By: Dean Muraya
Transcript from a lecture given on November 30th 2014.
Introduction
The Third World[1]
appeared as a ‘project’ during the struggle against colonialism (Prashad, 2008,
pg. xv). In fact the term Third World was coined in Europe in the 19th
Century (Prashad, 2008, pg. 6). A derogatory term to signify the inferior
status of the global south, nonetheless it spurned into a word of resistance, a
concept of the liberation from colonial rule. The term Third World formed a
common solidarity among former colonized nations as they stood up to
imperialism in the numerous nationalliberation struggles in the 1950’s and
1960’s. This was further personified with the establishment of the NonAligned
Movement, and the forming of the United Nations (Prashad, 2008, pg. xvi). It is
commonly regarded that the Third World completed their project of emancipation
and wrestled free from their colonial masters. This was evident as colonized
nations gained independence one after the other. With the liberation of
colonized nations complete, it was assumed that imperialism had met its end.
However imperialism survived and in the cold ashes of greed, violence and
destruction it was able –like a phoenix to recreate itself albeit in a
different image but the inextinguishable desire for wealth still burned in its
heart.
This new form of imperialism has its roots in the
neoliberal project that was started in the 1970’s. Two institutions should gain
special mention for the existence and the persistence of this neoimperialism.
These two institutions are the World Bank and the I.M.F. How these two
institutions have managed to fulfil imperial desires despite the devastation
and destitution it leaves in its wake will be the discussion for tonight.
Imperialism seems to be somewhat of an abstract concept it
has many faces that are difficult to identify and works in multiple layers that
makes it difficult to detect. Especially in its neoliberal form.
However Hannah Arendt in her brilliant work: ‘The Origins
of Totalitarianism’ has given us something to work, with. She has successfully
been able to define imperialism by identify its two characteristics. Which
makes it easier to detect even if it engages in its historic act of
shapeshifting.
Arendt explicitly states that:
“imperialism is not
empire building and expansion is not conquest (Arendt, 1951, pg. 130)”
So what is it?
Well imperialism can be defined by two processes:
Imperialism is the perpetual accumulation of capital (wealth) through the
perpetual accumulation of power.
Why is power necessary in the pursuit of perpetual capital?
This is because power defies all laws, including economic ones.
“Money could finally beget money because power, with
complete disregard for all lawseconomic as well as ethicalcould appropriate
wealth” (Arendt, 1951, pg 137).
Now the elite class in the 19th century had
a problem, they were confined to the boundaries of their nation and could not
accumulate perpetual capital because of this (Arendt, 1951, pg. 130). They
could export their capital to other markets through investments so that money
could beget money as they put it, but they would have to face economic laws
that would result in the slow and limited accumulation of capital or they would
be barred fully through economic laws referred to as protectionism. Thus
imperialism was their savings grace, through the export of power in the form of
colonialism they could bend the economic laws and export their capital and
would be able to accumulate huge sums of wealth (Arendt, 1951, pg. 136137).
However as we talked about in the beginning the nationalliberation struggles
of colonial nations won independence and imperialism was defeated. This did not
quell the elite classes desire for money once again to beget money, especially
since the world was becoming more and more globalized, meaning that capital was
not restricted to the boundaries of the nation state but it still had to
contend with economic laws. But through the actions of the World Bank and the
I.M.F in the 1980’s economic laws that barred the perpetual accumulation of
capital were removed, through the export of power, but this is not power as we
are used to seeing it. This was the export of soft power. The results of this
neoliberal imperial project implemented by the World Bank and the I.M.F in the
1980’s has had spectacular results that have lasted 34 years.
● 2/3
of economies in the world are controlled or have been controlled by the World
Bank and the I.M.F (Pieper and Taylor, 1996, pg. 1). The lack of control a
nation has over its own economy seriously undermines its national sovereignty,
but national sovereignty is a foolish concept when your country is regarded as
territory.
If we look at the case of the African continent we can see
the fruits of imperial ambitions:
● In
a multiparticipatory report conducted by credible social justice organizations
such as the jubilee debt campaign, the tax justice network and the world
development movement entitled ‘Honest Accounts? The
True Story of Africa’s Billion Dollar Loses’ concluded
that;
● 134
billion dollars flows into Africa whilst, 192 billion flows out (Honest
Accounts, 2014, pg. 6).
● That
means for every 100 euros given in aid 640 euros is given back to the wealthy
nations (Honest Accounts, 2014, pg. 5).
● The
biggest outflow is attributed to multinational corporations who extract 46.3
billion in profits (Honest Accounts, 2014, pg. 6). Africa is not an isolated
case, there are many Third World countries who are being plundered by
multinational corporations. This wouldn’t be possible without the I.M.F and
the World Bank forcing Third World nations to remove restrictions on the activities
of multinational corporations.; to give you an idea of how damaging the
activity of unrestrained multinational corporations can be we can take the
case of Uganda. The Government of Uganda lost 400 million dollars in capital
gains tax (which is a tax levied on the profits from the sale of property or an
investment) when one mineral company sold its license. The 400 million dollars
that was lost due to one company was larger than the budget allocated to
Uganda’s Health Care (Honest Accounts, 2014, pg. 11). (this matter is being
resolved in court).
Its
no wonder the New York Times in a 2004 publication refers to the
World bank and the I.M.F as ‘The Overlords of Africa[2].
