Released September 3, 2001
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The Globalizer Who Came In From The Cold

by Gregory Palast

"It has condemned people to death," the former apparatchik told me. It 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.

But this 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.

He is in Washington for this week's Spring Ministerial [1], 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 outside 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.

Two years ago, the World Bank fired Stiglitz. He was not allowed quiet retirement; the US Treasury Secretary 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 with Stiglitz for The Observer and BBC TV's Newsnight about the real, inside 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 a begging, busted finance minister who is handed a 'restructuring agreement' pre-drafted for his 'voluntary' signature.

Each nation's economy is individually analyzed, then, says Stiglitz, the Bank hands every minister the same exact four-step program.

Step One is Privatisation - which Stiglitz said could more accurately be called, 'Briberisation.'

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, at that time 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.

After briberisation, 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 cauldrin 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, Newsnight obtained several documents from inside the World Bank, stamped over with those pesky warnings, "confidential," "restricted," "not to be disclosed." In one, last year's Interim Country Assistance Strategy for Ecuador, the Bank several times refers - with cold accuracy - that the plans could be expected 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 foreigners, 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. While stopping Indonesia from subsidizing food purchases, "when the banks need a bail-out, intervention (in the market) is welcome."

The IMF scrounged up nearly $100 Billion 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 democratic president. 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 it's population.

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, which Stiglitz the insider likens 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 unbalanced trade. Today, the World Bank can order a financial blockade which is just as effective and sometimes just as deadly.

Stiglitz is particularly emotional over the WTO's intellectual property rights treaty which goes by the acronym TRIPS. 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. By the way, don't be confused by the mix 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, including trade policies more punitive than WTO.

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, the continent's income dropping 23 percent in the past two decades.

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.'"

So the solution to world poverty and crisis, then, is simple: remove the bloodsuckers.

1. First published in The Observer, April 29, 2001.

Kim Murphy, "Perle and U.S. pushing for status quo with Jewish oligarchs in Russia," Los Angeles Times, July 23, 2003

[They are Mikhail Brudno and Vladimir Dubov, Israeli-Russian partners in the giant Russian oil company Yukos. They, along with a number of their cronies, are wanted by Interpol for allegedly bilking Russian citizens out of billions of dollars. To elude Russian prosecution, these men have taken up residence in Israel.

As the Israeli newspaper Ha'aretz explains: "In recent years Russian authorities began investigating [Yukos], its managers and major stockholders, many of whom are of Jewish origin. The probes caused several of the managers to flee to Israel, and resulted in Khodorkovski's [Yukos CEO] arrest and a Kremlin attack on Yukos."

The fact is that Israel is an important factor in the ongoing, nation-shaking power struggle now going on in Russia. Yet AP virtually never reports this connection. For example, a few months ago in a typical AP story on this power struggle, "Report: Russia again charges Berezovsky," Moscow AP Bureau Chief Judith Ingram makes no mention anywhere that Berezovsky is an Israeli citizen, or of his many connections to Israel.--Alison Weir, "Russia, Israel and Media Omissions," CounterPunch, February 17, 2005]

Copyright © 2001 Gregory Palast -- Gregory Palast is an investigative reporter for London's Sunday paper, The Observer, and BBC TV's Newsnight. Read, view or subscribe to his column at
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