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Chapter 5
LESSER DEVELOPED COUNTRIES
5.1 Empowering Third World
Governments
5.2 The Sell Off
5.1 EMPOWERING THIRD WORLD GOVERNMENTS
AFRICA
Mr Ian Smith, Prime Minister of Rhodesia 1964-1979, often said: "we
were never beaten by our enemies - we were betrayed by our friends".
The West essentially promised white leaders in South Africa that
they would be allowed to continue practicing apartheid if they would
stop arming Rhodesia in her war against communism.
Between 1979 and
1980, Rhodesia fell into Marxist dictatorship under Mugabe and had
its name changed to Zimbabwe.(1) The World Bank provided loans to
Mugabe up until May 2000.(2) This is not an academic issue since
millions face starvation because of Mugabe's Marxist policy of
seizing the nation's farms. Ominously, Mugabe has turned to
communist China to run farms in Zimbabwe.(3)
In the 1980s the world saw starving children in Ethiopia, but what
they did not realize was that this was a planned famine. The Marxist
regime of Mengistu Haile Mariam undertook nationalization of
agriculture and massive population resettlement program modeled on
Stalin and Mao's starvation programmes in the 1930s and 40s which
killed millions. Meanwhile the World Bank continued to send Mengistu
millions of dollars, much of it intended for the ministry of
agriculture undertaking the resettlement programme.(4)(5) The Wall
St. Journal recently reported on a study by the The Free Africa
Foundation which concluded that,
In country after country in Africa, there has been no accountability
in the use of World Bank loans... Billions in World Bank loans have
been embezzled in Africa and rarely anyone is held accountable and
prosecuted.(6)
It comes as no surprise then that by its own admission, the World
Bank's purported policy of strengthening African free market
economies by lending $50 billion for 'Structural Adjustment
programs' and other projects over the past thirty years has been an
abject failure. That's because their real purpose was the exact
opposite: The destruction of the property rights and the creation of
socialist dictatorships. What else could possibly have happened
after handing over $50 billion to undemocratic governments with no
accountability?
Given a political system that is based upon a patronage system and
governments run by uniformed bandits, the commitment to reform is
almost non-existent as genuine economic reform would be politically
suicidal. The result is a 'reform charade,' where "reforming"
governments take one step forward and three steps backward.(7)
The Bank's own reports in the 1980s revealed that it played a major
role in nationalizing the development process throughout the Third
World. Regarding these so-called harsh conditionalities imposed by
the structural adjustment loans, a 1985 confidential bank report by
leading development experts concluded that 'the SAL's seemingly hard
and all-encompassing conditionality is largely illusory'.
The bank and some proponents of foreign aid claim that a wave of
privatization swept the Third World but actually 'privatization was
almost all talk'. World Bank loans either go directly to the
recipient government or must be guaranteed by the government. So, by
inevitably increasing the politicization of Third World economies,
World Bank aid was the economic tranquilizer dart which created a
weaker domestic market for the foreign multinationals to feed on.(8)
LATIN AMERICA
By 1982 almost every Third World government was running behind on
its payments and Latin America was no exception. Over the next seven
years, multi-billion dollar bailout packages failed to stem the
economic decline. That's because they were used to build cumbersome
nationalized industries at the expense of the private sector. For
example, the western banks funded large government run companies
such as Petroleo Brasilerio S.A. in Brazil and Petroleus Mexicanos
in Mexico.
By 1990 these companies were failing miserably and
dragging the rest of the economy down with them. Brazil was unable
to produce enough petrol and Mexico became a food importer. Brazil
is now controlled by the military and government run companies
consume 65% of all industrial investment. Exactly the same process
brought Argentina's economy to its knees. It had an expanding middle
class until its government became the recipient of massive loans
from the World Bank and U.S. commercial banks during the 1980s.