Imperial ambitions seem to be in the logic of the bank, in
an internal memo Chief economist of the World Bank Larry Summers had this to
say:
“Just between you and me should, shouldn’t the World Bank
be encouraging more migration of the dirty industries to the LDC’s
[Lessdeveloped countries]?... I think the economic logic behind dumping a load
of toxic waste in the lowest wage country is impeccable and we should face up
to that… I’ve always thought that underpopulated countries in Africa are vastly
underpolluted, their air quality is probably vastly inefficiently low compared
to Los Angeles or Mexico City.. The concern over an agent that causes a one in
a million change in the odds of prostate cancer is obviously going to be much
higher in a country where people survive to get prostate cancer than in a
country where under 5 mortality is 200 per thousand… the problem with the
arguments against all of these proposals for more pollution in LDC’s (intrinsic
rights to certain goods, moral reasons, social concerns, lack of adequate
markets etc) could be turned around and used more or less effectively against
every Bank proposal for liberalization”3.
About the organization
The I.M.F and the World bank were set up in 1944 at the
Bretton woods conference (Ismi, 2004, pg. 7). This conference was set up to
establish the new global economic system. Since the United States emerged as
the sole economic superpower after World War II, the new economic system was
crafted to its liking (Ismi, 2004, pg.7).
The I.M.F was set up to facilitate deficits with short term
loans, whilst the World bank would focus on long term loans for economic
development and infrastructure.
The U.S has de facto control over both the World Bank and
the I.M.F, this is because in the I.M.F it has 17.16% voting shares and in the
World Bank it has 16.41% voting shares, this gives the United States exclusive
veto power in the areas that need 85% majority, which happen to be in the areas
of administering voting quotas and the article of agreement, basically allowing
it to veto any mandate it doesn’t like without anyone to challenge its position
now or in the future (Ismi, 2004, pg. 7).
However mandates are not important to both the bank or the
fund, as both violate their mandate which explicitly states that neither the
bank or fund will engage in political activity, yet it constantly violates its
own mandates starting in the 1980’s and continuing today, all in the name of
neoimperialism[3].
How did the bankfund gain control over 2/3 of the world’s
economy? In 1982 Third World countries were crushed by the oil shocks of the
1970’s and entered into a debt crisis, just about being able to swim and
needing serious help the World Bank and later the I.M.F stepped in to help
(Ismi, 2004, pg.8). They issued loans to these heavily indebted countries but
at a price, besides the interest rate the loans came with conditions. Known as
Structural Adjustment Programs (SAP’s) (Ismi, 2004, pg.8).
Structural Adjustment Program
Structural adjustment programs are the conditions attached
to the loans given to the Third World countries who were being ravaged by the
debt crisis of 1982.
These conditions are meant to restructure a countries
economy to fit the neoliberal ideology where open markets paired with
deregulation, privatisation and minimal government interference are the factors
that lead to economic growth (Ismi, 2004, pg 8). They were also used to
restructure the economies of Third World countries so that they become
exportled economies, where the main driver of the economy is the exportation
of primary commodities.
Structural adjustment programs consisted of the following
policies:
● Devaluing
the currency
● Cuts
in Social Spending like Healthcare, Education.
● Shrinking
of Government ● Increase on interests rates ● Privatization
● Investment
liberalization
● Trade
liberalization
● Elimination
of subsidies of basic goods
● Lowering
of wages
● Increase
the price of public services
● Reorientation
to export economy.
These measure have led to the impoverishment of Third World
countries, rendering them as territory for the exploitation of multinational
corporations and the whims of foreign investment. It has deprived the people of
the Third World of the high living standards often taken for granted in wealthy
nations. Health Care is virtually nonexistent, Education guaranteed for every
child is nonexistent, access to clean water and electricity for all is
nonexistent, wages allowing one to live a decent life is continually slashed.
It has created export processing zones were corporations enjoy tax freestatus
and where labour regulations don’t apply. It has left domestic producers unable
to compete with the multinational corporations, allowing multinational
corporations to dominate in every sector you could think of, leaving the Third
World in a state of colonial dependency. It has restructured the economies of
the Third World so their main focus is exportation of primary commodities,
leading to the environmental degradation of the Third World, the displacement
of indigenous peoples, and the sad fact that the Third World has enough
resources that contribute to most high quality goods but are unable to process
them themselves due to the technological gap imposed on them ad infinitum, it
leads to the sad fact that the Third World exports enough to feed other nations
but cannot feed itself.
For example in the year 19701997, SubSaharan Africa was
the only region in the world to face a decrease in domestic food production,
calories supply and protein supply for the population. Despite being an export
led economy of primary commodities such as food (Global Exchange, 2001, pg.
7).
These policies are so unpopular that Since 1976, over a 100
protests have occurred in countries dealing with the World Bank and the I.M.F
(Global Exchange, 2001, pg. 3).
Structural Adjustment programs have been a complete
failure, not only on the African continent. If we look at Latin America, after
15 years of following the advice of the World Bank and the I.M.F by 1999 it had
suffered its worst period of socioeconomic deprivation, with 60 million people
rendered poor in 10 years (Ismi, 2004, pg.9).
Even to the Banks own admission their policies have been a
failure, during the year 19942003 when Sap’s were in full effect until their
revocation in 2002, the bank admitted that during this period the poverty level
in the Third World had increased by 75% (Ismi, 2004, pg. 11)
I want to give you a sense of how pervasive Structural
Adjustment policies have been around the globe and the devastation it leaves in
its wake. So I’ll be giving you few cases of countries who have involved
themselves with the bankfund and have followed their policies to the tee, and
the results such policies have derived. In each case, it is clear that the
clients the bankfund purport to serve, i.e the poor are the ones that suffer
the most while the clients the BankFund actually serve which are the elite
class benefit the most.
Haiti has had a long history with the World bank and the
I.M.F starting in the
1980’s and as a result of following their policies:
● 70%
of Haitians are unemployed
● 4
in 10 have access to drinking water
● The
local population is virtually dependent on imported food, U.S
Subsidized rice accounts for 75% of the rice market in
Haiti
● The
I.M.F has insisted that wages be kept at poverty level and any increases in
wages has to be offset by firings at the same time the I.M.F has encouraged
the Haitian Govt to offer bonuses to foreign investors.
