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Former World Bank Economist -- How We "Assist"

Readers interested in the following story may also wish to read our earlier piece:World Bank Responds to Four Demands from Mobilization for Global Justice.

Joe Stiglitz: The Globalizer Who Came In From The Cold

The World Bank's former Chief Economist's accusations are
eye-popping - including how the IMF and US Treasury fixed the
Russian elections

by Greg Palast, The Observer, London, October 10, 2001

"It has condemned people to death," the former apparatchik told
me. This was like a scene out of Le Carre. The brilliant old
agent comes in from the cold, crosses to our side, and in hours
of debriefing, empties his memory of horrors committed in the
name of a political ideology he now realizes has gone rotten.

And here before me was a far bigger catch than some used Cold War
spy. Joseph Stiglitz was Chief Economist of the World Bank. To a
great extent, the new world economic order was his theory come to

I "debriefed" Stigltiz over several days, at Cambridge
University, in a London hotel and finally in Washington in April
2001 during the big confab of the World Bank and the
International Monetary Fund. But instead of chairing the meetings
of ministers and central bankers, Stiglitz was kept exiled safely
behind the blue police cordons, the same as the nuns carrying a
large wooden cross, the Bolivian union leaders, the parents of
AIDS victims and the other 'anti-globalization' protesters. The
ultimate insider was now on the outside.

In 1999 the World Bank fired Stiglitz. He was not allowed quiet
retirement; US Treasury Secretary Larry Summers, I'm told,
demanded a public excommunication for Stiglitz' having expressed
his first mild dissent from globalization World Bank style.

Here in Washington we completed the last of several hours of
exclusive interviews for The Observer and BBC TV's Newsnight
about the real, often hidden, workings of the IMF, World Bank,
and the bank's 51% owner, the US Treasury.

And here, from sources unnamable (not Stiglitz), we obtained a
cache of documents marked, "confidential," "restricted," and "not
otherwise (to be) disclosed without World Bank authorization."

Stiglitz helped translate one from bureaucratise, a "Country
Assistance Strategy." There's an Assistance Strategy for every
poorer nation, designed, says the World Bank, after careful
in-country investigation. But according to insider Stiglitz, the
Bank's staff 'investigation' consists of close inspection of a
nation's 5-star hotels. It concludes with the Bank staff meeting
some begging, busted finance minister who is handed a
'restructuring agreement' pre-drafted for his 'voluntary'
signature (I have a selection of these).

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

Step One is Privatization - which Stiglitz said could more
accurately be called, 'Briberization.' Rather than object to the
sell-offs of state industries, he said national leaders - using
the World Bank's demands to silence local critics - happily
flogged their electricity and water companies. "You could see
their eyes widen" at the prospect of 10% commissions paid to
Swiss bank accounts for simply shaving a few billion off the sale
price of national assets.

And the US government knew it, charges Stiglitz, at least in the
case of the biggest 'briberization' of all, the 1995 Russian
sell-off. "The US Treasury view was this was great as we wanted
Yeltsin re-elected. We don't care if it's a corrupt election. We
want the money to go to Yeltzin" via kick-backs for his campaign.

Stiglitz is no conspiracy nutter ranting about Black Helicopters.
The man was inside the game, a member of Bill Clinton's cabinet
as Chairman of the President's council of economic advisors.

Most ill-making for Stiglitz is that the US-backed oligarchs
stripped Russia's industrial assets, with the effect that the
corruption scheme cut national output nearly in half causing
depression and starvation.

After briberization, Step Two of the IMF/World Bank
one-size-fits-all rescue-your-economy plan is 'Capital Market
Liberalization.' In theory, capital market deregulation allows
investment capital to flow in and out. Unfortunately, as in
Indonesia and Brazil, the money simply flowed out and out.
Stiglitz calls this the "Hot Money" cycle. Cash comes in for
speculation in real estate and currency, then flees at the first
whiff of trouble. A nation's reserves can drain in days, hours.
And when that happens, to seduce speculators into returning a
nation's own capital funds, the IMF demands these nations raise
interest rates to 30%, 50% and 80%.

"The result was predictable," said Stiglitz of the Hot Money
tidal waves in Asia and Latin America. Higher interest rates
demolished property values, savaged industrial production and
drained national treasuries.

At this point, the IMF drags the gasping nation to Step Three:
Market-Based Pricing, a fancy term for raising prices on food,
water and cooking gas. This leads, predictably, to
Step-Three-and-a-Half: what Stiglitz calls, 'The IMF riot.'

The IMF riot is painfully predictable. When a nation is, "down
and out, [the IMF] takes advantage and squeezes the last pound of
blood out of them. They turn up the heat until, finally, the
whole cauldron blows up," as when the IMF eliminated food and
fuel subsidies for the poor in Indonesia in 1998. Indonesia
exploded into riots, but there are other examples - the Bolivian
riots over water prices last year and this February, the riots in
Ecuador over the rise in cooking gas prices imposed by the World
Bank. You' d almost get the impression that the riot is written
into the plan.