By
1989 inflation averaged 5000% and thousands of corporate
bankruptcies followed. Government figures showed that in 2002, about
100,000 people dropped out of the middle class each week to become
the new poor. A country that only 10 years earlier had Latin
America's highest standard of living was now on a level with
Jamaica; half of Argentina's 37 million people lived below the
poverty level. The Government had subsidy programmes for about 2
million malnourished Argentines, but millions more got nothing. Some
subsisted by scavenging through garbage. (10) (11)
Furthermore the West has supplied physical weapons for military
governments to spend their free money on. Britain is the world's
second largest arms exporter after the U.S. with 20% market
share.(12) A U.S. military training school, the School of the
Americas, has trained many of the worst human rights violators and
dictators in various Latin American countries, including Roberto
D'Aubisson from El Salvador and Manuel Noriega of Panama.(13)
ASIA
Joseph Stiglitz's discussion of the role of bankruptcy laws in the
1997 Asian financial crisis reveals how the IMF deliberately
undermined domestic property rights. Here the bankers exploited the
absence of the legal framework for implementing trusteeships when
large numbers of firms were going bankrupt.
The IMF encouraged the
state to get involved in restructuring the companies, i.e. telling
them how to run themselves instead of sorting out who really owns
the firm. Countries such as Thailand followed their advice and
languished whilst Korea and Malaysia ignored it and prospered.(14)
5.2 THE SELL OFF
By the end of the 1980s the banks had successfully empowered and
corrupted Third World governments with billions in bank loans.
Liberal democracy and the free market had been strangled. Now for
the second play: The sell off. The directive for the sell off came
from the World Bank and IMF at the end of the 1980s as shown by
World Bank documents signed by James Wolfensen and leaked to a BBC
investigative journalist, Greg Palast.
The World Bank flew in their
teams who dictated their plans, an average of 111 conditions in a
pre-written document, to each nation's finance minister. If he
refused he would be denied any further loans and the life blood
which had sustained his government would be cut. These conditions
included selling off the natural resources and national industries
to foreign multinationals. In the case of Argentina, they required
the nation to give up its gas water and oil to Vivendi, Repsol,
Enron and a few other multinationals.
In 1988 Jeb Bush made a call
to an Argentine senator asking him to sell a gas pipeline to Enron
at one fifth of its market value. In return, a percentage of the
discount would be deposited in the senator's Swiss bank account. The
process has been called 'briberization' rather than
privatization.(15)
The Water Barons report for the Center for Public Integrity deals
in-depth with the sale of national water supplies. "Surgery without
anesthesia," was how Menem described his policies in 1989 as he set
out to make Argentina one of the world's leading models for
privatization. Faced with rampant inflation - caused by the banks
and who were suddenly "reluctant" to make further loans - Menem won
passage of the National Administrative Reform Law, which declared a
state of economic emergency and gave him the power to privatize
public utilities by decree.
As a result World Bank money came
flowing back to Argentina. On 18 Dec. 1990, the World Bank approved
a loan (a bribe) of $300 million for "The new adjustment projects in
Argentina". None applauded louder than Santiago Soldati, a
businessman and close Menem ally who would end up as the lead
Argentine partner in the privatization of water.
Soldati later sold
his interest in the water company, making a tidy $100 million in the
process. In 1993, the Government granted a 30-year concession to run
the water system to Aguas Argentinas a consortium controlled by two
French corporate giants, Compagnie Générale des Eaux (now Vivendi
)and Lyonnaise des Eaux (now Suez). Soon after, the World Bank
declared the Buenos Aires privatization an overwhelming success, and
made it a model for privatization's of water that followed in the
Philippines, Indonesia, Australia and South Africa.(16)
The investigation showed that the enormous expansion of these water
companies could not have been possible without the World Bank and
other international financial institutions, such as the IMF, the
Inter-American Development Bank, the Asian Development and the
European Bank for Reconstruction. In countries such as South Africa,
Argentina, Philippines and Indonesia, the World Bank has been
advising the leaders to 'commercialize' their utilities as part of
an overall bank policy of privatization and 'free-market' economics.
