IMF'S FOUR STEPS TO DAMNATION
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Editor, The Konformist
IMF'S FOUR STEPS TO DAMNATION
How crises, failures, and suffering finally drove a Presidential
the wrong side of the barricades
Sunday April 29, 2001
It was like a scene out of Le Carré: the brilliant agent comes in
cold and, in hours of debriefing, empties his memory of horrors
the name of an ideology gone rotten.
But this was a far bigger catch than some used-up Cold War spy. The
apparatchik was Joseph Stiglitz, ex-chief economist of the World
new world economic order was his theory come to life.
He was in Washington for the big confab of the World Bank and
Monetary Fund. But instead of chairing meetings of ministers and
bankers, he was outside the police cordons. The World Bank fired
years ago. He was not allowed a quiet retirement: he was
purely for expressing mild dissent from globalisation World Bank-
Here in Washington we conducted exclusive interviews with Stiglitz,
Observer and Newsnight, about the inside workings of the IMF, the
and the bank's 51% owner, the US Treasury.
And here, from sources unnamable (not Stiglitz), we obtained a cache
documents marked, 'confidential' and 'restricted'.
Stiglitz helped translate one, a 'country assistance strategy'.
assistance strategy for every poorer nation, designed, says the World
after careful in-country investigation.
But according to insider Stiglitz, the Bank's 'investigation'
more than close inspection of five-star hotels. It concludes with a
with a begging finance minister, who is handed a 'restructuring
pre-drafted for 'voluntary' signature.
Each nation's economy is analysed, says Stiglitz, then the Bank hands
minister the same four-step programme.
Step One is privatisation. Stiglitz said that rather than objecting
sell-offs of state industries, some politicians - using the World
demands to silence local critics - happily flogged their electricity
water companies. 'You could see their eyes widen' at the possibility
commissions for shaving a few billion off the sale price.
And the US government knew it, charges Stiglitz, at least in the case
biggest privatisation of all, the 1995 Russian sell-off. 'The US
view was: "This was great, as we wanted Yeltsin re-elected. We DON'T
it's a corrupt election." '
Stiglitz cannot simply be dismissed as a conspiracy nutter. The man
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
nearly in half.
After privatisation, Step Two is capital market liberalisation. In
this allows investment capital to flow in and out. Unfortunately, as
Indonesia and Brazil, the money often simply flows out.
Stiglitz calls this the 'hot money' cycle. Cash comes in for
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
capital funds, the IMF demands these nations raise interest rates to
'The result was predictable,' said Stiglitz. Higher interest rates
property values, savage industrial production and drain national
At this point, according to Stiglitz, the IMF drags the gasping
Step Three: market-based pricing - a fancy term for raising prices on
water and cooking gas. This leads, predictably, to Step-Three-and-a-
what Stiglitz calls 'the IMF riot'.
The IMF riot is painfully predictable. When a nation is, 'down and
IMF] squeezes the last drop of blood out of them. They turn up the
until, finally, the whole cauldron blows up,' - as when the IMF
food and fuel subsidies for the poor in Indonesia in 1998. Indonesia
There are other examples - the Bolivian riots over water prices last
and, this February, the riots in Ecuador over the rise in cooking gas
imposed by the World Bank. You'd almost believe the riot was
And it is. What Stiglitz did not know is that Newsnight obtained
documents from inside the World Bank. In one, last year's Interim
Assistance Strategy for Ecuador, the Bank several times suggests -
accuracy - that the plans could be expected to spark 'social unrest'.
That's not surprising. The secret report notes that the plan to make
dollar Ecuador's currency has pushed 51% of the population below the
The IMF riots (and by riots I mean peaceful demonstrations dispersed
bullets, tanks and tear gas) cause new flights of capital and
bankruptcies This economic arson has its bright side - for
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
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
to sales in Asia, Latin American and Africa while barricading our own
against the Third World 's agriculture.
In the Opium Wars, the West used military blockades. Today, the World
can order a financial blockade, which is just as effective and
Stiglitz has two concerns about the IMF/World Bank plans. First, he
because the plans are devised in secrecy and driven by an absolutist
ideology, never open for discourse or dissent, they 'undermine
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
'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
the elites. That's not high on their agenda.'
Ultimately, what drove him to put his job on the line was the failure
banks and US Treasury to change course when confronted with the
failures, and suffering perpetrated by their four-step monetarist
'It's a little like the Middle Ages,' says the economist, 'When the
died they would say well, we stopped the bloodletting too soon, he
a little blood in him.'
