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.

 

gregory.palast@observer.co.uk