Global Finance or Economic Crimes Against Humanity?
July 4th 2002
Papua New Guinea
Who Sets The Agenda?
A Little History
What Is The Agenda?
Is There Another Side Of The Coin?
The IMF and the World Bank were formed in 1944 largely in an attempt to stabilise international
markets and so preempt 'crashes' such as the Wall Street crash of 1929. The IMF's
profile has increased in the past 20 years however, such that since the early 1980s, the IMF
and it's sister organisation the World Bank have imposed programmes of 'structural adjustment'
on over 70 developing nations. Some of these arrangements have been welcomed by affected populations.
Increasingly, however (in the 1990's in particular) the IMF has been party to a series of spectacular
crashes that have devastated the economies of a number of countries. Is this mere incompetence
(adversely affecting the lives of millions) or worse? The essay aims to answer that question.
Those wishing to skip reading through the detail of the dozen or so example countries
given below should go straight to Who Sets The Agenda below. Otherwise (if you are sitting comfortably) let's take a critical look at
what goes on.
A country may be persuaded that it is a good idea to become a 'member' of the International Monetary Fund,
so that it may by that means use the IMF to effectively seek financial assistance from the 'international
community'. An IMF team may then be delegated to look into the state of the country's economy,
drafting proposals through which the IMF would then lend the country money conditional upon it's
acceptance of a number of reforms. These 'conditional' 'structural adjustments' always tend to include
what might be called 'deregulated free-market capitalist' policies such as:
Privatising and 'liberalising' the economy, including
Liberalising import controls
Liberalising capital markets
Reducing financial and legal safety nets for businesses
Introducing a payment ethic for social services of all kinds
Rescheduling existing debt
Decreasing government spending, by
Ending subsidies, and allowing the market to regulate prices
Laying off workers
Reducing education, reducing health expenditure
Increasing exports, by
Devaluing the currency
Improving the terms of foreign investment
Reducing or freeze wages
Reducing worker power
Often the IMF has insisted on all of these things. Let's look at some examples.
'It is good to kill a country from time to time, pour encourager les autres, as Voltaire might
have said. That, at least, seems to be the message the international community is trying to send
to debt burdened countries in its handling of the crisis in Argentina'.
(Source: Charlotte Denny The Guardian April 29, 2002).
At moment in Argentina -mid-2002- many people are unable to access their bank accounts,
having seen the value of life savings held by banks drop to a small fraction of their
original worth. Tens of thousands of people have lost their jobs, and for those who
have not, the real value of their wages has generally fallen drastically. There are
shortages of food and other essential goods, and in many parts of the country 'local
economies' have sprung up, using either a local currency or bartering, since attempting
to trade with a peso in such a state of flux has become so difficult.
Many in Argentina blame the country's catastrophic woes on the International Monetary
Fund, claiming that the IMF insisted that among the conditions for it's loans,
(starting in 1991) Argentina should peg the value of its peso 1 to 1 against the dollar.
This led to the peso being overvalued, which in turn led to exorbitant interest rates (as
investors demanded high interest rates as a protection against the fact that the peso's
value looked set to fall at any time).
To maintain an overvalued currency, a country needs large reserves of dollars; the
government has to guarantee that everyone who wants to exchange a peso for a dollar can
get one. The IMF's role here was crucial.
It arranged large loans, including $40 billion in the year 2000, to support the peso.
This was the IMF's second fatal error. To appreciate its severity, imagine Washington
borrowing $1.4 trillion (70 percent of the federal budget, as might well be the case if
the 'rules' were applied uniformly to all countries) just to prop up an overvalued dollar.
It didn't take long for Argentina to pile up a foreign debt that was impossible for it to
pay back. The IMF now claims that it was against the fixed exchange rate, and the large loans
to support it, all along. Officials say they went along with these policies to please the
Argentine government. (And since all IMF documents pertaining to decision-making and
strategy are kept secret, no-one outside the organisation has much chance of getting
IMF officials to take responsibility for their actions and own up to any misdeeds).
In 2002 the IMF has also denied advising Malawi to sell grain reserves (that then left
the country catastrophically exposed to the risk of drought, which then occurred).
Bakili Muluzi, the President of Malawi has insisted that the IMF did give this
catastrophic advice: the IMF says 'oh no we didn't'. Bear with me dear reader: there is a
Prior to the current crisis, Argentina had been described as a model of development by
both the IMF and World Bank. AND YET, following their prescriptions has led to the current
situation where the Argentine economy is currently more or less in free-fall. As the economy
has collapsed, people have died in confrontations, millions are losing jobs or facing reduced
salaries and many risk going hungry.
In mid-2001 Argentina owed US$128 billion in debt. Normal interest plus the premium meant
that the country's yearly repayments amounted to US$27 billion a year. In 2002 Argentina
arranged a US$20 billion 'bail-out' loan with the IMF. In other words, Argentina's people
didn't see one penny from the US$20 billion in bailout loans. The debt grew, but none of
the money escaped New York, where it lingered to pay interest to US creditors holding the
bonds. (Source: Gregory Palast, Eyes-Only Memos Show Who Done It, Americas.org web site, February 7, 2002).
It is worth pointing out here that on top of all of these woes inflicted on the economy
Argentina will also suffer huge foreign exchange losses
as prices for cereals fall, as a fairly direct consequence of the huge new subsidies given
to crop producers in the US (2002). See US Hypocrisy
below. The standard American rhetoric about 'free trade' is thus rendered somewhat hollow...
An anomaly. It is claimed (by Joseph Stiglitz, one-time chief
economist at the World Bank)
that since the IMF became involved in arranging structural 'assistance' to the majority of African
counties, income in those countries dropped by an average 23%. Did any nation avoid this fate? Yes,
said Stiglitz: Botswana. Their trick? 'They told the IMF to go packing.'
In the same interview (to the
Observer newspaper in the UK in April 2001) Stiglitz went on to attack
the the US for 'asset-stripping'
nations in debt to global financial institutions. (Joseph Stiglitz also won the Nobel Prize for Economics
in 2001, was chairman of Clinton's Council of Economic Advisers, and in 2002 is a professor at Columbia
University. In his new book, Globalization and Its Discontents, Stiglitz argues that far from the current
system of global free trade and open markets being both beneficial and inevitable, it is actually deeply
damaging, with many better alternative options available).
Another similar story is how 'during the Asian financial crisis in 1997, Malaysia rejected international assistance to shore up the economy and imposed stringent
capital controls. Branded lunacy at the time, the strategy has since proved successful'
(Source: The Guardian 26.06.02)
By way of comparison, here are some figures showing the amount of arable land per person (in hectares)
in various countries (some of whom are close to being self-sufficient in agricultural products):
China 0.13, North Vietnam 0.10, North Korea 0.07, Pakistan 0.40, Bangladesh 0.16, Indonesia 0.15.
Yet in Brazil there are 2.3 acres of arable land per person (and Brazil has a significant hunger problem).
Why? The main reason is that in Brazil around half of all land being farmed is used to produce goods for
export (mostly beef).
Brazil entered into loan arrangements with the IMF in the early 80s. First off, international financiers did
well out of the debt alone: -between 1985 and 1987, the International Monetary Fund collected US$16.8 billion
more in payments to Brazil than it had actually loaned out.
Most of these payments were interest on earlier IMF-sponsored loans.
Again, part and parcel of the IMFs 'conditionality' with regard to Brazil was the
Fund's insistence that Brazil open up it's markets further to foreign investment and speculation. So
when subsequently, succumbing to a speculative onslaught, the Sao Paulo stock exchange crumbled in 1998. The
immediate results were massive rises in interest rates, the immediate crippling of manufacturing due to
debts that appeared from nowhere, drastic cuts in general purchasing power, loan defaults and a
devaluation of the Brazilian Real such that the vast majority of Brazilians saw their personal wealth
Brazil then entered into further 'post-crisis' arrangements with the IMF whereby Brazil agreed to
accept further IMF 'conditions'. (Although the meetings where these conditions were 'negotiated'
were held at the US Federal Reserve Bank and apparently included not only the Brazilian Finance Minister but
also George Soros from the Quantum Hedge Fund, Citigroup Vice-President William Rhodes, Jon Corzine from
Goldman Sachs and David Komansky of Merrill Lynch. Rhodes was also representing the New York Banking
Committee on behalf of some 750 creditor institutions standing 'behind' the IMF as it were). This time
the requirement was for further budget cuts in the order of US$28 billion (including massive lay-offs
of civil servants, the dismantling of social programmes, the sale of state assets, the freeze of transfer
payments to the State governments and the channelling of State revenues towards debt servicing).
The subsequent rescue 'package' was boggling in its cheek. During a single 6 or 7 month period (July
1998 to January 1999) US$50 billion of Brazil's foreign currency reserves had been appropriated by
private financial institutions (largely transacted through 'options' and 'futures' contracts of one
sort or another). This was equivalent to 6 percent of Brazil's GDP.
US$30 billion of international funds were subsequently lent back to Brazil in 1999 in the form of
'bailout' funds (being part of a US$41 billion package). Who lent the money? The same Wall Street
financiers (and their affiliated hedge funds) who had been involved in the speculative onslaught against
the Brazilian Real in 1998 (see above). Heads you win, tails you lose.
