Richard Moore

See also: Michel Chossudovsky, "The Globalization of Poverty - 
Impacts of IMF and World Bank Reforms", The Third World Network, 
Penang, Malaysia, 1997.

From: "Brian Hill" <•••@••.•••>
To: <•••@••.•••>
Date: Sat, 26 May 2001 04:56:54 -0700

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 Carré: 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

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 
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

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

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

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

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

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.


Deb Foskey
School of Social Sciences
Faculty of Arts
ACT 0200

Phone:  +61 2 612 53977
Fax: +61 2 612 52222


Richard K Moore
Wexford, Ireland

    A community will evolve only when
    the people control their means of communication.
    - Frantz Fanon

    "One cannot separate economics, political science, and
    history. Politics is the control of the economy. History,
    when accurately and fully recorded, is that story. In most
    textbooks and classrooms, not only are these three fields of
    study separated, but they are further compartmentalized into
    separate subfields, obscuring the close interconnections
    between them" -- J.W. Smith, The World's Wasted Wealth 2,
    (Institute for Economic Democracy, 1994), p. 22.

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