(17)
The World Bank calculates that privatization projects in developing
countries in 2002 alone totaled (U.S) $24 billion.(18) Having become
impatient with the sluggish pace of progress on this issue, the
World Bank launched an internet toolkit for privatization in
developing countries, providing on-line advice on how to sell off
highways, water, waste systems, ports, and telecoms industries!(19)
CONCLUSION
When making the case for such a grand conspiracy as this, it is
helpful to call a whistleblower to the witness stand. Published in
November 2004, the book entitled Confessions of an Economic Hit Man
by John Perkins (now a New York Times best seller) is a public
confession by an insider about the real purpose of Western loans to
developing countries. Working in a private consulting firm, Perkins
was one of the 'economic hit men' who carried out the plan detailed
in the World Bank documents.
Perkins describes a classical
conspiracy between government and big business. The U.S. National
Security Agency (NSA) recruited and trained the 'economic hit men' to
carry out their duties through private consulting firms and other
corporations. The beneficiaries of the conspiracy were the
international bankers and shareholders in the multi-national
corporations. Unable to repay the loans organized by the hit men,
developing countries had to surrender their national resources to
their Western creditors.
What an extraordinary scam: Destroy a country's domestic capitalism
and free-markets, get it into massive debt and then with financial
gun to its head, shake it down for everything its got. It is even
more extraordinary for the fact that, because this piracy is
conducted in international waters, it isn't even illegal!
One of the
questions raised in the next chapter is whether or not these agents
have been acting, to some degree, on Her Majesty's (secret) service.
Chapter 5 End Notes
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Peter Hammond, Not Defeated -Betrayed, Frontline Fellowship. See
http://www.frontline.org.za/mission%20reports_prayer/not%20defeated_%20betrayed.htm
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The Wall Street Journal, Opinion, 5 August 2003 (Review & Outlook).
See http://www.freeafrica.org/commentaries15.html
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Andrew Meldrum, Mugabe hires China to farm seized land, The
Guardian, London,13 February 2003. See
http://www.guardian.co.uk/zimbabwe/article/0,2763,894421,00.html
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James Bovard, The World Bank vs The World's Poor, Cato Policy
Analysis 1987, pp.4-6. See
http://www.cato.org/pubs/pas/pa092.html
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G. Edward Griffin, The Creature from Jekyll Island, American Media,
Fourth Edition, 2002, p.100
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The Wall Street Journal, op cit.
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The Failure of World Bank Programs in Africa, A Special Report by
The Free Africa Foundation, March 2003. See summary at
http://www.freeafrica.org/reports.html
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Bovard, op cit.,
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Griffin, op cit., ch's 5-6 especially pp.103-104 and 116
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Daniel Santoro, The 'Aguas' Tango: Cashing In On Buenos Aires'
privatisation , The Water Barons. A report for The Center for Public
Integrity, 2003. See
http://www.icij.org/water/report.aspx?sid=ch&rid=50&aid=50
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Brian Wheeler, How big is the UK arms trade? BBC, London, 9
September, 2003. See
http://news.bbc.co.uk/2/hi/business/3084718.stm
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Anup Shah, Globalissues.org, 30 October 2001. See
http://www.globalissues.org/Geopolitics/ArmsTrade/TrainingViolators.asp
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Joseph Stiglitz, Globalization and its Discontents, Penguin Books,
2002, pp. 117-118
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Greg Palast, The Best Democracy Money Can Buy. Also see Greg
Palast's website for discussions of the book at
http://www.gregpalast.com/detail.cfm?artid=125&row=1
http://www.gregpalast.com/detail.cfm?artid=128&row=1
http://www.gregpalast.com/detail.cfm?artid=198&row=1
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Daniel Santoro, op cit.
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Bill Marsden, Cholera and The Age of The Water Barons, The Water
Barons, A report for The Center for Public Integrity. See
http://www.icij.org/water/report.aspx?sid=ch&rid=44&aid=44
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Private Participatiion in Infrastructure Project Database, The World
Bank Group. See http://rru.worldbank.org/ppi/
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Toolkits, The World Bank Group. See
http://rru.worldbank.org/Toolkits/
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