Yet again (see elsewhere, below) we see i) IMF involvement ii) the economic meltdown of a country,
enabling foreign capital to take over the internal market, reinforce its stranglehold over domestic
banking and enable it to pick up the most profitable productive assets at bargain basement prices.
'In Bulgaria in 1996, the IMF praised the government for its continuing reforms, and signed
a new agreement with the Bulgarian government for a one-year loan. The program forecast
a zero growth rate in 1996 and 2.5 percent for 1997. The IMF recognized that there was
a budding banking crisis but neither the IMF nor the Bulgarian government really knew how
to handle it.
In a ham-handed way, the IMF and the government decided to take "tough" action, including
the announcement of sudden bank closures. Depositors panicked; the rest of the banks
collapsed, and the flight from the currency produced a hyperinflation. Defying IMF
predictions, in 1996 GDP collapsed by 10.9 percent (in fact, this represents a staggering
fall of around 20 percent in the second half of 1996). Of course, the IMF blamed the entire mishap on the government'.
(Source: The IMF and The Asian Flu, Jeffrey David Sachs, The
American Prospect Magazine).
Historically there appears to have been a pattern of the IMF taking credit for the
successful policies of national governments: examples include Bolivia 1985, Poland 1989
and Estonia 1992, where in each case government measures introduced against
strong IMF resistance were later heralded as IMF successes. At the same time, the
IMF has at times refused to accept responsibility when failures are obvious, blaming
anything and everybody else instead. This has been the case with most of the countries
To illustrate the extent to which both the trade and political agendas of 'the West' can be seen
to come together in IMF policy here is a quote from the 'CIA World Factbook' (2002):
'A series of IMF arrangements -along with massive external debt relief resulting from Egypt's
participation in the Gulf war coalition- helped Egypt improve its macroeconomic performance during
Eisuke Sakakibara, Japan's vice minister of finance for international
affairs, questioned the stringent IMF conditions placed on Indonesia in 1997 (when Asian
economies in general were experiencing serious problems).
Fifty items of structural reform were required of Indonesia and he doubted whether
'all of these reforms were absolutely necessary to resolve their crisis'.
'The reform measures were too ambitious, as evidenced by the closure of 16 banks
in Indonesia in a matter of a few days without adequate protection for depositors,'
he said. 'I (also) do not understand why there was such harsh criticism by
the IMF of the Indonesian authorities in January, 1998, when they announced a balanced budget'.
He said the criticism had a severe adverse impact on market confidence.
Mr Dillon, Minister for Poverty Reduction in the Indonesian Cabinet, has said that in
1960 the number of those living below the poverty line in Indonesia was 50%. By 1997
the number had fallen to 11%. By 1998 it had doubled to 28%. By 1999 it had
rocketed to 80%. Something like 160 million Indonesians, 70% in rural areas, live
below the official poverty line. The World Bank estimates that between 1997 and 1998
the real wages of agricultural workers fell by 40%, and those in urban areas fell by
34%. Since 1997, it is said, 39 million Indonesians have lost their jobs.
(Source: Ann Pettifor of the Jubilee Plus organisation in a letter to Gordon Brown,
the UK Chancellor).
The sudden IMF-inspired removal of subsidies on fuels like Kerosene was extremely regressive
in its impact on the poor of Indonesia in 1998. This led to rioting in Jakarta.
The IMF has insisted that Indonesia lowers her tariffs on imported sugar to
25%, while in another example of the double standards at work the tariffs imposed
by some IMF shareholders remain at 80%.
In the 2002 renegotiation of the IMF Accord with Indonesia, one of the most notable features
is the virtual abandonment of Indonesia's attempts at strategic industrial policy: to whit a
'national car project' (the suggestion of which had apparently had upset carmakers in Detroit
and Tokyo) and the plan to manufacture indigenously designed passenger jets (that had apparently
worried Boeing). Thus if it is the case that the sceptical analysis turns out to be true (the
sceptical analysis being that these conditions were imposed by the IMF as an instrument of
protectionist US trade politics) then clearly the 'free trade' rhetoric is, shall we say,
meaningless. Currently (spring 2002) Indonesia and South Korea are set to receive US$100
billion between them in what the IMF calls 'bailout funding'. This is how one expert
commentator on international finance characterised this new set of IMF South Asian loans:
'"You'd think most of the loot would go to help ease some of the crushing dollar-denominated
debt of these hard-hammered Asian economies -at least, that's what Rubin and Larry Summers
[the US Treasury Secretary and Assistant Treasury Secretary]
claim" commented Fred Ackerman, a veteran Wall Street trader in
Nothing like it, warned this veteran money manager. "In reality, the IMF's bailout is being
used mainly as loan insurance to enable Indonesia and Korea's tapped-out state agencies and
corporations to borrow even more in the global markets". Goldman Sachs, chosen as the lead
underwriter and syndicator of new bond issues for some of the largest Southeast Asian borrowers,
is already collecting millions -and is expected to collect tens of millions- of dollars in
fees and royalties for helping to pile more debt on the stumbling Indonesian and Korean economies.
"It's like one of Mike Milken's daisy chains, isn't it?" asked Ackerman sarcastically, referring
to the fraudulent syndicates set up in the '80's by convicted swindler Michael "Junk King"
Milken to rig the bond markets. In much the same fashion, there is just a thinly veiled linkup
between the official acts of Treasury Chief Rubin -known to insiders as the most powerful man in
Washington as well as the main back-channel promoter of the IMF -and the huge profits skimmed by
his once-and-future firm, Goldman Sachs, from such international bailouts, Wall Street sources say'...
(Source: The Spotlight, by Martin Mann, May 11, 1998 republished on the
Dirty Gold In Goldman Sachs website April 2002).
Former Prime Minister Michael Manley was elected on a non-IMF platform in 1976. He was forced to sign
Jamaica's first loan agreement with the IMF in 1977 'due to lack of viable alternatives'. (But of course
sometimes when people -like Mrs Thatcher, and here the IMF- say 'there is no alternative' they may not
actually be telling the truth: they may well be trying to cajole you into accepting 'your pain, their
gain', a classic ruse of the Machievell). Subsequently the IMF (on behalf of US interests) persuaded Jamaica
to set up the 'Free
Trade Zones' that we now see around Kingston, where foreign clothing companies run high-security, low-rent
factories. Over 10,000 Jamaican women currently work for foreign companies under sub-standard work conditions
(most being on the Jamaican minimum wage of US$30 per week). The companies are encouraged to bring in
shiploads of material tax-free, which is then sewn up, assembled and transported out to foreign markets
in a minimum turn-around time.
In the 70s and 80s, women who spoke out and attempted to organize to improve their wages and working
conditions, were fired with their names placed on a blacklist in an attempt to ensure that they never worked
again. The US government supported these Free Trade Zones through the US Agency for International Development
which used over $34 million US tax dollars to target, persuade and provide incentives to American companies
to relocate offshore in Jamaica in this period. (Although now many of the same industries are relocating to
Mexico, Costa Rica and the Dominican Republic since production costs have fallen further in those countries).
Michael Manley was later deposed in a CIA-orchestrated coup.
The IMF and various private institutions made large loans to Mexico in the 1980s and 90s.
It has been said that the dream of a liberal order, which became the Washington Consensus dogma
of the 1990s, collapsed with the Mexican crisis of 1994. Wage levels in Mexico declined by 40
percent in 1994-95, having already declined by 60 percent between 1980 and 1990.
When the Mexican economy suddenly went pearshaped after agreeing to IMF 'structural adjustments'
the US treasury helped bail out the Mexican economy with a contribution of US$20 billion. There
are those who say that this was little more than a publicly-financed insurance
policy for Goldman Sachs and other large investment houses and banks that were 'exposed' in this
'Mexican peso crisis'. Needless to say perhaps, by this means the institutions generally made a great
deal of money out of the 'crisis'. Interestingly Robert Rubin, then US Treasury Secretary, who did
much to facilitate the movement of bailout funds from the US to Mexico (that then went back from Mexico
to US private finance institutions) at that time still had an interest in Goldman Sachs (one of the
main beneficiaries of the bailout).
In Mexico in 1994, as in East Asia in 1997, foreign
creditors turned abruptly from euphoria to flight. The outflow of funds started moderately in April 1994;
it became a stampede in December 1994, following the devaluation of the Mexican peso. Like Asia,
Mexico was basically a solvent, creditworthy country hit by a panicked withdrawal of foreign funds.
And like today's crisis countries in Asia, Mexico had so much short-term debt that the sudden
withdrawal of confidence threatened to push Mexico into default.
'The United States and the IMF led a bailout operation in early 1995. The IMF was assigned
the task of designing the "macroeconomic framework" the set of monetary, interest rate,
exchange rate, and fiscal policy targets to accompany the bailout loan to Mexico.
The IMF didn't really understand the Mexican crisis, and treated it incorrectly as a typical
case of a profligate government rather than crisis in
the private capital markets. The IMF called for a lot of monetary and fiscal stringency that unnecessarily
added to the contractionary effects of the creditor panic. In setting up the program, the IMF forecast a
Mexican growth rate of 1.5 percent in 1995. The actual outcome was -6.1 percent. This whopping
prediction error of 7.6 percentage points within the year was never explained, and apparently
did not lead the IMF to reconsider its strategy in Mexico or in similar countries' ...