(Global Exchange, 2001, pg. 12)
A more illuminating example would be Mexico.
Mexico suffered from the debt crisis of the 1980’s, the
World Bank and the I.M.F stepped in to help and attached Structural Adjustment
policies to the loans given to the Mexican Government.
In a span of 9 years from 19811990
● Real
wages fell by 75%
● Worker
share of national income went from 49% to 29%
(Global Exchange, 2001, pg. 4)
Yet the World Bank praised Mexico for being a ‘model
student’.
The bank also imposed the following conditions, that are
literally an attack on the poor:
● Slashed
regulation regarding severance pay
● Prohibited
collective bargaining
● Prohibited
obligatory benefits to workers
● Prohibited
Company sponsored training
● Prohibiting
Social Security
● Prohibiting
Government housing
(Global Exchange, 2001, pg. 5)
The World Bank in the Same period as a condition of their
loan called for Mexico’s telecommunications network to be privatized. To make
the deal sweeter for foreign investors the bank insisted that the telephone
rate increase from 16 pesos to 115 pesos (Global Exchange, 2001, pg.4).
Stable prices and subsidies for basic food such as rice and
corn were a lifesaver for many Mexican farmers. The I.M.F forbids the Mexican
government to deliver subsidies so they were revoked at the same time
subsidized U.S corn could flood the market and reduce the local price by 45%,
effectively rendering Mexican farmers unemployed (Global Exchange, 2001, pg.
4).
The I.M.F was not done, it insisted that the Mexican
Government devalue its currency and increase interest rates, the result was
that Mexico experienced the worst depression in 60 years (Global Exchange,
2001, pg.45).
After The World Bank and I.M.F were finished infant deaths
due to malnutrition tripled. Less than half of its population before Sap’s
lived in poverty, after Sap’s 2/3 of the population live in poverty (Ismi,
2004, pg. 10).
In Ghana 3/4 of the loans are from the World Bank and the
I.M.F (Honest
Accounts, 2014, pg.9). In the course of their relationship
with the bank and fund, Ghana went from being fully selfsufficient in rice
production to being totally dependent on U.S rice that I must stress again is
subsidized (Ismi, 2004, pg. 16).
Sap’s Led to the privatization of Ghana’s mining sector, as
well as allowing up to 95% of profits to be transferred into foreign accounts
tax free so that the Ghanaian people won't see a penny, it also resulted in the
abolition of income tax (Ismi, 2004, pg. 16). Furthermore due to restructuring
Ghana into an export led economy it went from being an exporter of timber now
to an importer of timber, you can imagine the environmental degradation as a
result of this (Ismi, 2004, pg. 17).
In Nicaragua as part of the SAP’s conditions the bank and
the fund insisted on the privatisation of the electricity sector in 1998, in
2000 the entire electricity sector was privatized. Following true neoliberal
dogma, the bank maintained the stance that the privatisation of the electricity
sector would lead to increased electrical output and lower tariffs (Aseed
Report, 2008, pg.2728).
Well Spanish corporation Union Fenosa won the bid and had a
complete monopoly of the energy sector. The results were staggering electrical
efficiency decreased so badly that the people of Nicaragua experienced 12 hour
power cuts, daily and tariffs increased by 300% in 5 years (Aseed Report, 2008,
pg.2728).
These were only brief examples to illustrate the
destructive nature of SAP’s, advocated by the Bank and the Fund. Its
interesting to note that in the 1980’s 70 countries initiated SAP’s, 40 of them
are now in the poorest of the poor club, entitled the HIPC Heavily Indebted
Poor Nations (Malaluan and Guttal, 2003, pg.5). In fact according to Cambridge
economist Hajoon Chang when the Third World was practicing ‘bad economics’, as
described by the bank because they did not adhere to neoliberal policies they
were doing better and their economies were growing at such a speed that has not
been recaptured yet (Chang, 2007 pg. 27).
Perhaps the failure of SAP’s are best captured by A 3 year
multi country study released in 2002 by the Structural Adjustment participatory
review International Network in collaboration with the World bank had this to
say:
“SAP’s have been expanding poverty, inequality and
insecurity around the world…torn at the heart of economies and the social
fabric. Increased tensions among different social strata, fuelling extremist
movements and delegitimizing democratic principles. Their effects particularly
on the poor are so profound and pervasive that no amount of targeted social
investment can begin to address the social crisis they have engendered (Ismi,
2004, pg. 56)”
Although Structural Adjustment programs technically ended
in 2002, in reality this is not the case. The bank and the fund still impose
the same principles on developing countries. All they’ve done is put a new
dress on the same bad set of policies. Which we shall discuss later.
Now why on earth would Governments accept such a lethal
dose of policies that have been impoverishing their nation up until today?
Remember I mentioned that imperialism is the perpetual accumulation of capital
through the perpetual accumulation of power. I said the bank and the fund
employ soft power to facilitate the perpetual accumulation of capital. They do
this by capitalizing on crisis like the debt crisis of the 1980’s when nations
are desperate for credit the only institutions that can provide an adequate
size of credit and relatively quickly are the I.M.F and the World Bank.
Furthermore The I.M.F acts as a seal of approval, if the I.M.F revokes its seal
of approval from a nation that nation cannot receive credit from any other
lending institution (Ismi, 2004, pg.9). Therefore Nations are forced to comply
with I.M.F demands. Furthermore sometimes employing the demands of the firm can
allow nations to be included into the WTO, as was the case with Vietnam
(Malaluan and Guttal, 2003, pg. 1617) which we shall discuss later. To give
you an idea of the importance of being a member of the WTO it is widely
considered that removal from the WTO is considered to be economic suicide. Due
to the fact that you cannot trade with the 160 nations that are part of the
WTO.
