-> SNETNEWS Mailing List The following article is from New Dawn No. 53 (March-April 1999) http://www.newdawnmagazine.com.au * * * * * * * * * * * * Masterstroke: Who Benefits from World Economic Chaos By SUSAN BRYCE While the Packer and Murdoch controlled media keep Australians updated on corrupt IOC officials and cricket scandals, and we digest the latest information about the Clinton presidential penis over our soggy breakfast corn flakes, the world economic crisis is pushed to the back of editorial agendas. The International Monetary Fund is set to undergo some of the most sweeping reforms in its history and the benefactors will be the world�s largest financial institutions. Meanwhile the Australian government slavishly pushes ahead with structural adjustments, fuelling the hungry fires of the globalisation juggernaut as our hard won freedoms are traded for the IMF�s economic disasters. The myths of globalisation have been fully exposed and debunked in the wake of the Asian financial collapse, the ongoing disintegration of the Russian economy, and the recent shocks in Latin America. "Instead of economic prosperity and social stability that it promised for all nations, globalisation has brought economic turmoil, political and social tension, and widespread devastation to the world�s peoples and resources."1 In the wash up from this debacle, the winners are the purveyors of globalisation: the International Monetary Fund (IMF) and a group of about six international banks. The world economic crisis being experienced at present is a masterstroke for the funny money people at the IMF and a financial coup d��tat for the international banks. Basking in the glory of "saving" the Asian economies, the IMF is currently waging a campaign based on fear of further economic calamity, to institute a series of sweeping changes to its charter. The IMF wants an amendment to its Articles of Agreement that would make promoting unfettered capital movements one of the purposes of the IMF and to extend Fund jurisdiction over such movements. This amendment would effectively give the IMF the authority to regulate national investment policies, with an eye towards eliminating any restrictions on capital flows. It is a back door attempt to achieve the aims of the OECD inspired Multilateral Agreement on Investment (MAI), which was stopped by citizen opposition.2 As part of its ongoing campaign to achieve these amendments, the Managing Director of the IMF Michel Camdessus, is openly advocating increased trade liberalisation, prodding countries to open up their economies, more than ever before, to foreign capital. Camdessus told the National Press Club in Washington on April 2, 1998, the IMF will encourage member countries "to liberalise capital flows in a prudent and properly sequenced way that will maximize the benefits and minimize the risks of freer capital movements. To this end, work is under way on an amendment to the IMF�s charter that would make the liberalization of capital movements one of the purposes of the Fund, and extend its jurisdiction to capital movements," Camdessus said. The premature liberalisation of capital markets pushed by the IMF is one of the main causes of the Asian crisis. It was financial market "reform" that allowed Thai, South Korean and Indonesian banks to tap into short-term international loans in the early 1990s. Hundreds of billions of dollars in loans flooded in as the factories of the Asian tiger economies increased their exports to phenomenal levels, fuelling a decade of rapid growth. Thailand, South Korea and Indonesia were left smothered in bad debts, preventing companies from getting working capital to keep producing. When the Thai baht was devalued by 40%, the country�s unrepayable foreign debts, low level of foreign reserves, heavy deficits and open financial exchanges spearheaded its decline into economic abyss. South Korea and Indonesia suffered a similar fate. A cartel of international banks including BankAmerica, Citibank, Chase Manhattan, J.P. Morgan, Bankers Trust, Bank of New York, the First National Bank of Chicago and Morgan Guaranty with upward of US$20 billion in loan exposures in South Korea3,4, were bailed out to the tune of US$35 billion. The IMF acted as a free insurance broker as the foreign loans of international banks went bad. The standard operating procedure of the IMF is to bail out Wall Street and other lenders5, doling out harsh punishment to borrower countries, socialising the risk and privatising the profits. The IMF�s Asian bailout conditions were dependent upon stringent compliance to the Fund's economic regime of Structural Adjustment Programmes. In return for the bailout, Thailand, Indonesia and South Korea agreed to further open their economies to foreign investors and allow unprecedented Foreign Direct Investment in factories, agriculture, service operations (eg: tourism and banks), as well as portfolio investment in stocks, bonds and currency. This policy enabled the same cartel of international