'When an internal IMF review criticized the IMF's role in Mexico in 1993 and 1994,
it was quickly hushed up and never made public'.
(Source: The IMF and The Asian Flu,
Jeffrey David Sachs, The American Prospect Magazine).
Papua New Guinea
When you look at the detail of conditions imposed by the IMF on countries, it's clear that
these conditions may well be political and not in the interests of ordinary people in
the countries concerned. As an example we need look no further than the Land Mobilisation
Programme Papua imposed on the New Guinea government by the International Monetary Fund, the Australian
government and the Japan Export-Import Bank as a condition of their $235 million 'rescue package'.
The IMF has been leaning on the Papua New Guinea government to overturn the system of 'customary
land tenure' in Papua New Guinea, which covers 97% of all land and supports more than 85% of the total
population. Customary land rights are obtained by virtue of being a member of, or being affiliated to,
a land-owning group.
'Customary land tenure system serves the needs and requirements of the people,'
says University of PNG lecturer and land tenure specialist Andrew Lakau.
'It has preserved a way of life which the people know best,' he adds. 'Because of it, people have remained on or returned to the land, rather than drift to remain in a stagnant urban sector. It has also prevented the rise of a tenant-landlord class of people.'
Meanwhile, foreign consultants from the World Bank, have called for
changes to the customary land tenure system, saying that the present set-up is an impediment to
productivity and economic development. Whose 'economic development' would that be exactly, one asks...
Many Papua New Guineans have seen the IMF and World Bank's position on this issue as evidence of a
conspiracy by foreign capital to buy their lands. This author agrees with them.
The last years of 'perestroika' prior the collapse of the Soviet Union were times of great uncertainty
and economic problems for the country. In 1992 for instance Russia experienced 2500% inflation.
But when the wall finally did come tumbling down, in 1995, even greater political chaos ensued, along
with even more serious economic problems.
'The biggest sell-off of all' is how Joseph Stiglitz, ex-chief
economist of the World Bank described
the collapse of the former Soviet Union in 1995. (Stiglitz was fired from the World Bank, for asking,
quite diplomatically, whether the policies of the World Bank were in everyone's best interests.
-Pour encourager les autres?)
The scramble for Russian assets at that time, by both foreign investors and a new (often corrupt) Russian
elite was an unedifying spectacle, perhaps somewhat akin to the 'scramble for Africa' in the 18th century.
Again, following perestroika billions of dollars worth of reserves migrated from Russia to the US.
Many Western advisers from the Bush (senior) administration, the IMF, the World Bank,
the International Finance Corporation, the European Bank for Reconstruction and Development and the
Harvard Institute of International Development in particular were involved in ostensibly helping to
steer the former communist nation into a successful free-market economy.
There are those who say that Yeltsin was primarily responsible for giving this new Russian elite the
freedoms and mechanisms to plunder their own country in tandem with a resurgent and more economically
competent criminal class. (Perhaps the most impressive example of 'outclassing' in this respect was
when US$5 billion provided by the World Bank for restructuring the Russian coal industry simply disappeared).
However, clearly the IMF and other such institutions have a lot to answer for, as the Russian people
are well aware. In 1995 the IMF made a US$6.7 billion loan to Russia, lending a further US$10.2 billion
in 1996. More than US$20 billion of international funds were used as 'bailout' funds for Russia in 1998,
after the ruble was devalued.
Besides lending from the IMF and the World Bank, Russia arranged loans directly from the US government-
for instance OPIC (the Overseas Private Investment Corporation, a US government entity) provided Russia with
nearly US$2 billion worth of 'guarantees' in the early 1990s: 'guarantees' that are still 'unresolved'.
Russia experienced a major economic 'crash' in mid-1998, when it was forced to devalue the ruble.
(Speculators please note: the experience of Russia and Brazil suggests that fostering a period of
apparent stability before the crash can do wonders for profits).
Since then, it has been locked in a debt trap, borrowing more and more from financial institutions,
with the whole system being in danger of careering out of control: for instance annual rates of interest
in the Russian bond market since perestroika have at times have exceeded 100%.
This is how one Russian economist has characterised this period:
'IMF theorists insisted that privatization would lead automatically to better management of
industries and lower government spending. [Claims that subsequently were shown to be quite false.]
They also stressed the need to spend less on education, social welfare, healthcare etc.
Not only did the IMF encourage the Russian leaders in the illusion that squashing inflation would
automatically lead to growth, but IMF spokespeople also fed the misconception that if things went wrong,
there'd be plenty of money in the world financial system to bail the Russians out'.
(Source: Russian economist Boris Kagarlitsky in testimony to the US congress 1998).
Again we see the same IMF-inspired formula (that did nothing to improve the quality of life
of ordinary Russians, in fact quite the reverse) where prices rose, wages fell, and government spending and
public investment fell. And again we find the same rapacious trickery: 'How can you talk
about due safeguards when it is a notorious fact that capital flight from Russia has far exceeded the sums
as credits by international financial institutions and world financial markets? To a large extent this is
the same money which immediately leaves the country through private banks working with government agencies.
It is impossible to imagine that IMF experts are not aware of these facts, which every shopkeeper in Moscow
knows about. On the contrary western experts always insisted on open markets and liberal regulations of
international financial transactions. In Russian conditions, open markets and liberal regulations on
international financial transactions mean not only a green light for capital flight, but also excellent
prospects for the mafia. But none of this has stopped the IMF and similar institutions from insisting that
controls be kept loose. Foreign credits did not save Russia. They did not prevent the current crisis.
On the contrary they provoked it. It is quite possible that the chief concern of the IMF decision-makers
was not the success of Russia but the prosperity of the Western financial community which made a lot of
money out of our crisis'. (Source: Boris Kagarlitsky 1998).
The IMF loaned about US$20 billion to South Korea in 1997.
At the centre of South Korea's agreement with the IMF we find Seoul agreeing to the IMF demand that foreign
investors be allowed to own up to 55% of the equity of Korean firms. This agreement paved the way
for giving Western interests the opportunity to pick up one of the world's major car manufacturing firms
at a knockdown price. Here's how financial-market-journalist Martin Mann described these carryings-on:
'The second kickback from the IMF bailout [after using bailout finance as loan insurance to enable
agencies within Indonesia and Korea's to borrow even more in the global markets] goes to
what even the Wall Street Journal calls "vulture
capitalists" -that is, international financiers who pounce on distressed corporations, buy them
out at knockdown prices, and then use "special connections" to make a killing on the deal.
This is what happened in Mexico in 1994-95, and it's happening now in Southeast Asia, Wall Street
sources say... For an example, they cite the case of Daewoo, a major Korean car manufacturer, crushed
by a back-breaking US$3 billion debt it could no longer service after international speculators
... raided Korea's currency and devalued it by more that a third last year ...
An international syndicate headed by General Motors and advised by Goldman Sachs is now negotiating
to buy a controlling interest in Daewoo at a time when they can acquire the huge bankrupt
manufacturing complex at a steep discount, something like "15 cents on the dollar," these sources
averred... "That's a real sweet deal for the vulture investors grabbing Daewoo, but will they also
get stuck with its US$3 billion in outstanding debt," asked Dr. Gottfried Sieberth, the dean of European
financial writers based in the US... Not if the IMF cash is divided up the way it was in Mexico, where
it was used to buy up the defaulted loans of the biggest banks and corporations, explained this
(Source: The Spotlight, by Martin Mann, May 11, 1998 republished on the
Dirty Gold In Goldman Sachs website April 2002).
In its agreement with the IMF, South Korea also promised to privatize the South Korea Tobacco
Ginseng Corp. and five other government-owned companies, by 2002. Again, this opens the way for
Philip Morris, British American Tobacco PLC, RJR Nabisco Holdings Corporation and others to muscle
in (all three of the above having clearly demonstrated their interest as early as 1998).
It is interesting to note that when the IMF was insisting on it's usual bundle of conditions to
East Asian countries in 1997 (while negotiating loans) and in 1998 (when many East Asian economies
were suddenly in serious trouble, after speculative raids on their currencies) the East Asian countries
were running budget surpluses.
(So the IMF had to find different ways to justify their proposals). Also, most East Asian nations
had tight monetary policies, such that generally inflation in these countries was low and falling.
Here is an interesting statistic: 'Thailand increased its rubber exports by 31% in the
first half of 1985 compared with the same period the year before -yet its rubber revenues fell by 8%'.
(Source: ‘Poor man’s gift’, Economist, 30 November 1985). Among other things this
the extent to which the word 'efficiency', banded around from time to time by rich economists in
the IMF and elsewhere, may not actually mean very much when used in the context of international trade,
where exchange rate fluctuations and the volatile movements of investment capital may influence revenues
more than any other factor. Generally one person using their hands for a given length of time in the
developing world will produce more than a similar person in the developed world...
After imposing rigorous reform programmes on Thailand and South Korea in return for massive bailouts,
the IMF changed course and returned to such Keynesian methods as reflation ostensibly to try to drag the
countries out of their economic woes. (This echoes Davison Budhoo's criticisms of IMF actions with regard
to Trinidad and Tobago, where he claimed that the IMF had a habit changing the rules to suit its policy
objectives -see IMF Fraud below).