Apart from stifling economic development; acting contrary
to their supposed mission, the World Bank and the I.M.F disregard their own
mandates and article of agreement in order to fulfil neoimperial desires.
The Record of the Bank and Fund
Imperialism is the perpetual accumulation of capital
through the perpetual accumulation of power. I mentioned earlier during the
brief history of SAP’s that the Bankfund rely on soft power, in order to
facilitate imperial ambitions. But soft power is power nonetheless and power is
necessary to ensure the perpetual accumulation of capital and is coveted by the
elite class. For two reasons as previously stated power defies all laws
including economic laws. Second power is not impeded by the constraints of
morality. The bankfund display these two characteristics quite well, they have
effectively denied natural economic laws and second their actions are devoid of
any moral considerations. The bankfund are agencies that ensure the prosperity
of the wealthy elite, this role is supervised by the United States. The overt
control the United States exercises on the bankfund have been dismissed as
conspiracy theories. A useful tactic to discredit dissidents, and suppress
information that otherwise should be taken seriously. The trouble is that these
supposed conspiracy theories unlike other conspiracy theories are grounded in
fact. For example in a 2002 report reviewing the horrendous results of
structural adjustment programs, the bank lamented that: ‘Safety nets should be
in place before market reforms are pushed onto the Third World’. However the
U.S Treasury wanted that little snippet of common sense omitted from the
publication and they got their way, leading to several members who authored the
report quitting the bank in protest (Nordiska Afrika Institutet, 2007, pg.
18).
Ironically the only conspiracy theory is the notion that
the bankfund actually obey their own articles of agreement which clearly
stipulate what the bankfund can or cannot do. One such agreement is that both
the bank and the fund cannot engage in political activity, and that political
considerations should not affect the lending practices of the bank or the fund.
History has proven that the bankfund are above the law, any law including
their own. A perfect example would be the case of Chile and the tragic fate of
Salvador Allende. Salvador Allende was democratically elected president of
Chile in 1970, he immediately began to implement policies that would help the
working class and the poor, his overall aim was to convert Chile into a
socialist state. Allende in 3 years managed to:
● He
redistributed around 59% of Chile’s agricultural land, so that landless working
class and the Chilean population could move towards selfsufficiency and cut
down on the importation of basic foods[5].
● Real
wages increased by 56%
His actions not only angered the financial elite in Chile,
but Uncle Sam. The
United States government was so angered by Allende’s reform
particularly the nationalization of key industries its corporations had a grip
over that in 1972,
Nixon called on the World Bank to: “Make the Chilean
economy scream” (Ismi, 2004, pg.8). The Bank complied and withheld Financial
aid to the Chilean economy destabilizing the economy whilst the C.I.A
effectively festered a coup. The coup ensued and with it ended Allende’s
presidency and his life. The dictator General Pinochet came into power and in
his 17 year reign of terror killed 130,000 Chileans (Ismi, 2004, pg.8). Did the
Bank cut aid to Pinochet’s Government? Quite the contrary they rewarded him for
his murderous spree by dishing out 350 million dollars, 13 times more than they
gave Allende (Ismi, 2004, pg.8).
The World Bank and The I.M.F are full of contradictions, so
much so that it has resorted to scapegoating in order to deflect attention from
the results of their economic policies. The BankFund have often taken on a
patronizing tone with Third World Countries often blaming them and their
culture for the failure of neoliberal policies. The bankfund often blame
corruption and bad governance for the failure of their policies. Ironically it
is the bankfund that assist and tolerate corrupt regimes, their affinity for
bad governance goes so far that the more corrupt a regime is the higher the
financial rewards it receives from the bankfund.
Transparency International listed the top 3 most corrupt
politicians[8]:
1. Mohamed
Suharto President of Indonesia from 19671998 (31 years)
2. Ferdinand
Marcos President of the Philippines from 19721986 (14 years)
3. Mobutu
Sese Seko President of Zaire (Now the DRC) from 19651997 (32 years)
The World Bank and The I.M.F have had special
relationships with all 3.
Lets start with number 1.
Suharto was named president in 1967 and stayed until 1998.
Walt Rostow special advisor to Lyndon Johnson told the World Bank president
Robert McNamara that “The World Bank’s support is essential if Suharto is to
stay afloat” (Hanlon, 2007, pg.42). The Bank complied and gave him 30 billion
between 19661998 (Hanlon, 2007, pg.42). 10 billion was stolen with the banks
full knowledge. In an internal memo dated 1997, it stated:
“We estimate that at least 2030% of development budget
funds are diverted through informal payments to Indonesian Government officials
and staff
(Hanlon, 2007,pg.42)”. This did not seem to deter the Bank
in the slightest. The bank also Sent 1 billion to Suharto to finance the
transmigration program (Hanlon, 2007 pg.42) that resulted in the massacre of
200,000 East Timorese.
Number 2.
Ferdinand Marcos was president of the Philippines from
19651986. He stole 510 billion dollars. During his reign the Philippines
incurred the largest single debt derived from a bogus infrastructure scheme
approved by the World Bank (Hanlon, 2007, pg. 46). The project was to build a
nuclear power plant called the Baatan Nuclear power station to the tune of 2
billion dollars (Hanlon, 2007, pg. 46). The plant was built but was never used,
because it was built on an earthquake fault at the foot of a volcano. Not a
single Watt of electricity has been produced by the plant, but the Filipino
people still have to pay 170,000 dollars a day until the year 2018 (Hanlon,
2007, pg. 4647). The bank has the largest budget for research with top
economists, experts and academics at their disposal, this was not a mistake but
a calculated scheme to make a profit off of the Filipino people.
