Interview with Palast on theft of election in New Mexico and the death of investigative journalism ...more
Neoconservative Accepts Blame for Intelligence Errors
[Brussels] In an unexpected turn of events, controversial US Pentagon official Paul Wolfowitz has turned down the post of President of the World Bank. The Deputy Defense Secretary had won unanimous support of World Bank trustees in a vote Thursday despite widespread objections to the appointment in the European press. …more
The Iraq Economy Plan ...more
Tells Convention He’s Ordered Invasion of Social Security Trust Fund
New York – Of all the bone-headed, whacky, breathtakingly threatening schemes George W. Bush is trying to sell us in his acceptance speech tonight is something he and his handlers call, “the Ownership Society.” Sounds cool, “ownership.” Everyone gets a piece of the action. Everyone’s a winner as the economy zooms. All boats rise. …more
Transcript of Interview of Greg Palast, Journalist for BBC and Observer, London, by Alex Jones ...more
In Buenos Aires, the Paris of Latin America, police gunned down two dozen Argentines in December after they chose to face bullets rather than starvation. The nationï¿½ï¿½ï¿½s currency had crumbled and unemployment had shot up from a grim 16 percent to millions more than the collapsing government could measure. The economy had been murdered in cold blood. ...more
When Tony met Enron I was there to witness love at first sight. New Labour was warned about Enron and its number crunchers, Arthur Andersen, after the office of Jack Cunningham, then Tony Blair's Shadow Trade and Industry Secretary, rang me in New York at 5am on 21 September 1995. ...more
The Globalizer Who Came In
From the Cold
Today’s Winner of the Nobel Prize in Economics
Greg Palast at the IMF Ministerial in Washington ...more
And news this week in South America is that Argentina died, or at least its economy. One in six workers were unemployed even before the beginning of this grim austral winter. Millions more have lost work as industrial production, already down 25% for the year, fell into a coma induced by interest rates which, by one measure, have jumped to over 90% on dollar-denominated borrowings. …more
How crises, failures, and suffering finally drove a Presidential adviser to the wrong side of the barricades
It was like a scene out of Le CarrÃ©: 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 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 expoÃ©s, known for stripping bare abuses of power. ...more
An internal Study Reveals The Price ‘Rescued’ Nations Pay: Dearer Essentials, Worse Poverty and Shorter Lives The Observer
So call me a liar. I was standing in front of the New York Hilton Hotel when the limousine carrying International Monetary Fund director Horst Kohler zoomed by, hitting a bump. Out flew a confidential report, Ecuador Interim Country Assistance Strategy. You suspect that’s not how I got it, but you can trust me that it contains the answer to a puzzling question.
Inside the Hilton, Professor Anthony Giddens told an earnest crowd of London School of Economics alumni that globalisation is a fact, and it is driven by the communicationsIMF revolution’.
Wow. That was an eye-opener. The screeching green-haired freaks outside the hotel demonstrating against the IMF had it all wrong.
Globalisation, Giddens seems to say, is about giving every villager in the Andes a Nokia internet-enabled mobile phone. What puzzled me is why anyone would protest against this happy future.
So I thumbed through my purloined IMF Strategy for Ecuador seeking a chapter on connecting the country’s schools to the world wide web. Instead, I found a secret schedule. By 1 November this year, it says, its government is ordered to raise the price of cooking gas by 80 per cent. It must eliminate 26,000 jobs and halve real wages for the remaining workers by 50 per cent in four steps in months specified by the IMF. It must begin to transfer ownership of its biggest water system to foreign operators by July and grant BP’s Arco subsidiary the right to build and own an oil pipeline over the Andes.
That’s for starters. In all, the IMF’s 167 loan conditions look less like an assistance plan and more like a blueprint for a financial coup d’etat.
The IMF would say it has no choice. Ecuador is broke, thanks to the implosion of its commercial banks. But how did Ecuador, an Opec member with resources to spare, end up in such a pickle?
For that, we have to turn back to 1983, when the IMF forced its government to take over the soured private debts owed by Ecuador’s elite to foreign banks. For this bail-out of US and local financiers, Ecuador borrowed $1.5 billion.
To repay this loan, the IMF dictated price hikes for electricity and other necessities. And when that didn’t drain off enough cash, yet another assistance plan required the state to eliminate 120,000 jobs.
Furthermore, while trying to meet the mountain of IMF obligations, Ecuador foolishly ‘liberalised’ its tiny financial market, cutting local banks loose from government controls and letting private debt and interest rates explode.
Who pushed Ecuador into this nutty romp with free-market banking? Hint: the initials are IMF. It made bank liberalisation a condition of another berserk assistance plan. The facts of this nasty little history come from the IMF report marked: ‘Please do not cite.’ Pretend I didn’t.
