiglitz has two concerns
about the IMF/World Bank plans. First, he says, because the plans are
devised in secrecy and driven by an absolutist ideology, never open
for discourse or dissent, they 'undermine democracy'. Second, they don't
work. Under the guiding hand of IMF structural 'assistance' Africa's
income dropped by 23%.
Did any nation avoid this
fate? Yes, said Stiglitz, Botswana. Their trick? 'They told the IMF
to go packing.' Stiglitz proposes radical land reform: an attack on
the 50% crop rents charged by the propertied oligarchies worldwide.
Why didn't the World Bank
and IMF follow his advice?
'If you challenge [land
ownership], that would be a change in the power of the elites. That's
not high on their agenda.'
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.
'It's a little like the
Middle Ages,' says the economist, 'When the patient died they would
say well, we stopped the bloodletting too soon, he still had a little
blood in him.'
Maybe it's time to remove