The IMF has subsequently 'persuaded' the Thai authorities to agree to the removal of all limitations on foreign
ownership of Thai financial firms and is pushing the government hard to enact even more liberal foreign
investment legislation that would allow foreigners to own land, a practice that has long been taboo in that
In the 1990s US$141 billion of international funds have been used as 'bailout' funds for Asian countries.
Thailand was in receipt of a US$17 billion international rescue package in 1997, US$4 billion of which
came from the IMF.
'the IMF arrived in Thailand in July filled with ostentatious declarations that all was
wrong and that fundamental and immediate surgery was needed. (Ironically, the ink was not
even dry on the IMF's 1997 annual report, which gave Thailand and its neighbors high marks
on economic management!) The IMF deepened the sense of panic not only because of its dire
public pronouncements but also because its proposed medicine high interest rates, budget
cuts, and immediate bank closures convinced the markets that Asia indeed was about to
enter a severe contraction (as had happened earlier in Argentina,
Bulgaria, and Mexico). Instead of dousing the fire, the IMF in effect screamed fire in the theater. The scene was repeated in Indonesia in November and Korea in December. By then,
the panic had spread to virtually all of East Asia. Even though the original fire could
well have been contained, the ensuing panic has proved devastating'.
(Source: The IMF and The Asian Flu, Jeffrey David Sachs,
The American Prospect Magazine).
Who Sets The Agenda?
Has it been the case that the US administration and Treasury and private financial institutions,
in collusion with the IMF, or a cabal within the IMF, have effectively hijacked world finance
arrangements? The examples presented here, along with a wealth of evidence available from other
sources, suggests that this is in fact the case.
Besides the 'member' countries of the IMF a number of private financial institutions such
as Goldman Sachs, Citigroup and Chase Manhattan are also involved in IMF lending schemes: not
directly (look at the blurb put out by the IMF for consumption by the general public and you
will see no mention of the IMF directing private finance in any way shape or form into countries
with which they deal). Dig a little deeper, however, and you find that the IMF does get involved
in cosy negotations through which would-be-lender countries are encouraged to strike up deals with
private institutions such as these. (And one single Goldman Sachs 'shareholder' may itself be
a financial organisation that represents a number of further organisations, and so on).
Or, these private institutions may well be invited to 'underwrite' IMF-sponsored
loans to debtor counties, such that they then receive payment for 'exposure to risk' (which may
effectively then constitute a transfer of funds from developing country to private Western bank).
Thus when a country gets in debt to the IMF, it is also effectively in debt to all organisations
(not just countries) that contributed to the original loan made to the debtor country.
Not only that, but in the US at least any one such underwriting institution then has the power to
make legal challenges to any subsequent restructuring of the debt by the IMF (when, in this
context, they may be referred to as 'rogue creditors') effectively giving
these (private) institutions the power to influence IMF policy.
For instance one creditor, Elliott Associates, a New York hedge fund, recently held up the
restructuring of Peru's debts with a court challenge.
But why, objectively, do private firms such as this actually 'need' to underwrite IMF-sponsored loans?
Besides the enormous contributions to the fund made by richer countries, the IMF has one of the
largest reserves of gold on earth, valued at over US$30 billion in 2001. Perhaps the word 'need'
above should be replaced with 'want' here (for obvious reasons). 'Exposure to risk'? To this author
at least it seems that what we're talking about here is all too often low cunning (or brute force)
employed in persistent attempts to rip off developing countries in any way possible. Talk of 'risk'
in this context brings to mind the image of some 6'6" martial-arts-trained rapist talking about 'risk'
in relation to his activities. (That is, the language does not seem to bear much relation to a
common-sense reality of any sort).
Goldman Sachs in particular has had close links with the IMF for
many years. For instance, Jonathan Anderson who joined Goldman Sachs' Asia Pacific economics
team as executive director in 2001 previously worked for the IMF both in Beijing and Moscow in
the 1990s. (And in 1993, Goldman Sachs split a profit of US$2.6 billion between 161
partners, whereas in the same year the country of Tanzania split a gross domestic product of
US$2.2 billion between 22 million people. Furthermore in 1997 the Tanzanian government announced
that it would lay off 10,000 civil servants in accordance with conditions tied to an earlier
-1996- IMF loan of US$234 million). Goldman Sachs also has a history of close ties with successive
US administrations: for instance Clinton Treasury Secretary Robert Rubin was a former chairman of
Goldman Sachs. Similarly, Stanley Fischer, deputy managing director at the IMF during the Asian
and Russian crises, is today vice-chairman at Citigroup (to what extent is this 'reward' one asks).
This section on 'who sets the agenda' would not be complete without reference to some of
the 'think-tanks' in Britain and in particular the US whose avowed intention is to influence
the way ordinary people perceive things. To those inclined to dismiss critics such as this
writer as being credulous conspiracy-theory believers, I would recommend the interested reader look
further into the activities of the American Enterprise Institute, the Cato Institute, the Competitive
Enterprise Institute, the Heritage Foundation, the Hudson Institute, the Progress and Freedom Foundation
and the Washington Legal Foundation in the States, all of whom receive significant funding from big
business in order to push particular (generally big business, right-wing political) agendas.
It is groups such as these who may be particularly keen to foster the use of language in certain ways-
for instance the positive use of terms such as 'free and open markets' and 'trade liberalisation' in
schools and the media, such that people in general do then come to walk around thinking that all of the
financial wheeler-dealing involved in international trade is ultimately in everybody's best interests.
The case made here (with supporting evidence) however, is that when the terms 'free and open
markets' and 'trade liberalisation' are invoked, the real agenda behind the rhetoric is all
too often profoundly rapacious and amoral, such that real and lasting damage (and untold
human misery) is all to often inflicted on countries in the developing world. One of the
fundamentals of capitalism is that to those who have shall be given more (and those who
have not will be exploited). Much rhetoric is employed in an effort to disguise this fact.
Free trade as defined by the IMF, the World Bank and the World Trade Organisation after Adam Smith
and Milton Freidman, in many ways means 'deregulated free-market capitalism'. However this trade is not
nearly so 'free' as the propagandists would have us believe. (Just as in the 19th century) Europeans
and Americans today are demolishing barriers to sales in Asia, Latin American and Africa while at the
same time often barricading their own markets against the Third World's agriculture (for instance).
And while the IMF may claim that a developing nation is 'inefficient' (in order to justify
massive 'structural adjustments') individual rich member nations of the IMF may well either
i) impose barriers against that developing nation's agricultural products, precisely because they are,
in one sense, more efficient (ie cheaper), in order to protect their own production of these goods or
ii) they may rush to buy up more of that country's commodities, thanking the IMF for making them even
cheaper than they were before.
The information presented here, and the interpretation, is admittedly somewhat 'dark'. There may well
in the developing world who are pleased with the arrangements thay have made with the IMF. However,
when considering the issue of spiralling 'third world debt' alone, one is inclined to question
the appropriateness of the phrase 'debt relief' that is currently given prominence on the IMF's
More than this though, much of the material presented here does lend credence to the view that
there is actually something even more sinister going on, whereby private finance, along with cabals
within the IMF and the US administration, have in many cases (ie those listed here and others) royally
screwed the economies of a number of countries in ways that have significantly reduced the quality
of life of people in the countries concerned. (And made a few people very very rich in the process).
A Little History
The institutions of the IMF and the World Bank were built on top of the 'Bretton Woods' consensus
of 1942-1944, in which the ostensibly laudable aims were to provide a global 'structure' for
international finance that would be in everybody's interests. The stated aims were originally that rich
countries could help poor countries and collectively a set of 'rules' could be agreed, in order that global
trade could be facilitated and all parties would gain from extra financial and political security.
Arguably, however, this laudable long-term agenda has been hijacked by those wishing to make short-term
profits out of countries in the developing world at the great expense of the populations of those countries.
This being the case, the IMF has quite clearly lost its way.
Interestingly, for at least 10 years after 1942 the US Federal Reserve bank acted as the de facto central
bank for these developing international financial structures. And arguably the undue global influence this
undoubtedly conferred on post-war US administrations remains to this day behind the scenes. (Many consider
that the Bretton Woods consensus finally ceased to exist in 1972 when the international link between the
dollar and gold was broken). Also, since the Reagan administration in the mid-80s, US foreign policy has
been even more aggressive in pursuit of a global economic agenda than it was before.
Here's how one writer has characterised the current US position:
'for globalism to work, America can't be
afraid to act like the almighty superpower that it is ... the hidden hand of the market will never work
without a hidden fist ... McDonald's cannot flourish without McDonnell Douglas, the designer of the F-15.
And the hidden fist that keeps the world safe for Silicon Valley's technologies is called the United States
Army, Air Force, Navy and Marine Corps. (Source: What the World Needs Now by Thomas Friedman, New York Times, March 28, 1999).