The IMF and the World Bank have lent a sticky helping hand to scores of nations. Take Tanzania. Today, 1.4 million people there are getting ready to die. They are the 8 per cent of the nation’s population who have the Aids virus. The financial ‘rescuers’ found a brilliant neo-liberal solution: require Tanzania to charge for hospital visits, previously free. This cut the number of patients treated in the three big public hospitals in the capital, Dar es Salaam, by 53 per cent. The financial cures must be working.
The bodies told Tanzania to charge school fees. Now the bank expresses surprise that school enrolment is down from 80 per cent to 66 per cent.
Altogether the Bank and IMF have 157 other helpful suggestions for Tanzania, and the Tanzanian government secretly agreed last April to adopt them all. It was sign or starve. No developing nation can borrow hard currency without IMF blessing (except China, whose output grows at 5 per cent a year thanks to it studiously following the reverse of IMF policies).
The IMF and World Bank have effectively controlled Tanzania’s economy since 1985. Admittedly, when they took charge they found a socialist nation mired in poverty, disease and debt.
Their experts wasted no time in cutting trade barriers, limiting government subsidies and selling off state industries. This worked wonders. According to bank-watcher Nancy Alexander of the Washington-based Globalisation Challenge Initiative, in just 15 years Tanzania’s GDP has dropped from $309 to $210 per capita, the literacy rate is falling and the rate of abject poverty has jumped to 51 per cent of the population.
Yet somehow the bank has failed to win over the hearts and minds of Tanzanians to its free-market gameplan. Last June, the bank reported in frustration: ‘One legacy of socialism is that most people continue to believe the state has a fundamental role in promoting development and providing social services.’
The World Bank and the IMF were born in 1944 with simple, laudable mandates: between them to fund post-war reconstruction and development projects and lend hard currency to nations left skint by temporary balance of payments deficits.
But in 1980 they seemed to take on an alien form. In the early Eighties, Third World nations, haemorrhaging after the fivefold increases in oil prices and a similar jump in dollar interest payments, brought their begging bowls to the two bodies. But instead of debt relief, they received structural assistance plans listing an average of 114 ‘conditionalities’ in return for capital.
The particulars varied from nation to nation, but in every case, they had to remove trade barriers, sell national assets to foreign investors, slash social spending and make labour ‘flexible’ (that is, crush unions).
Some say the vicious policy change resulted from the election that year of Ronald Reagan as US President, the quickening of Margaret Thatcher’s powers and the beginning of the neo-liberal ascendency. (My own information is that the IMF and World Bank were taken over by a space alien named Larry. It’s obvious that ‘Larry’ Summers, once World Bank chief economist and now US Treasury Secretary, is really a platoon of extra- terrestrials sent to turn much of the human race into a source of cheap protein. But I digress.)
So what have The Aliens accomplished with their e free-market prescriptions? An article by Samuel Brittan in last week’s Financial Times declared that the new world capital markets and free trade have ‘brought about an unprecedented increase in world living standards’. Brittan cites the huge growth in GDP per capita, life expectancy and literacy in the less developed world from 1950 to 1995.
Now hold on a minute. Until 1980, virtually every nation in his survey was either socialist or welfare statist. They were developing on the ‘Import Substitution Model’, by which locally-owned industry was built through government investment and high tariffs, anathema to the neoliberals.
In those dark ages of increasing national government control and ownership (1960-1980), per capita income grew by 73 per cent in Latin America and by 34 per cent in Africa. By comparison, since 1980, Latin American growth has come to a virtual halt, growing by less than 6 per cent over 20 years – and African incomes have declined by 23 per cent.
Now let’s count the corpses. From 1950 to 1980, socialist and statist welfare policies added more than a decade of life expectancy to virtually every nation on the planet. From 1980 to today, life under structural assistance has become brutish and shorter. Since 1985, the total number of illiterate people has risen and life expectancy is falling in 15 African nations. Brittan attributes this to ‘bad luck, [not] the international economic system’. In the former Soviet states, where IMF and World Bank shock plans hold sway, life expectancy has plunged, adding 1.4 million a year to the death rate in Russia alone.
Admittedly, the World Bank and IMF are reforming. The dreaded structural assistance plans have been renamed ‘poverty reduction strategies’. Doesn’t that make you feel better?
Recently, the IMF admitted that ‘in the recent decades, nearly one-fifth of the world population have regressed’ – arguably ‘one of the greatest economic failures of the twentieth century.’ And that, Professor Giddens, is a fact.
Gregory Palast’s other investigative reports can be found at www.gregpalast.com where you can also subscribe to Palast’s column.
Gregory Palast’s column “Inside Corporate America” appears fortnightly in the
Observer’s Business section. Nominated Business Writer of the Year (UK Press
Association – 2000), Investigative Story of the Year (Industrial. Society – 1999), Financial Times David Thomas Prize (1998).