banks that were bailed out of the Asian crisis, with only the slightest sacrifice, to buy up lucrative sectors of the now suffering Asian economies. After the Asian bailouts the IMF was left with approximately US$45 billion in liquid capital, US$25 billion available through the General Arrangements to Borrow, as well as the Fund's ability to borrow unlimited sums from private capital markets. Despite these reserves, the IMF began lobbying the US Congress to fast track a quota increase of US$14.5 billion, rather than going through the regular budgetary process. The Fund argued that it needed extra billions for other imminent financial crises. The IMF did not elaborate on what the crises might be.6 The USA is the largest contributor to the IMF, providing approximately 18 per cent of funds, putting America in a unique position to wield influence. Through its aid and trade policies, the US plays a fundamental role in designing and financing Structural Adjustment Programs of the IMF. Starting in the 1980s, the US began routinely conditioning its aid agreements on acceptance of a package of economic reforms, and adherence to the prescriptions of the IMF and World Bank.7 As these economic blackmail measures continued, the political legitimacy of dozens of developing countries was undermined as the IMF conspired with governments, influencing them to legislate for US style free market reform.8 These tactics are also reflected in the now all too familiar IMF bailout procedure. Firstly, the IMF�s negotiating positions are settled in Washington, then the mission team goes to the client country to convey Washington�s conclusions. Meanwhile, the financial markets wait breathlessly to see whether the country will comply. The American govern-ment repeats the mantra "Obey the IMF" and journalists assess the "seriousness" of reforms according to whether countries bite the bullet to carry out the IMF dictates.9 Jeffrey Sachs, professor of international trade at Harvard University and director of the Harvard Institute for International Development, describes the US role as "stage managing the transition to global capitalism"� "America has wanted global leadership on the cheap. It was desperate for the developing world and post-communist economies to buy into its vision, in which globalisation, private capital flows and Washington�s advice would overcome the obstacles to shared prosperity, so that pressures on the rich countries to do more for the poor countries could be contained by the dream of universal economic growth".10 With this vision, the USA would not have to shell out real money to help the peaceful reconstruction of Russia; or to ameliorate the desperate impoverishment and illness in Africa. In essence, America has tried to sell its social ethos: The rich need not help the poor, since the poor can enjoy rising living standards and someday become rich themselves.11 The argument is simplistic and flawed. The IMF�s policies open up developing economies to competition from large, often-subsidised, multinational corporations, making transnational corporations richer, and often impoverishing or bankrupting developing country businesses and workers. SAPPING THE COUNTRY DRY The IMF conditions its loans on the debtor nations adherence to Structural Adjustment Programs (SAP) which suppos-edly stabilise economies and make them more productive. SAPs are actually designed purely to maximise extraction of profit from individual countries at the expense of all else.12 Structural adjustment usually begins with trade liberalisation and the abolition of protection, quotas and tariffs. A devaluation of the currency takes place, boosting the competitiveness of the export sector, making exports cheap, with the aim of earning foreign exchange so Fund loans can be repaid. Export industries and companies often receive subsidies and preferential treatment (ironic, given the institutions� free trade bent). Structural adjustment virtually always requires countries to reduce government expenditures with the aim of balancing the budget. The sacrificial lambs are health care, education, social security and other programs that benefit the poor. The poor often lose services they are dependent upon, as programmes are slashed and major sectors of the government are privatised. Some of the more obvious effects of SAPs are rising unemployment, job insecurity, declining standards of living, business stagnation due to the absence of mass purchasing power, tax changes, industrial "reform" and the destruction of Trade Unions. Readers in Australia should be very familiar with structural adjustment policies. Witness the one third privatisation of Telstra at a cost of 25 000 jobs; the creation of Centrelink; the closure of the CES; the abolition of Youth Allowance for under 18 year olds; the Kennett sell off of Victorian Railways; the Productivity Commission�s proposal to cut tariffs on footwear, clothing and textiles (which will cost up to 100 000 of the lowest paid jobs in