FOR NEW Readers of RMN ...
The OBSERVER, London
October 10, 2001
by
Greg Palast
http://www.GregPalast.com
THE GLOBALIZER WHO CAME IN FROM THE COLD
http://www.gregpalast.com/detail.cfm?artid=78&row=0
The World Bank's former Chief Economist's accusations are eye-popping - including how the IMF and US Treasury fixed the Russian elections.
EXCERPTS:
On the issue of standard IMF prescriptions for "assisting" nations in financial trouble ...
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.
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.
.....
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.
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Joseph Stiglitz Lecture
Globalisation and its Discontents:
How to Fix What's Not Working
http://idpm.man.ac.uk/stiglitz.html
IDPM, University of Manchester, UK
4 April 2001
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This post dedicated to Ali - the little boy from Baghdad, Iraq ...
- Aladdin
Serving Freedom
and Liberty