Ever since Reagan, the main thrust of US foreign policy has
been to aggressively promote US trade and investment across the world, while removing all obstacles,
such as protectionism, government regulation, and subsidization of local producers, that
appeared to constitute handicaps to US-based companies. And one of the more obvious aspects
of 'globalisation' that is often overlooked is that when a very rich country is given unfettered
access to the economy of a very poor country, ownership and control of the poor country's assets
will tend to fall into the hands of interests from the rich country (because local entrepreneurs
will always be 'outgunned': -the 'foreigners' will generally be able to buy up local resources more easily).
This is one reason why there are currently (in 2002) several hundreds of Americans in the capital city
of Kazakhstan, Almaty. Many of them are looking for assets to buy for 'a song'. Such a situation is
NOT always desirable, however, whatever the apologists for such 'freedom' may say. The 'freedom'
exists on one side only. The tendency of capital to concentrate in the hands of a tiny few at the
expense of everyone else is one of the fundamental flaws of the unregulated capitalist free market.
This is how Mark Twain described the United States indulging in European-style imperialism in the
Philippines in 1901:
'it is yet another Civilized Power, with its banner of the Prince of Peace in
one hand and its loot-basket and its butcher-knife in the other'.
(Source: Mark Twain, To the Person Sitting in Darkness, 1901).
Plus ça change, plus c'est la même chose.
Running structural adjustment through finance ministries that became its virtual appendages, the
IMF substantially has transformed the economies in Latin America, Africa and Asia in a free-market
direction. And the 'advertising' rhetoric put out by Fund supporters is that central to the
Fund's operations is the idea that 'sick economies', through the ministrations of the Fund,
could be 'nursed back to health'. However, there are those who say that many IMF programmes were,
in fact, never meant to restore 'sick economies' to health at all, and that the real agenda
has been quite different: the rhetoric being simply a means by which A Belief System Is Imposed
Under Which The Unwitting Willingly Hand Their Wealth To The Cunning...
There has often been a political dimension to this agenda too: for instance
'Turkey received the largest handout last year from the IMF of any country since the Asian
crisis. Defenders of the package would no doubt argue that the country has stuck to the IMF's
tough conditions more successfully than Argentina, at considerable economic cost. Cynics might
note that the country is an EU accession candidate with an overwhelmingly Muslim population,
and an important ally in America's war on terror. The moral of the story seems to be, no
bailouts except for countries which are strategically or economically important. Poor old
Argentina is neither'.
(Source Charlotte Denny The Guardian April 29, 2002).
Clearly the US government has also attempted to push its policy goals through the actions of the
IMF and the World Bank. (The US Treasury 'owns' 51 percent of the World Bank, for instance).
What Is The Agenda? (A Sad, Depressing And Ugly Business)
Step into my debt trap, little one...
In 1997 the total foreign debts of all developing countries were more than US$2 trillion
(million million) and still growing. (Only some of this is owed to the IMF of course).
The result is a debt of US$400 for every man, woman
and child in the developing world where average income in the very poorest countries is
less than a dollar a day. (Source: New Internationalist Issue 312 on Debt).
Half the world's people live on less than US$2 a day.
1.2 billion people live on less than US$1 per day.
When the inescapable compound interest owed by the debtor nations is taken into account
the situation is even more absurd, ridiculous, and life-and-death-serious: writing in 1994
(when the total foreign debt of the developing world stood at US$1.5 trillion) this is
how economist JW Smith described the situation: 'if allowed to continue to grow
the magic of compound interest dictates it is unsustainable. One trillion dollars compounded at
10 percent per year becomes US$117 trillion in fifty years and US$13.78 quadrillion in one
hundred years, about US$3.5 million for every man, woman and child in the Third World.
Their debt is 50 percent greater than this and has been compounding at twice that rate
-over 20 percent per year- between 1973 and 1993'.
(Source: JW Smith, The World's Wasted Wealth 2, Institute for Economic Democracy,
1994, p 143).
In 1998 developing countries paid back $13 for every $1 they received in grants.
And still, in 2000 alone the total amount invested in developing countries was
US$1.7 trillion. (Source: United Nations Report Of The High-Level Panel On Financing For
Money-lending has often been one of the less savoury ways to earn a living, and, like money-lenders
in the poorer parts of the city, lenders may have no real interest in educating, encouraging and
helping people to find better ways of doing things, such that they avoid the trap altogether. Like
drug pushers, what they really want is that you should take that first step with them into a new
landscape, where they hold your hand and do their best to make you 'trust' them. The first step is the
difficult one. After that it's all downhill. And thus it is with the IMF. The developed world
currently owes a total of more than US$2 trillion to governments and private financial institutions
in the developed world, and once in that trap, if the experience of the countries listed above
is anything to go by, they will squeeze (and squeeze, and squeeze) and it does not matter how poor
you are, or how much you are suffering...
One of the age-old tricks of the loan shark is to somehow push the debtor into a situation
where they default on a loan. This gives the shark a whole lot more leverage, enabling
them to push the debtor yet further into a debt trap, enabling the shark to make yet more
money from extortionate interest repayments, etc. Looking at the case of Mexico in 1995,
for instance, it is hard not to come to the conclusion that this was precisely what the
IMF was up to in their use of innappropriately negative financial 'gossip' regarding
'Debt is an efficient tool. It ensures access to other peoples' raw materials and infrastructure on
the cheapest possible terms'. (Source: Susan George, A Fate Worse Than Debt).
Let's take a step back and look at the generalised IMF/World Bank strategy of imposing conditions-
the conditions tend to include some or all of these (usually all of them):
Privatising and 'liberalising' the economy, including
Liberalising import controls
Liberalising capital markets
Reducing financial and legal safety nets for businesses
Introducing a payment ethic for social services of all kinds
Rescheduling existing debt
Decreasing government spending, by
Ending subsidies, and allowing the market to regulate prices
Laying off workers
Reducing education, reducing health expenditure
Increasing exports, by
Devaluing the currency
Improving the terms of foreign investment
Reducing or freeze wages
Reducing worker power
Regarding privatisation, Joseph Stiglitz' (ex-chief economist of the World Bank)
view is that
when international financial institutions stepped into the breach made by perestroika in the
Soviet Union's defenses in 1995, for instance, US-backed oligarchs stripped Russia's industrial
assets. In the ensuing chaos national output was cut nearly in half. When state-owned enterprises
are sold off to foreign interests in this manner Stiglitz said that 'rather than
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"'.
(Source: The Observer 29th April, 2001). Did you know that Thames Water owns
and manages Jakarta's water supply? Elsewhere Stiglitz has observed that the
IMF's objectives have changed 'from serving global economic interests to serving the
interests of global finance'.
In theory 'liberalising capital markets' allows investment capital to flow in and out. Unfortunately,
as demonstrated in Indonesia and
Brazil, the money often simply flows out. Cash may come into the country for speculation in real estate
and currency, but it may also fly out of the country at the first hint of trouble. A nation's reserves
can drain in days. And when that happens, to seduce speculators into returning a nation's own capital
funds, the IMF may then demand that these nations raise interest rates to 30%, 50% and 80%, thus
demolishing property prices, savagely reducing industrial production and draining national treasuries.
'Liberalising capital markets' may well also involve devaluation of a country's currency. When the
IMF/World Bank/GATT/NAFTA/WTO/ colossus somehow forces a country to devalue its currency, and reduce
consumption to increase sales of resources to the developed countries, this lowers the costs of such
labor and commodities to outsiders, while raising the costs of manufactured products from outside when
imported in to the country. The claim is often made that such a situation is an inevitable result of
inefficiencies in the developing country's industry and labor, but actually such a situation can clearly
benefit foreign investors and/or asset-strippers if ENGINEERED by them.
And where this is the case (as it all too often it seems to have been in recent years) what we are
seeing is effectively 21st century colonialism.
By way of example, as a result of austerity measures forced on rubber-producing countries by the
international financial institutions, the relative value of world rubber exports dropped 300 percent
between 1960 and 1975. Cotton exporters lost 60 percent of their buying power in the same time span.
The price of primary commodities that developing countries in general export have collapsed to the same
price as 20 years earlier while prices for manufactured products have soared, forcing the developing
countries to export more and more while importing less and less. Is this 'development'? The liberalising
of capital markets may well also involve enticing the country into (further?) debt: the IMF or World Bank persuading that country to borrow more money. This is sometimes referred to as the 'debt trap' or 'debt
dependence'. In general the scenario is this: typically the debts are incurred by the developing country
for investments to extract resources, produce agricultural exports, and build the infrastructure to ship commodities to developed countries. The developing country is then expected to lower living standards
and export more minerals, lumber, and food, all to pay debts that did little for their economic
development in the first place. According to the World Bank, commodity prices overall lost 16 per cent of their
value in 1998 alone, continuing a longer-term trend. Metals and minerals prices ended the year 33
per cent down from their peak in August 1995, while food prices fell 21 per cent from their level
in April 1996. Ironically all of the main conditions giving rise to these falls have been as a direct
result of IMF and World Bank-sponsored structural adjustment programmes. (Source: Jubilee 200 Coalition).
Also in a typical list of IMF conditions we invariably find: item- 'reducing education' and
item- 'reducing health expenditure'.