Number 3
Mobuto Sese Seko, was president of Zaire, now the DRC from
19651997. When Mobutu came into power the I.M.F put their own man Ian
Blumenthal in a key position in the Central bank of Zaire. He resigned within a
year citing unfathomable corruption (Hanlon, 2007, pg. 47). After his
resignation the I.M.F granted Mobutu the largest loan had ever given to an
African country which was 700 million (Hanlon, 2007, pg. 47).
The BankFund are quite happy to shelter, appease and
provide for Dictators or corrupt regimes, like I said previously the bankfund
are not restricted by morals. It is why they make such an effective agency of
neoimperialism. It was the same case with 19th Century Imperialism
when the elite classes were all too happy to back fascist regimes like the
nazi’s[9].
As long as politicians comply with the golden rule of profit over people the
bankfund are all to happy to assist them financially, as soon as a leaders
disobey the golden rule and start implementing policies that help their people
to the detriment of the financial elite the bank steps in and cuts of aid and
communication.
In all 3 cases the
bankfund knew that these leaders were pocketing cash, but the bankfund
continued to lend these countries huge sums money, money that went into the
facilitation of human rights abuses, money that went into bogus infrastructure
projects, money that didn’t improve the living standard of the people under the
corrupt regimes. How can the bankfund have the audacity to purport that they
care about economic development, good governance, or the poor? Because the fact
of the matter is the bank fund haven’t cancelled illegitimate debts incurred
countries like the
Philippines, they still insist that the poor pay for the
negligence of the Bank and fund. This insistence for the repayment of loans the
bankfund gave in bad faith, is a testament to the state of the banks moral
conscious and reaffirms whose interests the bankfund actually serve.
NeoLiberal
Agenda Continued.
After World Wide dissent the World Bank and the I.M.F
officially ended their Structural Adjustment program. The BankFund like all
other powerful institutions that are caught with their pants down, promised to
clean up their act. Sadly powerful institutions are good at portraying
‘business as usual’ as ‘reform’ or ‘change’. The bankfund are no different,
and have successfully managed to put a new dress on Structural adjustment
policies and continue to further the neoliberal agenda, with three
programs.
1. Poverty
Reduction Strategy Papers
2. Doing
Business Ranking
3. Benchmarking
the Business of Agriculture
Poverty Reduction Strategy Papers were introduced in 1999
(Malaluan and
Guttal, 2003, pg. 1). The idea is
that the paper is drawn up together with the
World Bank and the I.M.F and a country government for
concessional loans[10].
The papers are supposedly meant to address poverty explicitly and deal with it
accordingly to the nature of the country and come up with strategies to address
them.
The BankFund like to talk about PRSP’s as much as they can
because they claim that it serves as proof that they have learnt from their
mistakes and have turned a new leaf by:
● Abandoning
the one size fits all method implemented with SAP’s now
PRSP’s are tailor made on a country to country basis.
● The
Papers are drawn up together with governments and civil servants giving it the
veneer of democracy.
(Malaluan and Guttal, 2003, pg. 2)
Poverty Reduction Strategies came about through the
Heavily Indebted Poor Countries Initiative (Malaluan and Guttal, 2003, pg.2).
These consist of countries who are heavily indebted due to SAP’s and are
extremely poor due to SAP’s and which have to draft a paper detailing the
methods that will alleviate poverty. The papers are drawn up by country
governments and civil servants through a platform of national dialogue where
the poor get to participate. But the truth is there is no national dialogue,
the papers are drafted behind closed doors without the knowledge of the poor
let alone their input (Malaluan and Guttal, 2003, pg. 910). Furthermore the
papers are drafted under the supervision of the bankfund, anything that is
outside the neoliberal paradigm of thought is excluded (Malaluan and Guttal,
2003, pg.7). Absurdly anything remotely social is revoked from the papers,
which happens to be exactly what the poor in these Heavily indebted poor
countries would want, just like everybody else they want free healthcare, they
want free education, they want welfare, they want subsidized basic foods so
that they don’t starve to death, they want cheap access to water and electricity,
they want multinational corporations to pay taxes, they want labor rights,
they want environmental protection, they
want an increase in minimum wage but its not what the bank wants so the
Governments don’t ask for them. Its imperative to understand the power the
bankfund have over Third World countries, they control 2/3 of the planets
economies, they act as the seal of approval for other donors, donor countries
and lending institutions base their loans on PRSP’s (Malaluan and Guttal, 2003,
pg. 3). Therefore if a government would like to adhere to the wants and needs
of their people and implement social
policies they can’t find a donor who would finance them. Therefore you can see
how the Bankfund undermines national sovereignty and how Third World countries
are run by a virtual unelected parliament whose constituents are corporations
and the financial elite. If you would like to know what a plutocracy is, this
is it.
A few examples:
● In
2003, the World Bank withheld 1 billion dollars from the Zambian Government
because they refused to privatize the stateowned Zambian National Commercial
Bank. The President, Parliament and the Public refused to sell citing the
grounds that it would lead to millions being without easy access to credit that
would stifle economic development (Malaluan and Guttal, 2003, pg.3).
● In
2002 in Nicaragua the bankfund demanded that they privatize their water
resources, this request came after parliament passed a law stating that water
privatization would be halted until a national debate is conducted, the
bankfund have refused to recognize this law
(Malaluan and Guttal, 2003, pg.4).
