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[Fwd: Dr. Bankenstein's Monsters: IMF and World Bank]

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DR BANKENSTEIN'S MONSTERS: 
THE WORLD BANK, THE IMF AND THE ALIENS WHO ATE ECUADOR

INSIDE CORPORATE AMERICA
by Gregory Palast

The Observer, London
Sunday, 8 October 2000

    So call me a liar.  I was standing in front of the New York Hilton Hotel 
a couple weeks ago when the limousine carrying International Monetary Fund 
Director Horst Kohler zoomed by, hit a bump and out flew a report, "Ecuador 
Interim Country Assistance Strategy" marked, "CONFIDENTIAL NOT FOR 
DISTRIBUTION".  You suspect that's not how I got this document, but you can 
trust me that it contains the answer to a very puzzling question.
    Inside the Hilton, Professor Anthony Giddens explained to an earnest 
crowd of London School of Economics alumni that, "Globalization is a FACT, 
and it is driven by the communications revolution."  
    Wow.  That was an eye-opener.    The screeching green-haired freakers  
outside the hotel demonstrating against the IMF have it all wrong. 
Globalization, Giddens seems to say, is all about giving every villager in 
the Andes a Nokia internet-capable mobile phone. What puzzled me is why 
anyone would protest this happy march into the globalized future.
    So I thumbed through my purloined IMF Strategy for Ecuador looking for a 
chapter on connecting Ecuador's schools to the world wide web.  Instead, I 
found a secret schedule.  By November 1 this year, it says, Ecuador's 
government is ordered to raise the price of cooking gas by 80%.  Also, the 
government must eliminate 26,000 jobs and cut real wages for the remaining 
workers by 50% in four steps on months specified by the IMF.  By July, 
Ecuador will begin to transfer ownership of its biggest water system to 
foreign operators and grant British Petroleum's ARCO unit rights to build and 
own an oil pipeline over the Andes.  
    That's for starters.  In all, the IMF's 167 detailed loan conditions look 
less like an Assistance Plan and more like a blueprint for a financial coup 
d'etat.  
    The IMF would counter that it has no choice.  After all, Ecuador is flat 
busted, thanks to the implosion of the nation's commercial banks.  But how 
did Ecuador, an OPEC member with resources to spare, end up in such a pickle? 
 For that, we have to turn back to 1983, when the IMF forced Ecuador's 
government to take over the soured private debts of Ecuador's elite owed to 
foreign banks.  For this bail-out of US and local financiers, Ecuador's 
government borrowed $1.5 billion.
    For Ecuador to pay back this loan, the IMF dictated price hikes in 
electricity and other necessities.  And when that didn't drain off enough 
cash, yet another Assistance Plan required the state to eliminate 120,000 
workers.  
    Furthermore, while trying to pay down the mountain of IMF obligations, 
Ecuador foolishly "liberalized" its tiny financial market, cutting local 
banks loose from government controls and letting private debt and interest 
rates explode.  Who pushed Ecuador into this nutty romp with free-market 
banking?  Hint: the initials are I-M-F â which made bank liberalization a 
condition of another berserker Assistance Plan.   The facts of this nasty 
little history come from an internal IMF report marked, "Please do not cite." 
 Pretend I didn't.
             The IMF and its sidekick the World Bank have lent a sticky 
helping hand to scores of nations.  Take Tanzania.  Today, in that African 
state, 1.4 million people are getting ready to die.  They are the 8% of the 
nation's population with the AIDS virus.   The IMF and World Bank have come 
to the rescue with a brilliant neo-liberal solution:   require Tanzania to 
charge for hospital visits, previously free.  Since the Banks imposed this 
requirement, the number of patients treated in Dar Es Salaam's three big 
public hospitals has dropped by 53%.  The Banks' cures must be working.  
    The IMF-World Bank also ordered Tanzania to charge fees for school 
attendance.  Now, the Banks express surprise that school enrollment has 
dropped from 80% to 66%.
    Altogether the Bank and IMF have 157 helpful suggestions for Tanzania.  
This April, the Tanzanian government secretly agreed to adopt them all.  It 
was sign or starve.  No developing nation can borrow hard currency without 
IMF blessing (except China, whose output grows at 5.0% per year by studiously 
following the reverse of IMF policies).
           The IMF and World Bank have effectively controlled Tanzania's 
economy since 1985.  Admittedly, when the Banks took charge they found a 
socialist nation mired in poverty, disease and debt.  The Banks' neo-liberal 
experts wasted no time in cutting trade barriers, limiting government 
subsidies and selling off state industries.  The Bank's shadow governors 