Maybe it's time to remove the bloodsuckers.
INTERNATIONAL INVESTIGATIVE REPORTER
by Sandeep Kaushik
Cleveland Free Times
Published April 11 - 17, 2001
Gregory Palast is almost certainly the greatest investigative
you've never heard of. An award-winning reporter in Britain, where he
for The Guardian and The Sunday Observer, as well as hosts the BBC's
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
series on how Jeb Bush and Katherine Harris conspired to illegally
Florida voting rolls of thousands of former felons whose voting
been restored by other states, the vast majority of whom were (not
coincidentally) Democrats. In the few venues that have bothered to
in the United States, it's caused scarcely a ripple. Palast will be
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
governments; I'm an expert in the regulation of industry. For
worked for the Chugach natives of Alaska to expose the fraud involved
grounding of the Exxon Valdez, and for the government in its
the Shoreham nuclear plant scandal in New England, the biggest
case in history. There we won a $400 million settlement from the
the utility, which we proved had lied about the plant's safety. It
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
imports that are responsible for the loss of American steel jobs. The
companies like LTV went with the introduction of continuous casting
automation. The truth is that when markets were tight, American
chose to crank up prices rather than produce and sell more steel,
helped foreign companies get a foothold in the market. They raised
when markets were tight, then closed plants when markets went slack.
the foreign competitors, they felt no obligation to maintain their
FT: The promo for your upcoming appearance for the Cleveland Council
Affairs says that British Prime Minister Tony Blair called you a
GP: I did an undercover investigation in which I penetrated his
circle of closest advisors to show how U.S. and British companies are
buy insider access. I posed as a businessman interested in getting
legislation changed, and a cabinet minister told me that for 5,000
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
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
Britain, hundreds of people asked me, "When will Bush resign?" It's a
shame: first the election shenanigans, then the almost total lack of
reporting about them. Mainstream American papers don't like to
controversial stuff, particularly if it has to do with investigations
industry. The Washington Post did print my story on the scam of
deregulation in California, but for the most part, while I'm
Europe, I'm non-stream in my home town. I should say, though, that I
currently filming a documentary for PBS on the presidential election
FT: Your talk in Cleveland is on the myth of "globalization." What
term even mean?
GP: The way it's usually bandied about, it's pretty vague. It has
to do with the future, with giving Bolivian peasants cell phones and
Eskimos to the internet. If you're against it, that means you must be
the future, and the communication revolution, and the concept of
world together. You're a Luddite. But it's funny; I haven't yet met
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
porn just like everyone else.
FT: So if it';s not about wiring the Sahara for cable, what is it
GP: I'm talking about groups like the International Monetary Fund
World Bank [WB], and the World Trade Organization [WTO]. Think of
right-wing conspiracy nuts that are always screaming about one world
government. Well, they're completely right that one exists, though
think it's the Jews or communists who are running it, in reality it's
white WASPs that run the IMF and WB. When I talk about globalization,
taking it upon myself to pull together the facts that reveal what the
FT: What does it do?
GT: It goes around to poor and needy countries and imposes something
a "poverty reduction strategy." First this involves "liberalizing
markets," which means making it easy for American banks to move money
and out of the country. When things are good, money flows in; when
bad, it flies out. At the same time, the IMF requires them to
value of their currency. But when the economy takes a downturn and
flows elsewhere, a country has to raise interest rates to levels that
make a Lower East Side loan shark salivate to bring it back. In
these countries end up buying back their own money, but at incredibly
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
GP: I've had large numbers of secret hidden documents slipped to me.
really is its own secret world government; all of these reports are
"for official use only" and "restricted distribution." They know if
details of what they're doing gets out, there'd be people in the
fact, there were 400 major demonstrations, riots and actions against
organizations across the world in 1999 alone, but only about a dozen
the West, so you don't hear about them. You will, though, if you come
Cleveland talk; it's going to be fun.
Award-winning reporter Palast writes Inside Corporate America for the
Observer. To read other Palast reports, to contact the author or to
to his column, go to http://www.gregpalast.com (cut and paste into
You can still view BBC TV's, THEFT OF THE PRESIDENCY, at BBC
Read A BLACKLIST BURNING FOR BUSH The (London) Observer;
FLORIDA'S ETHNIC CLEANSING OF VOTER ROLLS Salon.com story of the
FLORIDA'S DISAPPEARED VOTERS in The Nation;
US media failures at SILENCE OF THE LAMBS;
and on Bush family finances: BEST DEMOCRACY MONEY CAN BUY;
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