For most if not all populations in the developed world, increasing expenditure on both education and
probably the number one priority. So why should we let the IMF or World Bank insist on reforms in
developing countries where these vitally important opportunities are taken away? People with social
consciences in the developed world must act to stop the rape of developing nations by these (and any
When one looks hard at the reality of what has happened in the case of those countries listed above
(for instance) it is difficult to escape the view that behind the rhetoric that would portray world
financial institutions as working in the interests of 'everybody', there really is a deeply ugly
conspiracy (with a predominantly US/multinational company agenda) afoot. Written into the script of
this conspiracy is the idea that certain key players have actively sought to destroy the economies
of certain countries so that a very few people can get very very rich at the expense of literally several
million people who have then been forced to suffer truly terrible consequences, including ultimately
(and in many cases) disease, hunger and even death.
Some say, for instance, that in the 1980's, the IMF effectively directed public funds first through the
institutions of indebted Southern governments and then back to the coffers of Citigroup, Chase Manhattan,
and other heavily 'exposed' Northern banks, then squeezing the peoples of these Southern countries
to repay the Fund (and the Fund's banking backers).
According to Walden Bello, professor of sociology and public administration
at the University of the Philippines 'there is a belief going around industrial and government circles throughout Asia that Washington
and the IMF conspired with the banks and speculators to bring about the region's financial meltdown. The
alleged reason: to derail Asia from its march to become America's strategic economic and political rival
in the 21st century. This is, of course, classic conspiracy theory, but it is a sign of the times that it
now has the status of fact among economic and political elites that once served as Washington's staunchest
backers in Asia'.
First, get a country hooked into the system (by making it owe you money). Promise greater wealth as a
consequence of the structural reforms that you advocate with the dual intention of i) making the
whole economy and reserves of that country vulnerable to asset-strippers ii) making it impossible for
the country to pay the debt when the promised extra wealth does not materialise (as you knew would be the
case). Then change the rules, asserting the need for yet more stringent measures, that create greater
devastation and lock the country in to the sick system even further. It really is like pushers and addicts
(except that the national funds at stake here are life-and-death ESSENTIAL to the countries involved).
The strategy of persuading someone that they have a need of something ('creating a market', in this
case for 'financial products') is a very old one. And when they bite a little at first, do everything you
can to 'lock them in' to your long-term strategy, such that over a period of years you can really take
them to the cleaners. The Grand Strategy appears to be to impose unequal trades upon the world so as
to lay claim to the natural wealth and the labors of weak nations.
World trade today is characterised by corporate imperialism.
In terms of rhetoric, the IMF and the World Bank have different faces that it seems they will
try and put across to different people at different times, as need dictates: on the one hand they
seem keen to foster the impression to people at large that they do have a social conscience and
that their actions are ultimately in everybody's interests. On the IMF web site
homepage in mid-2002,
for instance, we see special prominence given to the terms 'debt relief'
and 'poverty reduction', along with the following: 'the IMF is an international organization of 183 member countries,
established to promote international monetary cooperation, exchange stability, and orderly
exchange arrangements; to foster economic growth and high levels of employment; and to provide
temporary financial assistance to countries to help ease balance of payments adjustment'.
But to interested parties such as
Western investors, they will say 'the IMF has repeatedly stated that it is not, and
was never intended to be, a development institution' and similarly 'the fundamental goal of creating
markets for industrialized countries' exports, was written into [the World Bank's] charter'.
If only these institutions had been as honest with the governments of developing nations who have been
lured into crippling debt traps (etc) then much human suffering would have been prevented. But
it seems that honesty itself is not been given much of a priority in these 'arrangements'...
Despite the cloak of secrecy thrown over all decisions made internally within the IMF, Davison
Budhoo, senior economist with the Fund, who resigned in the late 1980s on ethical grounds,
brought some of the organisation's shockingly dubious internal practises to the attention of the
world at large with his 150-page resignation letter.
(With facts and figures later verified by independent research). Among other things, Budhoo pointed
out the way in which, when making a assessments of the state of a country's economy, IMF
economists wre keen to put a value against what they called the Relative Unit Labour Cost, or RULC.
Within the IMF this was (and possibly still is) taken to be a key indicator, attempting to compare
the unit labour costs for manufacturing industries in a developing country against the unit labour
costs for manufacturing industries in developed countries (ie the developing country's 'major
trading partners'). Budhoo was at pains to point out the dubiousness of these statistics, however,
claiming that 'what we had done, over the years, was to manufacture statistical
indices -the RULC and several others- that would allow us to prove our point, and push a particular
policy line, irrespective of the economic realities and circumstances of the country'. In his book
'Enough is Enough', Davison Budhoo plots the course of IMF machinations with relation
the example of Trinidad and Tobago in some detail, showing how on the basis of fraudulent fugures, the IMF
pressured Trinidad and Tobago into (the same list, including)
public sector job losses and wage cuts
price deregulation (for which read price increases) on essential goods used by the poor in particular
further regressive tax measures
Budhoo shows, however, that not only were the figures contrived in the first place, he also shows
that even as sections of the organisation itself become fully aware of the 'mistakes' in the
figures, and internally at least admitted to the fact that the figures on which the policies were
supposed to be based were quite wrong, the same policies nevertheless continued to be pushed,
with all reference to the originally fraudulent figures simply expunged from all documentation,
and no mention of the 'mistakes' ever being made to the government of T and T.
It is not difficult to play around with statistics, such that they show what you want them to show,
if one has a mind to do so. For instance, when referring to 'a basket of currencies of major trading
partners' (as the IMF is wont to do) and using that as an index, immediately one has a great deal of
scope: one can choose to include only the figures for countries that help one's 'cause' on that particular
day (perhaps taking adjantage of big fluctuations in the money markets in the process). One can simply
ignore the rest (that don't help the 'cause').
In the case of Trinidad and Tobago, the IMF even used figures pulled out of thin air, saying
that it had 'unconfirmed reports ... indicating that unpaid bills amounted to
This would have represented 6.5% of GDP, had it been true. In fact the government of T and T
owed virtually nothing in unpaid bills at that time. So where did these 'unconfirmed reports'
come from? The IMF would not say.
Furthermore, according to Budhoo (producing internal IMF figures that were later validated by
independent academic research) the IMF
misrepresented T and T's 1986 fiscal deficit to make this appear to be TT$1.9 billion more
than was in fact the case
misrepresented a 1986 decline in private sector bank deposits in T and T to make this figure
appear to be TT$250 million less than was in fact the case
misrepresented T and T's 1986 deficit on the current account of the balance of payments to make
this appear to be TT$500 million more than was in fact the case
misrepresented T and T's 1986 government transfers to the public enterprise sector to make
this appear to be TT$1.0 billion more than was in fact the case
A recent a recent decision within the WTO (World Trade Organisation) quotes
Article XV:2 of GATT 1994, asserting that 'the contracting parties must accept all findings of
statistical and other facts presented by the Fund [ie the IMF] relating to foreign exchange,
monetary reserves and balance of payments'. This when the IMF is in no way transparent and when
it has also often been clear that IMF statistics are dubious.
Another relatively simple way to indulge in statistical trickery is to choose your own 'base' from
which to provide figures. For example, in pressing the IMF's subsequent
'case' for devaluation of the Trinidad and Tobago dollar, an IMF report in 1987
stated 'the external value of the Trinidad and Tobago
dollar was still around 10% higher in real effective terms than in 1980, while the external terms of trade
had declined by about 50% since that time'. However, in 1980 unusual fluctuations in the price of oil
on world markets took place (when oil was accounting for 80% of Trinidad and Tobago's merchandise
exports) so fluctuations in the price of oil worldwide tended then to have a big (and in this case
unusual) effect on the country's trade figures. Had 1982 been chosen as the base year, however, the
report quoted above would have read 'the external value of the Trinidad and Tobago dollar
had declined by 16% in real effective terms since 1980, while the external terms of trade had declined
by less than 10% since that time'.
So the IMF, while recommending massive changes to the economy and lifestyle of the people of Trinidad
and Tobago, was basing its recommendations on figures that many of its staff surely knew were
fraudulent. (see Davison Budhoo, Enough is Enough page 26, section entitled Statistical Monkey-Business Once Again).
At one point in 'negotiations' with Trinidad and Tobago in the late 80s, it was clear that the
country had in fact achieved (by their own methods) the fiscal account adjustments that the IMF
had been insisting on. The IMF's response? The response was to move the goalposts by insisting on
stiffened targets (in what therefore demonstrated a clear attempt to enforce a political agenda).
Budhoo suggested that in choosing the example of Trinidad and Tobago he was merely demonstrating
practises that were in fact the norm in relations between the IMF and 'member' counties.
Besides the specifics of the way in which the IMF was using statistical fraud to justify massive
'structural readjustments' in Trinidad and Tobago however, the whole theoretical basis notions such
as the Relative Unit Labour Cost, or RULC as used by the IMF begins to unravel on close scrutiny.
When looking at the relative value of labour in different countries, the 'productivity' of labor-time
is seen less of a function of the level of wages (as classical economic theory would suggest) and more
of a function of exchange rates and the workings of the international monetary system. For instance
Mexican metal workers are 40 percent more productive than US workers, Mexican electronics workers 10 to
15 percent more productive, and Mexican seamstresses produce 30 percent more sewing per hour than their
US counterparts. So the rhetoric about 'efficiency', or lack it, when used to justify the kind of massive
structural changes that the IMF tends to insist on, generally does not add up.
