An interesting article in The Daily Star:http://www.thedailystar.net/story.php?nid=47529
Whose friend?
Fozia Akhtar
THE World Bank claims that its goal is to help low-income countries by lending money for development works that will help reduce poverty and spur development, but it is, in fact, meant to increase the profits of multi-national corporations and to ensure that trade imbalances favour the wealthy countries over the poor ones.
The World Bank, IMF, and the WTO pressurise low-income countries to adopt measures ("structural adjustment") to reform their economy. Yet, in countries which adopt such measures, the economy often lands up in worse shape than before they were adopted. The question is whether the formula works, and if not, why is the World Bank so eager to push it?
For many years, the one success cited by the World Bank and IMF was Argentina -- that is, until its economy crashed. Rather than blindly following the proposed measures, a government should consider whether such a move would be wise -- or whether it would be wiser to refuse their loans and advice.
Consider the case of the United States, which makes recommendations for privatisation, but does not follow them itself. The US government owns over $2.85 trillion of assets. After adding the assets of state and local governments, the total investment in public enterprise is far greater than the stock market, making the US one of the most socialised nations.
Joseph Stiglitz, former chief economist of the World Bank, has an insider's view on the activities of the World Bank and its partner agencies. According to Stiglitz, the World Bank analyses each nation's economy during in-country investigations, then hands them virtually the same program it gives to every country in which it operates. So much for carefully-tailored advice based on the characteristics of the countries in which it operates.
Step one in the process universally recommended by the World Bank is privatisation, which Stiglitz says could more accurately be labeled "briberisation." This consists of selling national assets at discount prices. Why the discount prices? US and other foreign companies offer "commissions" to government officials in return for shaving a few billion dollars off the price of the assets. In the case of Russia, "US-backed corruption stripped Russia's industrial assets, cutting national output nearly in half, causing economic depression and starvation."
The second step is capital market liberalisation. This involves repealing any law that taxes money crossing borders. The reason, supposedly, is to allow money to enter as well as leave; the idea is that investment will suddenly pour in. However, in many cases, the money simply flowed out.
In the era of modern banking, the process need not take much time. A nation's fiscal reserves can be drained in days or even hours. When this happens, to bring money back in, the IMF demands that the government raise interest rates to 30%, 50% or even 80%. The result is demolition of property values and industrial production, and draining of national treasuries.
The third step is "market-based pricing." This means raising the price of food, water, and domestic gas. Unsurprisingly, this leads to step 3.5: what Stiglitz calls "the IMF riot," whereby the populace revolts due to its inability to access basic needs. Examples include riots in Indonesia in 1998 after subsidies ended, riots in Bolivia over water price hikes in 2000, and riots in Ecuador in 2001 over an 80% increase in the price of cooking gas.
The result is a depreciation in prices of assets, so that the sale price to foreign companies drops even further. Meanwhile, there is always plenty of money to bail out the banks. One particularly grotesque example of how this works occurred in Ethiopia, where the US ordered the government to divert European aid money to the US treasury, at 4% interest, while borrowing at 12% to feed the starving.
The IMF and World Bank required Tanzania to start charging for previously free hospital appointments; never mind that 1.3 million people have Aids, many of whom cannot afford to pay. After that condition was imposed, the number of patients treated in Dar es Salaam's three public hospitals dropped by 53%.
Following orders by the IMF and the World Bank to start charging school fees, school enrollment dropped from 80% to 66%. Thanks to the interventions of the IMF and World Bank, in just 15 years, Tanzania's GDP fell from $309 to $210 per capita, literacy also fell, and the number of the abjectly poor rose to 51% of the population.
The World Bank, confused that Tanzania's suffering population did not appreciate its contribution, said in 2000: "One legacy of socialism is that most people continue to believe the state has a fundamental role in promoting development and providing social services."
Other measures include drastically reducing the workforce and cutting wages for those still employed, which are sure to increase hardship -- and exactly the sort of thing the US would never do in times of economic downturn.
The final step is the creation of a poverty reduction strategy -- the goal of which, apparently, is rarely to reduce poverty. According to observers, PRSPs "undermine democracy," as they are not instituted democratically and often have nothing to do with poverty. In fact, they are the new term for the former "structural adjustment programs" that have proved, deservedly, so unpopular.
The World Bank's concept of poverty reduction is encapsulated in two words: free trade. Of course free trade does not mean open, unrestricted trade among countries, but trade governed by the rules of the World Bank and the WTO. Under their ideas of free trade, Europe and America prevent countries in Asia, Latin America and Africa from imposing barriers to sales, while blocking their own markets against agricultural imports from the low-income countries.
Another example of not-so-free trade is the property rights treaty, which protects the research and development costs of drug companies. Why those costs need protecting is a good question, given the incredible wealth of the pharmaceutical companies and their minimal investment in R&D; in fact, most of their research is on slight modifications to existing drugs, and on drugs for mostly cosmetic conditions. Little do they spend developing drugs for the diseases that create the most illnesses and deaths in low-income countries.
Meanwhile, high drug prices translate into death for all those that cannot afford them -- yet governments are prevented from allowing anyone to make generic versions of those drugs at prices their population could afford. (Cuba, which refuses to give the World Bank a presence in its country, makes its own Aids drugs and, hence, is able to treat its HIV-infected population cheaply and effectively.)
But the World Bank is always available with its easy loans, which usually require only(!) 114 conditions, dictated, odd though it may seem, by the WTO and IMF. And the IMF lays down even stricter conditions than the WTO. Which is very strange if the goal of the World Bank were truly to help the poor, rather than to increase the profits of a very few multi-national companies.
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