Joe Stiglitz - The globalizer who came in from the cold

>
> The Observer, London      October 10, 2001
>
> The globalizer who came in from the cold
>
>      Joe Stiglitz: Today's winner of the nobel prize in economics
>
>      by Greg Palast
>
>      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.
>