One of the most dramatic ways in which the hypocrisy of the US manifests itself in this context,
is in relation to 'balance of payments' issues. The IMF, the World Bank, and other financial institutions,
when making their mark in the developing world, and following a US and US-multinational-inspired agenda,
will often point to perceived balance of payments problems in a country, where the value of that
country's imports may be much greater than the value of the goods it has imported (or vice versa).
Rough parity between the value of a country's imports and exports is seen by classical economists to be
a 'good thing'. Yet the current (2002) US trade deficit (as the difference is known) is thought
to be around US$400 billion. It has even been suggested that funds (eventually) flowing into the US as
a consequence of IMF/World Bank sponsored arrangements as described here are one of the main ways in
which the US treasury can maintain such an imbalance. If true, this would suggest hypocrisy on a truly
The US government provides US$5 billion annually in subsidies to the fossil fuel industry (coal, oil,
gas, petrol). (And, by way of an interesting 'aside', a petition to the US government signed by over
1,000 economists stated that 'the most efficient approach to slowing climate change is through
Shortly after his election as president, George W Bush put his name to a bill that
will raise US agricultural subsidies by up to 80% a year for the next 10 years.
Recently (in 2002) the tariffs imposed by the US on imported steel have caused a
good deal of 'concern' in other countries. These are two examples of many, demonstrating
the fact that while encouraging other countries to remove subsidies and tariffs (and
using the IMF/World Bank/WTO/NAFTA etc to push these policy aims) the United States
itself is manifestly unwilling to swallow this 'medicine'. So are we ever likely to see
the IMF passing judgement on the US in the way that it has persistently judged other
countries (taking note of the massive subsidies the US gives to agriculture and other
industries, taking note of the tariffs slapped on many goods to deter foreign imports,
taking note of the 'inefficiencies' that such subsidies and tariffs must surely hide,
taking note of the current US$400 billion US trade deficit)? Perhaps the US will
emasculate its own economy and tie the hands of all interested parties within the country
in the interests of 'trade liberalisation', giving speculators from across the globe the
opportunity to take them to the cleaners? When a person has a 'one rule for you, another
rule for me' kind of attitude, this is usually perceived to be one of the hallmarks of
a selfish, myopic or arrogant individual...
The huge subsidies given to farmers in the US may in themselves have massive effects on farmers in
the developing world. For instance West African cotton exporters already lose about US$250 million
a year as a direct result of US subsidies (a figure set to rise sharply after the imposition of new
subsidies in 2002). For countries like Burkina Faso, Mali and Chad, where cotton accounts for more
than one-third of export earnings, the losses are huge. It's a similar story re Mexican maize, and
Haitian rice, where US subsidies have completely distorted the market, forcing local producers out
of business, and forcing countries to import products where before their agriculture had been
virtually self-sufficient. 'The first law of the free market in agriculture according
to President Bush can now be clearly stated: we subsidise, you liberalise'
(Source: Kevin Watkins, senior policy adviser at Oxfam).
Both the US and the EU are hypocritical in respect of tariffs and subsidies.
Franz Fischler, the EU Agriculture Commissioner claimed
in 2001 that in the three years since 1998 each US farmer had received US$11,000
in direct payments, almost three times as much as EU farmers who in the same period had received
the equivalent of US$4,500. A study by the Organization for Economic Co-operation
and Development (OECD) found that
for every tonne of wheat produced, Canadian farmers get US$15 in total subsidies, American farmers
US$72 and Europeans US$116. The EU spends nearly half its collective budget on the Common
Agricultural Policy (with most of it payed out in the form of subsidies).
'subsidies which ensure that third world farmers struggle while EU farmers survive, are not the
stuff of free trade'.
(Source: Free Trade Is Bananas By Patrick Barkham Guardian Unlimited March 4th 1999).
Is There Another Side Of The Coin?
The detail here shows the IMF and other financial institutions in something of a bad light. In
the interests of clarity, it could be argued that to home in on these few countries is effectively
to use only a subset of the data. So, we may ask 'have the actions of the IMF and the World Bank
benefitted any countries of the 70 or so that have been helped since 1980?' The standard line
given out is that the IMF helped to expand global trade through out the 1950s and 1960s. More
recently, yes, there are some countries that appear to be happy with their IMF arrangements. It is
the view of this author that the failures listed, however, here are sufficient to justify a complete
overhaul of the system, where the IMF and other similar institutions are scrapped.
Some have argued that in the case of the Brazilian and Russian currency devaluations, for
example, the IMF supported overvalued currencies (both in 1998) with large loans and sky-high
interest rates. In both cases, some say, the currencies collapsed anyway, and both
countries were better off for the devaluation (some say) pointing out that Russia's growth
in 2000 was its highest in two decades. One commentator argueing from this angle, for
example, has been Mark Weisbrot, co-director of the Center for Economic and Policy Research.
Conversely, however, it can be argued that were it not for the deadly combination of vicious
raids by foreign speculators and IMF 'conditionality', neither country would have been forced
to their knees economically (where devaluation became an inevitability) anyway.
In 1997 president Fidel Ramos of the Phillipines went on record as saying that he considered
his country an 'IMF success'. Since the late 80s, however, such 'successes' appear to be
the exception and not the rule.
'The 1930s were the last era in which the international political and financial elite
sought advantage through control of the global economy. What economists call "hot money"
raced from one nation to the next throughout that era, leaving a trail of competitive
currency devaluations in its wake. Six decades ago, as nation after nation was humbled
by and strangled with the manipulations of the financial world’s insiders, history saw
fit to serve up Adolph Hitler'.
(Source: economist and Russian expert, Anne Williamson,
in testimony to the Committee on Banking and Financial Services, US House Of
Representatives, 1999). Currently (in July 2002) peaking out from the huge relative
affluence and security of typical 'developed' nations, we see that now too there are
in fact many serious warnings now being made about the risk of another global recession
from which no countries will be immune.
There are those who say that in another era, the wild speculations of
the big finance houses such as Goldman Sachs had a lot to answer for in relation to the Wall
Street Crash of 1929. The same people point to the global recession of the 1930s that
followed, suggesting that in many ways this led to the Second World War.
The examples above illustrate a spectacular failure of the IMF 'experiment', an experiment
that has inflicted serious damage upon the economies and peoples of too many developing-world
Noted economist William Easterly has pointed out that
'The IMF and World Bank had, during the last decade, given 36
poor countries 10 or more loans each, with conditions attached. The growth rate
of income per person of the typical member of this group was zero'.
, ex-chief economist of the World Bank has pointed out that because the plans of the
IMF and World Bank are devised in secrecy and driven by an absolutist ideology, never open for
discourse or dissent, they
'undermine democracy'. Secondly (as he put it)
'they don't work'.
How convenient it would be (for apologists of the present system) if it could be
argued that incompetence was at the root of current problems, and that essentially we should
continue attempting to apply band-aids and tourniquets (or not) to the internal haemorrhages
of economies in the developing world that are merely caused by some kind of innappropriate
application of the essentially faultless neo-liberal free-market-capitalist dogmas of Adam Smith,
Milton Friedman et al (that should remain essentially sacrosanct).
It is worth pointing out here that Adam Smith was writing in the 18th century. His was an
early analysis of such things as the way in which markets operate. Yet today we find
people still invoking Adam Smith's name, by way of intellectual justification or rationale
for the unregulated free market. And often those doing the invoking make more money the less
the markets in which they operate are regulated. However how much clear academic
evidence is there that Adam Smith 'got it right'? How much clear academic evidence is there
that 'free' and 'open' markets of the kind espoused by the IMF are in the best
interests of all concerned? Answer: almost none. It is important to remain extremely
sceptical of such claims. Far from being self-evidently true they remain untested (or,
what evidence there is actaually points in the other direction).
But no, there's more than incompetence going on here. Seemingly it's both incompetence and
fraud, theft and deceit. (Anne Wilkinson, who is also quoted above,
has made it clear that in her opinion
'Michel Camdessus [the then IMF head] and his deputy, Stanley Fisher, together are quite
possibly the two most incompetent people on the planet'.
But there's more than incompetence going on
here -and perhaps it has suited certain interests to have 'socialists' like Mr Camdessus
as head of organisations like the IMF. [The current head of the IMF -in 2002- is
now Horst Kohler]). It is the conclusion of this author that the pattern manifest in the
examples quoted here is a pattern whereby the interests of private capital groups have been effectively working 'under cover' within the institutions of global finance, using the IMF
as camouflage, as a trojan horse, such that what's really going on is that some of the
richest people on the face of the planet are taking from the poorest. It's hard to find adjectives to match the ugliness of this situation.
Ever since the earliest days of colonialism the developed world has been trying to screw the
developing world for all that it could lay its hands on. This remains the case today. But whereas
once the means by which such colonialism was forced upon the poor and powerless of the world was
with vast armies, now the means are the institutions of world trade such as the IMF, the World Bank,
the World Trade Organisation, NAFTA, and so on. And where once recalcitrant countries were threatened
with military blockades, now they are threatened with economic blockades. No bank in the world
will loan to a country blacklisted by the World Bank. 'Analysis' or even 'rumours' put out by
the IMF or World Bank (who claim to make objective assessments of a country's economy) invariably
have a huge effect of the way the 'global market' relates to that country. Thus even IMF/World
Bank inspired rumour can be used as a weapon, as a means of persuading (for which read
intimidating) a country into doing what they are told. As the text above makes clear, the
IMF, for instance, has been shown to be both willing and able to use fraudulent statistics
in pursuit of its political objectives.
