SHUT YOUR CAKE-HOLE latest SchNEWS

“The new global order has condemned people to death. They don’t care if people live or die.”
Joseph Stiglitz, The World Bank’s former Chief Economist

Sixty years ago this month, Western leaders got together at Bretton Woods to redesign the world’s financial systems, creating the International Monetary Fund and World Bank. Although there is plenty for them to celebrate, SchNEWS warns readers to read on before sending them a birthday card.

Whilst the IMF and World Bank lend cash to ‘developing’ countries to help them run construction projects and meet budget deficits, their real role is to ensuring that the international economy is geared to boosting the profits of Western corporations. By the 1970s troublesome unionised workers in Europe and the US started making big wage demands to state owned and private sector companies. Paying to meet the cost of the huge rise in oil prices in 1973, governments no longer had the cash to meet these demands and corporations found it harder to increase profits. Solution? Get rid of the unions, flog off the state companies and relocate to the Third World where wages were smaller and governments weren’t too fussy about worker and environmental protection.

An example of this philosophy in action was The North American Free Trade Agreement signed in 1994 between America, Canada and Mexico. This enabled company bosses to dump 800,000 unionised US auto workers earning around $17 per hour, in favour of 700,000 Mexican workers on $5 a day. 400,000 of these jobs are now off to China for $2 a day. Size matters too. Small, local businesses are no match for the likes of Wal-Mart, Coke and Nike. Home-grown industries are quickly bought out or pushed aside. With the competitors out of the frame, international firms then use their monopoly position to raise prices and profits.

Not that the countries of the South were that cheap, for the multinationals, at least to start off with. Some governments subsidised basic necessities like food, health care and housing. Governments also added tariffs to imports to protect their farmers. If a US firm exported maize to Mexico, a percentage was added to the cost to make sure that Mexican grown maize was cheaper. This helped guarantee a basic wage for farmers and gave local companies time to develop technologies so they could compete with international firms: a standard policy followed by all European and US countries during most of the 20th century.

Most countries in the ‘developing’ world had their wealth plundered by Europe during colonial times. Take Bolivia, once the richest country in Latin America because of its vast silver mines. The Spanish drained the mines, killing 8 million indigenous people in the process and now it’s the poorest country in mainland Latin America. With no assets of their own, countries have to borrow cash, but loans from the World Bank and IMF are conditional upon countries ‘structurally adjusting’ their economies. This entails: cutting wages, axing pensions, social security and workers benefits and also hacking away at subsidies on food and housing.

There are so many examples of piss poor policy making, greed and corruption that it’s difficult to pick a birthday example, but the way they sucked the cash out of Argentina is worth a mention. The country followed the fundamentalism of the ‘Washington Consensus’, beginning by ‘pegging’ the Argentinean currency to the dollar. This meant that for every Peso spent the government had to have a dollar to back it up in its coffers. Of course Argentina didn’t have any dollars and needed to borrow, but the banks lending the cash, thought that doing so was risky business, so they charged 16% interest on such loans.

But the rip off didn’t stop there. When the economy looked like it was about to collapse, the IMF offered the government $20bn in return for further reducing wages and cutting pensions. Despite following instructions the Argentineans never got their hands on the $20bn. It lingered in New York bank vaults and was used to pay the interest on loans made by firms like Citibank. During the crisis, poverty in Argentina affected 58% of the population and over a quarter earned too little even to feed themselves. It total $130bn left Argentina for Western banks. During each day in 2001, 20,000 Argentineans slid below the poverty line.

BIRTHDAY BASH

Although Citibank lost some $2bn during the Argentinean crisis, it was but a small blip, with profits rising 36% during 2003 (they also bunged the US Republican party $4m between 1999 and 2004). Oh and there’s some corruption too. Using a series of “offshore banks” (which only do business with customers outside the country where they are licensed), well-connected Argentines laundered millions of dollars in bribes and drug money through Citibank, which in turn made little effort to stop them.

Since it got a bashing at its fiftieth birthday celebrations, the IMF and World Bank have been keen to show how much they’ve reformed. But don’t believe the hype. As ex World Bank’s Chief Economist Joseph Stiglitz said “I was very naive and I am not pleased to have discovered a confused world where money takes priority over the life of people.”

Although it says its reports are now released after five years, instead of thirty, most of the information is in English, and very little of it translated into the languages spoken by the people most likely to be affected by a dam, power plant, or road-building project. Nor does the re-labelling of ‘Structural Adjustment Programs’ to ‘Poverty Reduction and Growth Facility Programs’ hide the fact that ‘poverty reduction’ in Nigeria has seen the country pay over $16bn for an original loan of $5b - and they still owe another $32 billion!

The World Bank and IMF are used by the powerful financial elite to carve up the global economy to suit their own needs. Votes are based on cash, with the G8 countries alone controlling almost half the votes. The US will not allow its voting power in the IMF to drop below 15%, which gives it a veto over all key decisions. At the same time Bush talks about free trade and breaking government intervention, the Farm Security and Rural Investment Act of 2002 chucked US farmers a cool $249bn. And don’t forget the World Bank is a bank! It’s made a profit every year since it came into existence - over $3 billion in 2003.

‘IMF riots’ have often ravaged Latin America’s cities from Buenos Aires to Caracas, leaving hundreds of dead and wounded and losses of millions of dollars in damaged property. People are supposed to retire at 60, SchNEWS reckons its time the IMF and World Bank did just that.

* 60 glorious or notorious years? Saturday 10 July 5-7pm Speakers include Rudolf Amenga-Etego, winner of this year’s Goldman Environmental Award for his work with the Ghanaian National Coalition who successfully stopped a $400bn water privatization project, which was backed by the World Bank.
Discussion organised by the World Development Movement at the Friends House, 173 Euston Road, London, NW1 2B. 020 7737 6215

* 50 years is enough network

* Joseph Stilgitz “Globalisation and its Discontents” (Penguin)