And it is. What Stiglitz did not know is that, while in the
States, BBC and The Observer obtained several documents from
inside the World Bank, stamped over with those pesky warnings,
"confidential," "restricted," "not to be disclosed." Let's get
back to one: the "Interim Country Assistance Strategy" for
Ecuador, in it the Bank several times states - with cold accuracy
- that they expected their plans to spark, "social unrest," to
use their bureaucratic term for a nation in flames.

That's not surprising. The secret report notes that the plan to
make the US dollar Ecuador's currency has pushed 51% of the
population below the poverty line. The World Bank "Assistance"
plan simply calls for facing down civil strife and suffering
with, "political resolve" - and still higher prices.

The IMF riots (and by riots I mean peaceful demonstrations
dispersed by bullets, tanks and teargas) cause new panicked
flights of capital and government bankruptcies. This economic
arson has it's bright side - for foreign corporations, who can
then pick off remaining assets, such as the odd mining concession
or port, at fire sale prices.

Stiglitz notes that the IMF and World Bank are not heartless
adherents to market economics. At the same time the IMF stopped
Indonesia 'subsidizing' food purchases, "when the banks need a
bail-out, intervention (in the market) is welcome." The IMF
scrounged up tens of billions of dollars to save Indonesia's
financiers and, by extension, the US and European banks from
which they had borrowed.

A pattern emerges. There are lots of losers in this system but
one clear winner: the Western banks and US Treasury, making the
big bucks off this crazy new international capital churn.
Stiglitz told me about his unhappy meeting, early in his World
Bank tenure, with Ethopia's new president in the nation's first
democratic election. The World Bank and IMF had ordered Ethiopia
to divert aid money to its reserve account at the US Treasury,
which pays a pitiful 4% return, while the nation borrowed US
dollars at 12% to feed its population. The new president begged
Stiglitz to let him use the aid money to rebuild the nation. But
no, the loot went straight off to the US Treasury's vault in

Now we arrive at Step Four of what the IMF and World Bank call
their "poverty reduction strategy": Free Trade. This is free
trade by the rules of the World Trade Organization and World
Bank, Stiglitz the insider likens free trade WTO-style to the
Opium Wars. "That too was about opening markets," he said. As in
the 19th century, Europeans and Americans today are kicking down
the barriers to sales in Asia, Latin American and Africa, while
barricading our own markets against Third World agriculture.

In the Opium Wars, the West used military blockades to force open
markets for their unbalanced trade. Today, the World Bank can
order a financial blockade just as effective - and sometimes just
as deadly.

Stiglitz is particularly emotional over the WTO's intellectual
property rights treaty (it goes by the acronym TRIPS, more on
that in the next chapters). It is here, says the economist, that
the new global order has "condemned people to death" by imposing
impossible tariffs and tributes to pay to pharmaceutical
companies for branded medicines. "They don't care," said the
professor of the corporations and bank loans he worked with, "if
people live or die."

By the way, don't be confused by the mix in this discussion of
the IMF, World Bank and WTO. They are interchangeable masks of a
single governance system. They have locked themselves together by
what are unpleasantly called, "triggers." Taking a World Bank
loan for a school 'triggers' a requirement to accept every
'conditionality' - they average 111 per nation - laid down by
both the World Bank and IMF. In fact, said Stiglitz the IMF
requires nations to accept trade policies more punitive than the
official WTO rules.

Stiglitz greatest concern is that World Bank plans, devised in
secrecy and driven by an absolutist ideology, are never open for
discourse or dissent. Despite the West's push for elections
throughout the developing world, the so-called Poverty Reduction
Programs "undermine democracy."

And they don't work. Black Africa's productivity under the
guiding hand of IMF structural "assistance" has gone to hell in a
handbag. Did any nation avoid this fate? Yes, said Stiglitz,
identifying Botswana. Their trick? "They told the IMF to go

So then I turned on Stiglitz. OK, Mr Smart-Guy Professor, how
would you help developing nations? Stiglitz proposed radical land
reform, an attack at the heart of "landlordism," on the usurious
rents charged by the propertied oligarchies worldwide, typically
50% of a tenant's crops. So I had to ask the professor: as you
were top economist at the World Bank, why didn't the Bank follow
your advice?

"If you challenge [land ownership], that would be a change in the
power of the elites. That's not high on their agenda." Apparently

Ultimately, what drove him to put his job on the line was the
failure of the banks and US Treasury to change course when
confronted with the crises - failures and suffering perpetrated
by their four-step monetarist mambo. Every time their free market
solutions failed, the IMF simply demanded more free market

"It's a little like the Middle Ages," the insider told me, "When
the patient died they would say, 'well, he stopped the
bloodletting too soon, he still had a little blood in him.'"

I took away from my talks with the professor that the solution to
world poverty and crisis is simple: remove the bloodsuckers.


A version of this was first published as "The IMF's Four Steps to
Damnation" in The Observer (London) in April and another version
in The Big Issue - that's the magazine that the homeless flog on
platforms in the London Underground. Big Issue offered equal
space to the IMF, whose "deputy chief media officer" wrote:

"... I find it impossible to respond given the depth and breadth
of hearsay and misinformation in [Palast's] report."

Of course it was difficult for the Deputy Chief to respond. The
information (and documents) came from the unhappy lot inside his
agency and the World Bank.