Australia); the sell off of electricity, water and gas utilities across the country; a 40% reduction in the number of farms (so empty have some country centres become, that businesses are closing, and bank branches, schools, hospitals, rail, bus and other services are being discontinued); not to mention the GST; the Workplace Relations Act; the Wallis Report into banking recommending a complete overhaul of the banking system to increase competition, foreign ownership and implement higher consumer charges and the proposed free trade in farm products. The IMF has praised the Australian government, comm-ending authorities for implem-enting these "sound macro-economic policies and structural reforms". The IMF�s Structural Adjustment medicine delivers other painful outcomes. Typically, a regression of democracy occurs, as economic impositions by governments cause increasing violations of human, economic, social and cultural rights. Political and civil rights violations become a fait accompli. The world�s modest attempts at domestic democratic governance shrivel in the face of the increasing power of international institutions like the IMF, Transnational Corporations and international currency markets, as economic marginalisation leads to political disempowerment. For Heavily Indebted Poor Countries (HIPCs), Structural Adjustment policies spell even greater disaster. SAPs affect about 80 indebted developing countries facing debt repayment problems. Should some of these countries get out of the debt crisis and no longer require SAPs conditioned loans, or should there be a change of government or government policies, the SAP policies can be changed or reversed. Newly emerging businesses in poor countries find it difficult, if not impossible, to compete in the world market and large multinationals find it easy to enter a developing country and take over economic sectors there. Author Michael Chossudovsky�s book Global Poverty13 describes the process: ##Since the Debt crisis, the economic reforms imposed by the IMF and the World Bank on developing countries have led to the impoverishment of hundreds of millions of people. The economies of sovereign countries are restructured and brought under the custody of external creditors. Applied simultaneously in more than 100 countries, these reforms are conductive to the development of a global cheap labour economy which feeds on human poverty and the destruction of the natural environment.## It is estimated that Structural Adjustment Programmes in Heavily Indebted Poor Countries (HIPCs) are responsible for the deaths of some 6 million children every year since 1982.14 As the victims are mostly poor people in poor countries, there has been little public controversy over IMF policy. The Heavily Indebted Poor Countries are a group of 41 developing nations15 that the IMF maintains in a condition of permanent subsistence. The IMF�s 21st Century "initiative" for the HIPCs is to cancel some of their debts, after years of delay, but only to a point that leaves the country still in the red. Post cancellation debt is meant to equal 200% of exports. These "debt for export swaps" are then implemented along with standard IMF Structural Adjustment Programmes, which means the HIPCs don�t collapse, but they never get better. The impacts of globalisation are hard to ignore. The gap between rich and poor nations is widening, rather than narrowing, and there is a �no holes barred� trend towards mergers and acquisitions.16 The 1996 Human Development Report (HDR) launched by the UN Development Program reveals that over the past 3 decades only 15 countries have enjoyed high growth whilst 89 countries are worse off economically than they were 10 years ago. The report reveals that out of the world�s total economic income, estimated at US$23 trillion, only US$5 trillion (22%) goes to developing countries, although almost 80% of the world�s population is housed there. Between 1960 and 1991, the richest 20% of the world�s people increased their share of total global income from 70% to 85%. In 1996, just 358 people owned as much wealth as half the world�s population, while the poorest 20% of people had their share of "wealth" fall from 2.3% to 1.4%. The IMF is group of unelected officials, a secretive organisation, with all of its programs stamped confidential. Only since the Asian crisis has the IMF, "an institution out of control",17 even made the headlines. While the Fund advocates "transparency" for its client debtors18, the IMF itself, is anything but transparent. Transparency, IMF style, means that a country participating in IMF programs has to open its books to IMF scrutiny, so that the Fund knows the who, what, when, where, why and how of each debtor economy. Every single import and export, every new mine opened, every ounce of gold sold, natural resources, employment, unemployment, the volume of shares traded, public and private borrowings etc., are made known to the IMF. In short, the debtor country must tell the IMF everything, as