'to disagree publicly with the IMF is viewed in the international
community as rejecting financial rectitude itself'.
(Source: The IMF and The Asian Flu,
Jeffrey David Sachs, The American Prospect Magazine).
The rules of modern world trade, while being imposed by bodies such as The IMF, the World Bank,
The World Trade organisation, NAFTA, and so on, are defined primarily by corporations, via
corporate lobbying and other forms of corporate political influence.
Corporations from the developed world, in involving themselves in operations where there is
unreasonably cheap labor, tax breaks and no environmental protections are effectively removing unpaid
costs (that should properly be considered industrial production costs) and banking them as profits.
Since the 1980s, when UNICEF, UNDP and others began talking about 'adjustment with a
human face', there has been high-level rhetoric about IMF medicine being administered with "social
safety nets"; however, since the Asian regional financial crisis first erupted (in Thailand in July 1997)
there has been a relatively coordinated anti-IMF anti-global-speculative-capital movement.
The IMF and the World Bank are increasingly coming to be seen more as 'the problem' rather than
The impoverished world's main requirements are the right to control their own land, the right to
industrial capital, and the right to grow their own food. Given those requirements, people will
not generally go hungry. However, what we see now is an increasing monopolization of land and the
means of production in the developing world by interests from the developed world, where wealth
is effectively diverted to those who are already well-off. Far from the rich countries subsidising
the poor countries, the situation is in fact very much the other way around. The rich countries
are bleeding the poorest countries on earth dry. For many in the developing world, the
result is more and yet more suffering. As disullusioned Russian economist
Boris Kagarlitsky put it
'there is one thing we need from the West now -for it to leave us in peace'.
The issue of the international conflict and anti-Americanism brought about directly by the catalogue
of disasters listed above should be sufficient reasons alone to force a rethink. (In Russia, Argentina,
Mexico, South Korea and elsewhere massive anger and mistrust at the rich countries of the world and
their financial organisations, where probably the majority of people blame the IMF more than any other
factor for their economic woes, seeing their recent crises as engineered and 'malicious').
This is how another expert characterises the scam:
'Sell assistance programs on an alleged "free market" and "humanitarian" basis by awarding government
grants to those academics who can be relied upon to supply the intellectual camouflage politicians
and journalists then repeat ad nauseum to a distracted public, move the IMF and the World Bank to
target, induce target to raise taxes, fine tune target’s central banking operations, encourage borrowing
and debt creation through the target’s government and its national banks, allowing IMF lending to pay
yields if necessary; induce target to privatize national property while building a flimsy, artificial
"infrastructure" for an equities market good enough to attract high risk foreign investors. Once the
target nation’s government flounders, step back and watch speculators assert discipline through a run
on the target’s currency. The subsequent devaluation delivers, in turn, a flood of cheap imports to
American manufacturers and producers.
The finishing touch on the swindle is to confiscate more money from G-7 citizens (the lion’s share from
Americans) to pay for what is said to be an "essential" IMF bailout; thereby allowing Uncle Sam’s IMF
minions to entrench themselves more deeply in the target’s government. Taxes are raised, the population
struggles beneath indebtedness, government funding demands and the inevitable domestic inflation a
devaluation delivers. Western neo-colonialists then bully the target over its rapidly compounding debt
in order to extract yet more property. Once successful, the world’s insiders then turn around and deliver
cheap shares from privatizations and initial public offerings into the maw of US mutual funds and
portfolio investors. US taxpayers get hit coming (foreign aid) and going (bailouts) and innocent
foreigners’ property is finagled away either from, or on account of, inattentive and corrupt leaderships.
The big winners are the world’s increasingly corrupt and cozy governing class, international bureaucracies
and global banks.
What US policy has wrought across much of the post-cold war landscape is a moral, political and
financial abomination based on fraud, theft and deceit'.
(Source economist and Russian expert, Anne Williamson, in testimony to the Committee on Banking and
Financial Services, US House Of Representatives, 1999).
Here's how another analyst has described speculative attacks on the currencies of developing countries
(and the related bail-outs by the IMF, etc):
'by now the ploy should be known to schoolboys. The government whose currency is attacked draws on
foreign loans arranged by the IMF, and turns over the foreign currency to buy back its own paper.
The "assisted" country ends up with the foreign debt to the amount of the "aid" while the speculators
pocket the proceeds of the loans, and move on to the next replay of the scam'.
(Source: Brazil's IMF Sponsored Economic Disaster: The Speculative Onslaught From East Asia And
Russia To Latin America by Michel Chossudovsky, Professor of Economics, University of Ottawa, who also
is author of The Globalisation Of Poverty, Impacts Of IMF And World Bank Reforms).
One final point to bear in mind is that moving agricultural products from one country to another
tends to be extremely wasteful in terms of resources, when looked at in absolute terms. It requires
US$0.4 worth of (often imported) oil to produce and transport US$1.0 worth of agricultural exports,
and the production and distribution of one can of sweet corn containing 270 calories consumes 2,790
calories of energy. Arrangements that deliver the greatest good to the greatest number of people
(and the environment) must surely be very different to this. It is the view of this author that
fiddling with the current system would not solve these problems. The 'system' needs replacing
root and branch: it needs replacing with a system that truly is in the best interests of
historically the IMF has never been accountable to the world at large. This is not acceptable.
Currently it fails in terms of its original aims, seeming to have been hijacked by greedy private
it needs to be said, loudly and clearly, that this kind of rapacious free-market capitalism
is not in everybody's long term interests.
it needs to be said, loudly and clearly, that 'third world debt', as currently manifest, is an obscenity.
the IMF should be scrapped. On the single issue of its original mandate to 'increase stability
in international markets' it has failed spectacularly in recent years (and it should be scrapped
for a range of other reasons too).
a return to Keynesian concepts such as a world clearing union (or even going
back to a 'gold standard').
agreed reduction of the standard 50% rate for crop rents charged by propertied oligarchs
in many countries of the world.
the fostering of a culture of social responsibility in Wall Street.
the fostering of a culture of social responsibility in private financial institutions such as
Goldman Sachs, Citigroup, Chase Manhattan, etc.
the fostering of a culture of social responsibility in the US treasury.
the fostering of a culture of social responsibility in US foreign policy.
consideration given to finding ways to ensure that Goldman Sachs partners, IMF directors,
et cetera, live for a single day in somewhere like the Duravi slums, Bombay (for instance)
with no way out, no money and no possessions. (What's one day? Millions of people spend their entire lives in such utterly, utterly desperate circumstances). OK this is a bit tongue in
cheek. For most Westerners, real experience of such poverty, even that gained from a short
visit, tends to be a life-changing shock. Such misery is perhaps hard to imagine until
it is right in front of your eyes...
make it generally more difficult for politicians and investment bankers worldwide to
i) promote deficits ii) force taxpayers to redeem government debts.
mechanisms put in place to reduce the extent to which
international financial institutions become the instruments of foreign policy of the more powerful 'members'
make absolutely sure that no-one who works for any of the international financial organisations
such as the IMF, the World Bank, and the World trade Organisation have any personal financial
interest in anything connected with their work (which would probably mean imposing restrictions
similar to those designed to stop 'insider dealing' on all concerned). Such restrictions must then be properly policed.
completely close the revolving door between the IMF (and any other similar body) the US
administration and the big international finance houses.
any organisation that replaces the IMF should use its resources to help fund health and
literacy efforts in the developing world.
any organisation that replaces the IMF should be both as transparent and democratically
accountable as possible.
write to your political representatives to i) scrap the IMF ii) drop the debt COMPLETELY
iii) set up new humane international finance institutions that really are interested in economic
development and social justice for all parties.
get involved in some kind of effective action...
developing nations should collectively and simultaneously say 'sorry, none of us intend to
pay back these loans' (ever).
Copy this page! Put it on your website! Get everyone you know to read it! There is
emphatically no copyright on this information. Please distribute it.
In recent years dialogue about reforming world financial institutions and attempts at reform have
been gathering more and more momentum. Some of this momentum has come from groups such as Unicef, from
a wide range of 'anti-globalisation' organisations, and increasingly from dissenting voices within
the G24, the group of 24 developed nations at the core of the IMF itself. These views have so far
been largely ignored by both the IMF management and the US government. In 2001, the US government did
commission a report (the Meltzer Commission Report) to look into the conduct of the IMF and World Bank
in relation to the South Asian financial crisis of 1997-98, but their anodyne recommendations ('IMF be
limited to only short term lending', 'countries should pre-qualify for IMF assistance' and 'penalty
interest rate borrowing from the IMF') are not commensurate with the scale of the problem.
The IMF should be scrapped.
What goes around comes around.
If you are a finance minister who has not yet had dealings with the IMF, it appears that the
best thing you could do when they come to call is tell them to take a running jump.