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.
Here in Washington we
conducted exclusive interviews with Stiglitz, for The Observer and Newsnight,
about the inside workings of the IMF, the 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’ and ‘restricted’.
Stiglitz 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 four-step
programme.
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 advisers.
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 into riots.
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
America, 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
the bloodsuckers.