● In
Pakistan in the year 2002, NGO’s, Consumer Rights Groups, Journalists unions,
Research Institutes and the Human Rights Commissions, published an open letter
to the Ministry Of finance denouncing PRSP’s on the grounds that it is another
form of SAP’s that undermine development and democratic processes (Malaluan and
Guttal, 2003, pg. 4).
This open letter would be useful if the bank cared about
economic development or human rights. One of the ways of alleviating poverty is
for a country to form an export processing zone, this is an area where labor
rights don’t apply multinational corporations get special benefits and
everything produced is exported. E.g in Kenya Multinational corporations
operating in EPZ get a 10 year tax free holiday, which they can renew if they
simply change ownership of the company (Tax Justice Network, 2012, pg. 4), EPZ
like Kenya are dotted everywhere in Africa and contribute to the 35.6 billion
dollars that leaves Africa every year in illicit capital flows, derived from
policies such as tax free holidays (Honest Accounts, 2014, pg. 5).
On the issue of human rights the I.M.F is quite clear
During the 25th meeting of the U.N SubCommission on Human
Rights, the I.M.F claimed that it did not have to abide by human rights
standards and is not bound by human right declarations or conventions because
human rights is not included in their article of agreements (Malaluan and
Guttal, 2003, pg.12).
The Bank through these new policies are truly showing
their true colors the days of subtlety are gone. The Bank created the doing
Business ranking in 2003, this ranks countries based on how easy it is to do
business for a foreign investor[11].
It is index based, with the regulating laws of the economy taken into account
the more regulation the lower the country is ranked. The doing Business index
is hugely popular almost all investors use the index in order to make decisions
on their investment. The doing Business Ranking is the epitome of neoliberal
imperialism, it forces countries to compete against each other in order to
reduce their regulatory laws so that multinational corporations and foreign
investors benefit at the expense of the nation’s population (Oakland Institute,
2014, pg. 7). Effectively creating a race to the bottom. It streamlines the
avenues for exploitation, resulting in perpetual accumulation of capital, and
countries cannot help but abide by the rules of neoliberalism even if its to
the detriment of majority of their own people because they are bound by the
soft power of the bankfund that became so great due to years of perpetual
accumulation of power that started in the 1980’s.
Liberia and Sierra
Leone were rated as good performers in 2008, with
Liberia making the top 10 ranking (Oakland Institute,
2014, pg. 8). This is because both Sierra Leone and Liberia relaxed regulations
that made it easier for multinational corporations to enter the country and
enjoy tax breaks. Well 6 years later where do they score on the living standard
index? Where does making business easier for foreign investors translate into
making life easier for the citizens of Liberia and Sierra Leone? Sierra Leone
and Liberia are being ravaged by Ebola due to an inadequate health care system.
You have to ask yourselves, why there isnt a functioning health care system?
why don’t they have enough revenue to build more hospitals, train more doctors,
buy protective gear and for God’s sake purchase decent chlorine? Well they
could if they didn’t have to give tax breaks in order to attract foreign
investors and be lauded as ‘good performers’.
The BankFund are not done with the plunder of the
Third World. In 2008 at the insistence
of the G8 the bank was instructed to create a doing business ranking for
agriculture.
The bank complied and devised the program entitled:
Benchmarking the Business of Agriculture (Oakland Institute, 2014, pg. 5). This
was created with the aim of strengthening agribusiness globally and enable
farmers to participate in the market (Oakland Institute, 2014, pg. 5).
The bank purports to protect the small scale farmer
but has strongly advocated for largescale industrial agribusiness as they way
out of poverty, but large scale industrial agribusiness is a euphemism for the
displacement and exploitation of the farmer, in a process that renders a
country dependent when it used to be selfsufficient. In fact the program of
the bank has led to land grabs by MNC in
Uganda 2011, Honduras 2012 and Cambodia in 2014 (Oakland
Institute, 2014, pg. 6).
The Bank has devised contract framing as the avenue for
economic growth and prosperity (Oakland Institute, 2014, pg. 7). Contract
farming is when a firm makes a contract with a farmer to produce certain foods
which the firm will buy. It is lauded by the bank as a winwin scenario, the
farmer no longer can be outcompeted by MNC because it works for them. However
they are two problems:
● It
leads to export oriented cash crops that does degrades the food security of a
nation.
● It
leads to the intensifies use of fertilizers and genetically modified seeds.
(Oakland Institute, 2014, pg. 7)
Most farmers cannot afford the fertilizers or the seeds,
and therefore spend more money on buying inputs than feeding themselves.
Furthermore the fertilizers degrade the environment, making it harder to create
the same yield as last year except if you buy more fertilizers and more
genetically modified seeds.
This leaves farmers in a state of dependency on the cartel
consisting of Monsanto, Dupoint and Syngeta which control 50% of the worlds
modified seeds. This leaves farmers more vulnerable than ever (Oakland
Institute, 2014, pg. 8).
As was the case in India where 250,000 farmers committed
suicide in the last
10 years for being too heavily indebted due to the cost of
fertilizers and seeds (Oakland Institute, 2014, pg.8).
By following the neoliberal policies of the Bank it leads
to the degradation of the farmers and the nation, it doesn’t improve food
security but destroys it, it doesn’t lead to economic development but
regression. By following the neoliberal policies of the bank a nation is
transformed into an export processing zone, and leads to the paradoxical state
where by a nation can feed other’s but cannot feed itself.
As is the case of Guatemala which used to be
selfsufficient in grain production before the World Bank I.M.F involvement.
Now it is mainly an importer, importing 750,00 tons of corn in 2013, 630,00 of
which is imported from the United States, corn which again is subsidized.
Unfathomably Guatemala is the 5th largest exporter of Sugar, Coffee and
Bananas but its Government has to dish out food rations (Oakland Institute,
2014, pg. 9). It defies logic and it defies economic development, what the Bank
and the I.M.F are prescribing to Third World countries is their death sentence
by neoliberal injection.
