The World Bank's former Chief Economist's accusations are eye-popping - including how the IMF and US Treasury fixed the Russian elections
- a crashed economy
- a destroyed government
- sometimes in flames with riots
- to sign secret agreements of 111 items
- in which they agreed to sell off their key assets - water, electric, gas, etc.
- in which they agreed to take economic steps which are really devastating to the nations involved
- in which they pay off the politicians billions of dollars to Swiss bank accounts to do this transfer of a countries fixed assets
The Observer, London, Sunday, April 29, 2001.
"It has condemned people to death," the former apparatchik told me. This was like a scene out of Le Carre.
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.
In 1999 the World Bank fired Stiglitz.
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."
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 BankYou'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 Ethiopia'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."
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.
"They told the IMF to go packing."
"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," 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 find it impossible to respond given the depth and breadth of hearsay and misinformation in [Palast's] report."
Award-winning reporter Palast writes Inside Corporate America for the London Observer.
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