IMF'S FOUR STEPS TO DAMNATION
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How crises, failures, and suffering finally drove a Presidential adviser to the
wrong side of the barricades
Gregory Palast
Sunday April 29, 2001
The Observer
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 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 the bloodsuckers.
gregory.palast@observer.co.uk
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GREGORY PALAST
INTERNATIONAL INVESTIGATIVE REPORTER
by Sandeep Kaushik
Cleveland Free Times
Published April 11 - 17, 2001
Gregory Palast is almost certainly the greatest investigative journalist
you?ve never heard of. An award-winning reporter in Britain, where he writes
for The Guardian and The Sunday Observer, as well as hosts the BBC?s 60
Minutes-esque Newsnight, Palast abandoned his native America when the
mainstream press declined to publish his groundbreaking, hard-hitting
exposés, known for stripping bare abuses of power. Case in point: his recent
series on how Jeb Bush and Katherine Harris conspired to illegally purge the
Florida voting rolls of thousands of former felons whose voting rights had
been restored by other states, the vast majority of whom were (not
coincidentally) Democrats. In the few venues that have bothered to report it
in the United States, it?s caused scarcely a ripple. Palast will be in
Cleveland on Tuesday to debunk reigning myths about the much-touted
phenomenon known as globalization.
Free Times: How did you become an investigative journalist?
Greg Palast: I started out as an investigator for American state and local
governments; I?m an expert in the regulation of industry. For instance, I
worked for the Chugach natives of Alaska to expose the fraud involved in the
grounding of the Exxon Valdez, and for the government in its prosecution of
the Shoreham nuclear plant scandal in New England, the biggest racketeering
case in history. There we won a $400 million settlement from the builders and
the utility, which we proved had lied about the plant?s safety. It was a
natural progression from there into journalistic investigations.
FT: Ever do any work in Ohio?
GP: Yeah, I discovered with the steel industry that it?s not cheap Japanese
imports that are responsible for the loss of American steel jobs. The jobs at
companies like LTV went with the introduction of continuous casting and
automation. The truth is that when markets were tight, American steelmakers
chose to crank up prices rather than produce and sell more steel, which
helped foreign companies get a foothold in the market. They raised prices
when markets were tight, then closed plants when markets went slack. Unlike
the foreign competitors, they felt no obligation to maintain their workforce.
FT: The promo for your upcoming appearance for the Cleveland Council on World
Affairs says that British Prime Minister Tony Blair called you a liar. What?s
that about?
GP: I did an undercover investigation in which I penetrated his cabinet and
circle of closest advisors to show how U.S. and British companies are able to
buy insider access. I posed as a businessman interested in getting
legislation changed, and a cabinet minister told me that for 5,000 pounds, he
would get me into 10 Downing Street, where I?d get what I wanted done. It was
the biggest scandal of the Blair administration, and forced the resignation
of several ministers, even though Blair said I was a liar.
FT: What?s your beef with American newspapers?
GP: Just look at my Florida theft-of-the-election story. When it came out in
Britain, hundreds of people asked me, "When will Bush resign?" It?s a dual
shame: first the election shenanigans, then the almost total lack of
reporting about them. Mainstream American papers don?t like to publish
controversial stuff, particularly if it has to do with investigations of
industry. The Washington Post did print my story on the scam of utility
deregulation in California, but for the most part, while I?m mainstream in
Europe, I?m non-stream in my home town. I should say, though, that I am
currently filming a documentary for PBS on the presidential election rip-off.
FT: Your talk in Cleveland is on the myth of "globalization." What does the
term even mean?
GP: The way it?s usually bandied about, it?s pretty vague. It has something
to do with the future, with giving Bolivian peasants cell phones and wiring
Eskimos to the internet. If you?re against it, that means you must be against
the future, and the communication revolution, and the concept of bringing the
world together. You?re a Luddite. But it?s funny; I haven?t yet met an
anti-globalization activist who is against the internet. Let?s get real - no
one?s against the natives in Alaska getting on the net and downloading their
porn just like everyone else.
FT: So if it?s not about wiring the Sahara for cable, what is it about?
GP: I?m talking about groups like the International Monetary Fund [IMF], the
World Bank [WB], and the World Trade Organization [WTO]. Think of those wacko
right-wing conspiracy nuts that are always screaming about one world
government. Well, they?re completely right that one exists, though while they
think it?s the Jews or communists who are running it, in reality it?s the
white WASPs that run the IMF and WB. When I talk about globalization, I?m
taking it upon myself to pull together the facts that reveal what the IMF
actually does.
FT: What does it do?
GT: It goes around to poor and needy countries and imposes something it calls
a "poverty reduction strategy." First this involves "liberalizing capital
markets," which means making it easy for American banks to move money into
and out of the country. When things are good, money flows in; when they?re
bad, it flies out. At the same time, the IMF requires them to maintain the
value of their currency. But when the economy takes a downturn and the money
flows elsewhere, a country has to raise interest rates to levels that would
make a Lower East Side loan shark salivate to bring it back. In essence,
these countries end up buying back their own money, but at incredibly high
rates. And this is just the beginning of the IMF?s involvement.
FT: You claim to know the dirty inner secrets of the IMF. How is that
possible?
GP: I?ve had large numbers of secret hidden documents slipped to me. The IMF
really is its own secret world government; all of these reports are stamped
"for official use only" and "restricted distribution." They know if the
details of what they?re doing gets out, there?d be people in the streets. In
fact, there were 400 major demonstrations, riots and actions against these
organizations across the world in 1999 alone, but only about a dozen were in
the West, so you don?t hear about them. You will, though, if you come to my
Cleveland talk; it?s going to be fun.
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Award-winning reporter Palast writes Inside Corporate America for the London
Observer. To read other Palast reports, to contact the author or to subscribe to
his column, go to http://www.gregpalast.com (cut and paste into your address
bar)
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You can still view BBC TV's, THEFT OF THE PRESIDENCY, at BBC Newsnight;
http://news.bbc.co.uk/hi/english/events/newsnight/newsid_1174000/1174115.stm
Read A BLACKLIST BURNING FOR BUSH The (London) Observer;
http://www.observer.co.uk/Print/0,3858,4103063,00.html
FLORIDA'S ETHNIC CLEANSING OF VOTER ROLLS Salon.com story of the year;
http://www.salon.com/politics/feature/2000/12/04/voter_file/index.html
FLORIDA'S DISAPPEARED VOTERS in The Nation;
http://www.thenation.com
US media failures at SILENCE OF THE LAMBS;
http://www.mediachannel.org/views/whistleblower/palast.shtml
and on Bush family finances: BEST DEMOCRACY MONEY CAN BUY;
http://www.gregpalast.com/detail.cfm?artid=15&row=1
(cut and paste the URL's into your address bar)
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