Kicking away the ladder
“Every empire, however, tells itself and the world that it
is unlike all other empires, that its mission is not to plunder and control but
to educate and liberate." –Edward Said. (2003)
It is a tactic the World Bank and the I.M.F have told the
World and themselves, that they are here to help bring economic development to
the Third World, that they are here to ensure prosperity to end poverty, to
show the ignorant Third World how it’s done. Their honesty is as distasteful as
their actions. The only thing the World Bank and the I.M.F have succeeded in
doing is fulfilling neoimperial ambitions, the transnational actors that have
formed the new dominant economic class in the era of globalization, have used
the bank and the fund, to ensure the perpetual accumulation of capital. I use
the word perpetual because the World bank and the I.M.F have rendered nations
of the Third World into territories for exploitation ad infinitum, they have
rendered Third World countries into a state of colonial dependency, relying on
MNC to sustain their economy, relying on the approval of the BankFund in order
to gain access to any form of credit, depriving them of any form of national
sovereignty. These are the effects of neoimperialism, you could say the
project that started in the 1970’s is now complete.
One of the aspects of imperialism is destroying any form of
alternative to the established order. The bankfund have managed to do this
quite effectively by a process HaJoon Chang Economics professor at Cambridge
terms: “Kicking away the ladder”.
Neoliberal economists have been asserting without any
empirical evidence that freetrade is the only way to economic development.
That the market will solve everything as long as it is unrestricted. They have
denounced Government intervention of any sort, and have lauded privatization,
capital and trade liberalization as the 3 steps to prosperity. They have
completely rewritten history. They maintain that all developed nations
practiced free trade, and it was their adoption of free trade that resulted in
them acquiring their huge sums of wealth and led to them being the prosperous
nations they are today. They cite the examples of Britain and the United States
who are the champions of free trade. If developed nations did why can't the
rest of the World? The problem is that these statements made by free market
economists that litter the bankfund are based on zero historical
evidence.
In his astounding book by HaJoon Chang entitled ‘Bad
Samaritans’, Chang meticulously details how none of the developed nations
practiced free trade on their route to development. All of them practiced
protectionism and state led intervention, methods which are denied to the Third
World, hence the term kicking away the ladder. To give you an example the
bankfund prohibits the Third World from using subsidies, especially subsidies
directed at basic foods, such as corn rice etc. Yet the rich countries give a
100 billion dollars’ worth of subsidies to the agricultural sector every year[12].
The hypocrisy only gets worse. The Bank and the fund
consistently deny the Third World the very practices that the developed nations
themselves used in order to develop economically.
Freetrade economists will tell you that Britain and the
U.S got rich from free trade and everyone else who did the same reaped the same
rewards. Yet historically Britain and the United States were the two most
protectionist countries in the World.
Britain started its protectionist course when Walpole
regarded as the first British prime minister implemented protectionist policies
in order to protect its vulnerable industries in 1721, many of the methods
denied to Third World countries such as tariffs on imported manufactured goods
and export subsidies were used by Britain (Chang, 2007, pg. 44). Britain
remained a highly protectionist country up until the mid19th
century, with tariffs on imported manufactured goods peaking at 4555% in
1820’s as compared to 12% in Germany and 20% in protectionist France (Chang,
2007, pg. 45). Britain were so protectionist that they banned exports from
colonies that would compete with its products at home, it banned cotton textile
imports from india, and others through the Wool Act (Chang, 2007, pg. 45). It
forced its colonies to adopt policies that would render it primary commodity
exporter so that they would never compete with British manufacturing this is
reminiscent of the World BankI.M.F policy that render their economies into
export led economies specializing in primary production, and restricting them
from setting up protectionist measures so they cannot develop industries that
would compete with the industries of the developed nations. It wasn’t until
Britain gained economic dominance through protectionism that it started
championing free trade (Chang, 2007, pg. 47) and effectively kicking away the
ladder for everyone else, as Economist Friedrich List put it:
“It is a very common clever device that when anyone, has
attained the summit of greatness, he kicks away the ladder by which he climbed
up, in order to deprive others of the means of climbing up after him. In this
lies the secret in the cosmopolitical doctrine of Adam Smith, and of the
cosmopolitical tendencies of his great contemporary William Pitt and of all his
successors in the British Government Administration.
Any Nation, which by means of protective duties and
restrictions on navigation has raised her manufacturing power and her
navigation to such a degree of development that no other nation can sustain
free trade with her, can do nothing wiser than throw away these ladders of her
greatness, to preach to other nations, the benefit of free trade and to declare
in penitent tones that she has hitherto wandered in paths of error and now for
the first time succeeded in discovering the truth (Chang, 2003, pg. 5)”
The United States followed the same route. Alexander
Hamilton the first Treasury Secretary of the United States coined the term
Infant industry, he argued that the U.S should protect its local industries
using protectionist measures so that they don’t get outcompeted, once they can
stand on their own two feet they can open up the market and introduce free
trade (Chang, 2007, pg.49). Thus the United States became the most
protectionist country in the World, at the same time it became the fastest
growing economy in the world (Chang, 2007, pg. 55), from 1820’s up until the
end of the Second World War tariffs remained on an average of 40% (Chang, 2007,
pg. 5154). It was only until the end of the second world war when the United
States emerged as the dominant economic power that it started championing free
trade; and it was predicted. Ulysses Grant President of the United States from
18681876 stated:
“For centuries England has relied on protection, has
carried it to extremes and has obtained satisfactory results from it. There is
no doubt that it is to this system that it owes its present strength. After two
centuries, England has found it convenient to adopt free trade because it
thinks protection can no longer offer it anything, very well then, Gentlemen,
my knowledge of our country leads me to believe that within 200 years, when
America has gotten out of protection all that it can offer it too will adopt
free trade (Chang, 2003, pg. 6)”
Therefore as Chang astutely put it:
Historically it has been proven that liberalization, free
trade has been the outcome of economic development not the cause.