worked wonders.  According to Bank-watcher Nancy Alexander of Globalization 
Challenge Initiative (Washington), in just 15 years, Tanzania's GDP has 
dropped from $309 to $210 per capita, the literacy rate is falling, and the 
rate of abject poverty has jumped to 51% of the population.
    Yet, despite this  neo-liberal effort, the World Bank has failed to win 
the hearts and minds of Tanzanians to its free market game plan.  In June, 
the Bank reported in frustration,"One legacy of socialism is that most people 
continue to believe the State has a fundamental role in promoting development 
and providing social services."  
    The World Bank and IMF were born in 1944 with simple, laudable mandates â 
to fund post-war reconstruction and development projects (the World Bank) and 
lend bank hard currency to nations skint by temporary balance-of-payments 
deficits (the IMF).  
    Then, beginning 1980, the Banks seem to take on an alien form.  In the 
early 1980s, Third World nations, hemorrhaging after the five-fold increases 
in oil prices and a like jump in dollar interest payments, brought their 
begging bowls to the IMF and World Bank.  But instead of debt relief, they 
received Structural Assistance Plans listing  an average of 114 
"conditionalities" in return for capital.  While the particulars varied 
nation to nation, in every case, the roll-over of debts dangled from edicts 
to remove trade barriers, sell national assets to foreign investors, slash 
social spending and make labour "flexible"  (read, âcrush your unions').
          Some say the radical and vicious change in the Banks in 1980 
resulted from Ronald Reagan's election that year as President, the quickening 
of Mrs Thatcher's powers and the beginning of the neo-liberal ascendency in 
policy. (My own information is that the IMF and World Bank were taken over by 
a space alien named Larry.  It's obvious that "Larry" Summers, once World 
Bank chief economist, now US Treasury Secretary, is in reality a platoon of 
extra terrestrials sent here to turn much of the human race into a source of 
cheap protein.  But I digress.)
         So what have The Aliens accomplished with their Structural 
Assistance free-market prescriptions?  An article by Samuel Britten in last 
week's Financial Times declared that the new world capital markets and free 
trade have, "brought about an unprecedented increase in world living 
standards."   Britten cites the huge growth in GDP per capita, life 
expectancy and literacy in the less developed world from 1950 to 1995.
    Now hold on a minute.  Until 1980, virtually every nation in his survey 
was either socialist or welfare statist.  They were developing on the "Import 
Substitution Model," by which locally-owned industry built through government 
investment and high tariffs, anathema to the neoliberals. In those dark ages 
of increasing national government control and ownership (1960-1980), per 
capita income grew 73% in Latin America and 34% in Africa.  By comparison, 
since 1980, Latin American growth has come to a virtual halt, growing by less 
than 6% over 20 years â and African incomes have DECLINED by 23%.  
          Now let's count the corpses.  From 1950 to 1980, socialist and 
statist welfare policies added more than a decade of life expectancy to 
virtually every nation on the planet.  From 1980 to today, life under 
Structural Assistance has gotten brutish and shorter.   Since 1985, the total 
number of illiterate people has risen and life expectancy is falling in 
fifteen African nations â which Britten attributes to "bad luck, [not] the 
international economic system."  In the former Soviet states, where IMF and 
World Bank shock plans hold sway, life expectancy has fallen off a cliff â 
adding 1.4 million a year to the death rate in Russia alone. 
             Admittedly, the World Bank and IMF are reforming.  No longer do 
they issue the dreaded "Structural Assistance Plans."  They now call them, 
"Poverty Reduction Strategies.".  Doesn't that make you feel better?  
    Recently, the Banks reviewed the fruits of globalization.  In its April 
"World Outlook" report, the IMF admitted that, "in the recent decades, nearly 
one-fifth of the world population have regressed. This is arguably," the Bank 
concedes, "one of the greatest economic failures of the 20th Century."
          And that, Professor Giddens, is a fact.

GREGORY.PALAST@xxxxxxxxxxxxxx
Reproduction granted to non-commercial organizations with notice to author.  
Re-prints must include:
"Investigative reporter Gregory Palast writes 'Inside Corporate America' 
every other week in the Observer, the Sunday paper of the Guardian of London, 
where this first appeared.  Contact gregory.palast@xxxxxxxxxxxxxx for 
comments or reprints. (c) Guardian Media."


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