part of what the IMF calls its "surveillance" policy, whereby it keeps an eye on almost every sector in society and then makes recommendations for change. IMF Managing Director Michel Camdessus describes the IMF as the most magnificent bureau-cracy, but a more apt description is provided by Mark Weisbrot in his paper, "IMF Cure Worse than the Disease": ##�The IMF is the international financial equivalent of the CIA. Its documents and proceedings are shrouded in secrecy, its bureaucracy is unaccountable, it is blinded by ideology, and dedicated to protecting the interests of the rich and powerful. And the Fund has probably toppled more governments, democratically elected and otherwise, than the CIA" �19## FOOTNOTES: 1. The joint statement of delegates at the 1998 International Conference on Alternatives to Globalisation November 9, 1998, Tagaytay City, Philippines. http://www.economicjustice.org/resources/action/alternativesconference.html 2. Testimony of Ralph Nader on the International Monetary Fund Before the General Oversight and Investigations Subcommittee, House of Representatives Committee on Banking and Financial Services, pp 1, http://www.Citizen.org/public_citizen/pctrade/IMF/imf.htm 3. Ibid pp 3 � 4. 4. Over 53 banks were affected by the Asian crisis. The ones most affected are listed in this article. 5. Another example occurred in 1995 when the IMF contributed $18 billion to a Clinton administration bailout of Wall Street interests who stood to lose billions with the Mexican peso devaluation. 6. The next currency crisis is likely to occur in Russia, notwithstanding the fragility of China, Argentina, Columbia and Brazil. On January 9 this year Russia warned that it could only pay half of its foreign debt obligations and requested outside help. The Russian government budgeted $9.5 billion for debt payments, while $17.5 billion was due. Repayments now must be delayed, or Russia will default. Key among Russia�s creditors is the IMF, which loaned Russia $7.9 billion during the Soviet era and $9.6 billion in loans after the collapse of the Soviet Union. 7. Friends of the Earth, 1998, "Structural Adjustment and the Environment: Promoting Efficiency or Exploiting Natural Resources, http://www.thirdworldtraveler.com/50years_Enough/StructAdjust_environ.html 8. The head of Brazil�s Central Bank resigned recently, sending �shocks� through international markets. The resignation was designed to coerce procrastinating Brazilian legislators into passing a series of sweeping reforms including major changes to social security, employment conditions and the public service, that the IMF wanted. 9. Sachs, Jeffrey (1998), "Global Capitalism, Making it Work", The Economist, September 21, 1998, pp 25 � 32. 10. Ibid, pp 25 � 26. 11. Ibid p 26. 12. Structural Adjustment Programs are literally true to their acronym: SAPping the lifeblood out of the debtor country. 13. Chossudovsky, Michel, (1997), Global Poverty, Third World Network. 14. A former IMF economist quoted by Mark Weisbrot, Research Director at the Preamble Centre for Public Policy and a Research Associate of the Economic Policy Institute in Washington D.C, in his article "IMF Cure: Worse than the disease", http://www.citizen.org/public_citizen/pctrade/IMF/imf.htm 15. The 41 HIPCs identified by the IMF are: Angola, Benin, Bolivia, Burkina Faso, Burundi, Cameroon, Central African Republic, Chad, Congo, C�te d�Ivoire, Democratic Republic of Congo, Equatorial Guinea, Ethiopia, Ghana, Guinea, Guinea-Bissau, Guyana, Honduras, Kenya, Lao PDR, Liberia, Madagascar, Mali, Mauritania, Mozambique, Myanmar, Nicaragua, Niger, Nigeria, Rwanda, S�o Tom� and Principe, Senegal, Sierra Leone, Somalia, Sudan, Tanzania, Togo, Uganda, Vietnam, Yemen, and Zambia 16. Transnational corporations around the world are currently merging and consolidating their assets. As the world experiences more financial crises, only the big companies will survive. 17. Testimony of Ralph Nader on the International Monetary Fund Before the General Oversight and Investigations Subcommittee, House of Representatives Committee on Banking and Financial Services, pp 1, http://www.Citizen.org/public_citizen/pctrade/IMF/imf.htm 18. The IMF applauded the Howard Government and welcomed the Charter of Budget Honesty for setting high standards of fiscal transparency and accountability. 19. see (14). Susan Bryce is an investigative journalist and researcher whose interests include issues which affect individual freedom, environmental health, surveillance technology and global politics. She publishes the Australian Freedom & Survival Guide, available on subscription for $45 for 6 issues/year. Send cheque/cash/money order to Susan Bryce, PO Box 66, Kenilworth, QLD 4574, or email [EMAIL PROTECTED] ____________________________________________________________ New Dawn Magazine, GPO Box 3126FF, Melbourne, VIC 3001 AUSTRALIA http://www.newdawnmagazine.com.au -> Send "subscribe snetnews " to [EMAIL PROTECTED] -> Posted by: Support <[EMAIL PROTECTED]>
