The
globalizer who came in from the cold
Joe Stiglitz: Today's winner of the nobel prize in economics
by
Greg Palast
The
Observer, London
October 10, 2001
The World Bank's
former Chief Economist's accusations are eye-popping - including how the
IMF and US Treasury fixed the Russian elections
"It
has condemned people to death," the former apparatchik told me. This
was like a scene out of Le Carre. The brilliant old agent comes in from
the cold, crosses to our side, and in hours of debriefing, empties his
memory of horrors committed in the name of a political ideology he now
realizes has gone rotten.
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. But instead
of chairing the meetings of ministers and central bankers, Stiglitz was
kept exiled safely behind the blue police cordons, the same as the nuns
carrying a large wooden cross, the Bolivian union leaders, the parents of
AIDS victims and the other 'anti-globalization' protesters. The ultimate
insider was now on the outside.
In 1999 the World
Bank fired Stiglitz. He was not allowed quiet retirement; US Treasury
Secretary Larry Summers, I'm told, demanded a public excommunication for
Stiglitz' having expressed his first mild dissent from globalization World
Bank style.
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."
Stiglitz helped
translate one from bureaucratise, 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 staff 'investigation' consists
of close inspection of a nation's 5-star hotels. It concludes with the
Bank staff meeting some begging, busted finance minister who is handed a
'restructuring agreement' pre-drafted for his 'voluntary' signature (I
have a selection of these).
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 Bank.
You'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 Ethopia'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."
By the way, don't
be confused by the mix in this discussion of the IMF, World Bank and WTO.
They are interchangeable masks of a single governance system. They have
locked themselves together by what are unpleasantly called,
"triggers." Taking a World Bank loan for a school 'triggers' a
requirement to accept every 'conditionality' - they average 111 per nation
- laid down by both the World Bank and IMF. In fact, said Stiglitz the IMF
requires nations to accept trade policies more punitive than the official
WTO rules.
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. Their trick?
"They told the IMF to go packing."
So then I turned
on Stiglitz. OK, Mr Smart-Guy Professor, how would you help developing
nations? Stiglitz proposed radical land reform, an attack at the heart of
"landlordism," on the usurious rents charged by the propertied
oligarchies worldwide, typically 50% of a tenant's crops. So I had to ask
the professor: as you were top economist at the World Bank, why didn't the
Bank follow your advice?
"If you
challenge [land ownership], that would be a change in the power of the
elites. That's not high on their agenda." Apparently not.
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. Every time
their free market solutions failed, the IMF simply demanded more free
market policies.
"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 took away from
my talks with the professor that the solution to world poverty and crisis
is simple: remove the bloodsuckers.
*
A version of this
was first published as "The IMF's Four Steps to Damnation" in
The Observer (London) in April and another version in The Big Issue -
that's the magazine that the homeless flog on platforms in the London
Underground. Big Issue offered equal space to the IMF, whose "deputy
chief media officer" wrote:
"... I find
it impossible to respond given the depth and breadth of hearsay and
misinformation in [Palast's] report."
Of course it was
difficult for the Deputy Chief to respond. The information (and documents)
came from the unhappy lot inside his agency and the World Bank.