Neoliberalism does not lead to economic growth, it stifles
it.
Mexico after adopting the pill of neoliberalism resulted in
a 0.1 % growth in GDP per Capita. During the years of 19851995, before I.M.F
World Bank involvement it had a per capita income growth of 3.1% per year
(Chang, 2007, pg.68).
Mexico is not an anomaly, during the 1960’s and the 1970’s
when Third World countries were not shackled by neoliberal policies, or policed
by the World Bank and the I.M.F they had a per capita income growth of 3%
annually (Chang, 2007, pg.27). After 1980’s up until the present day it has not
managed to recapture that rate of prosperity, in fact their economies have
regressed with capita per income only growing 1.7% (Chang, 2007, pg.27).
Neoliberalism that the Bank and the I.M.F insist that Third
World countries adopt, leads to economic regression, lead to destitution, lead
to impoverishment, lead to the increase of human rights abuses, leads to the
undermining of democracy, leads to the increase in extremism, leads to
environmental degradation, leads to an increase in malnutrition, leads to an
increase in inequality, leads to a lowering of wages, leads to a disregard of
labour rights, leads to land grabbing and displacement and leads to a state of
colonial dependency ad infinitum. And unlike neoliberal dogma, such a statement
is grounded in empirical evidence, all you have to do is to look at the state
of all the countries who have adopted policies prescribed by the World Bank and
the I.M.F since the 1980’s.
Why do the World Bank and the I.M.F continue to insist on
such policies? How can the most wellfunded organization with the most
extensive research teams, academics and economists at their disposal commit
such blunders? Why is there a failure to change policies or cancel the debt of
Third World countries? Why the hubris? Why the arrogance? Where is the shame?
Where is the guilt?
Why the unending faith in an ideology that is completely
detached from reality? Surely an institution with such a horrendous track
record would be decommissioned? Well it isn’t for good reason, the bankfund
are doing the job it was intended to do, it wasn’t meant to help the poor, it couldn’t care less about
economic development, the bankfund are agencies of neoimperialism, that
sought to and successfully managed to
globalize neoliberalism. Since the 1980’s the bankfund have been fulfilling neoimperial ambitions,
ensuring the perpetual accumulation of capital for the financial elite and
ensuring the creation and maintenance of a system of plutocracy ruled by the
new dominant transnational class that governs us all.
Bibliography:
● Prashad,
Vijay. 2008. ‘The Darker Nations: A People's History of the Third World’.
● Arendt,
Hannah. 1951. ‘The Origins of Totalitarianism’.
● Nordiska
Afrika Institutet. 2007. ‘African Agriculture and the World Bank: Development
or Impoverishment?’
● Ismi,
Asad. 2004. ‘Impoverishing A Continent: The World Bank and The
I.M.F in Africa’
● Honest
Accounts: ‘The True Story of Africa’s Billion Dollar Loses’. 2014. ● Pieper,
Ute and Taylor, Lance. 1996. ‘The Revival of the Liberal Creed:
The
I.M.F, The World Bank and Inequality in a Globalized Economy’.
● Global
Exchange. 2001. ‘How The International
Monetary Fund and World Bank Undermine Democracy and Erode Human
Rights’.
● Malaluan
J. Jenina and Guttal, Shalmali. 2003. ‘Poverty Reduction
Strategy Papers: A Poor Package for Poverty Reduction’.
● Chang,
HaJoon. 2003. ‘Kicking Away the Ladder: The Real History of Free Trade.
● Chang,
HaJoon. 2003. ‘Bad Samaritans: The Myth of Free Trade and the Secret History
of Capitalism’.
● Tax
Justice Network. 2012. ‘Tax Competition in East Africa: A Race To The Bottom’.
● Aseed
Report. 2008. ‘World Bank and Conditionalities: Poor Deal for Poor Countries’.
● Oakland
Institute. 2014. ‘Unfolding Truth: Dismantling the World Bank’s
Myths on Agriculture and Development’.
● Oakland
Institute. 2014. ‘Wilful Blindness: How World Bank’s Country Rankings
Impoverish Smallholder Farmers.
[1] The use of the term Third
World is not meant to be derogatory. It is used in memory and in solidarity of
the nations that have fought and are still fighting imperialism. These nations
make up what is known as the ‘LDC’s’, ‘the emerging countries’, and the
‘developing nations’.
[2]
http://www.nytimes.com/1994/06/20/world/in-poor-decolonized-africa-bankers-are-new-overlords.html
3 http://www.whirledbank.org/ourwords/summers.html
[3]
https://www.I.M.F.org/external/pubs/ft/aa/
[4]
http://www.thenation.com/article/true-verdict-allende
[5] For further reading:
Bellissario, Antonio. 2007. ‘The Chilean Agrarian Transformation’.
[6]
https://www.opendemocracy.net/senan-fox/remembering-salvador-allende
[7]
http://spartacus-educational.com/COLDallende.htm
[8]
http://www.infoplease.com/ipa/A0921295.html
[9]
For a brief overview watch: https://www.youtube.com/watch?v=WpJjuotD534
[10]
https://www.I.M.F.org/external/np/exr/facts/prsp.htm
[11]
http://www.oaklandinstitute.org/world-bank%E2%80%99s-doing-business-rankings-relinquishing-sovereignty-go
od-grade
[12]
http://www.ncpa.org/pub/ba547
