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IMF'S FOUR STEPS TO DAMNATION

2001-06-05

IMF'S FOUR STEPS TO DAMNATION 

---------------------------------------------

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 Carr: 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 [A/T] observer [dot] co [dot] uk

---------------------------------------------

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.

--------------------------------------------
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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