Resolved to Ruin

Palast on economic murder in Argentina 
 
Bolivia is in flames, its economy shot dead. And I've got my hands on the
murder weapon, the same one that killed Argentina's economy: the "Country
Assistance Strategies" of the World Bank and International Monetary Fund
(IMF). They are marked confidential. How I got them-well, that's not
important. But this is-from this month's Harper's Magazine, my exposé of a
batch of these secretive plans for the seizure, control and ultimate ruin of
the nations the IMF supposedly seeks to save.

Resolved to Ruin

by Greg Palast

Harper's Magazine, March 2003.

Green-haired protesters in the streets of Seattle were ridiculed for their
belief that the World Bank, the International Monetary Fund, and the world's
finance ministers enter into secret agreements to impoverish developing
nations.

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See the March edition of Harper's
Magazine for the complete annotated document, based on Chapter 4 of the
new US edition of The Best Democracy Money Can Buy, out February 25th
from Plume/Penguin.
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Here, in fact, is one such agreement: Argentina's "Country Assistance
Strategy Progress Report" from June 2001. This document, nominally produced
by the World Bank, represents the interlocking directives of both the Bank
and the IMF, as well as, indirectly, the wishes of both institutions'
largest patron, the United States Treasury Department. Marked "Confidential"
or "Official Use Only," these reports are seldom publicized to the citizenry
bound up in their stipulations. And yet for the 100-plus that rely on IMF
and World Bank loans-countries such as Argentina, Tanzania, Ecuador, Sierra
Leone-such agreements serve as de facto legislation, meticulous in detail
and ideological in thrust. Although couched as loan conditions or as helpful
development advice, these reports closely resemble the minutes of a
financial coup d'etat....

To reduce its deficit per IMF decree, Argentina had cut $3 billion from
government spending-a cut that was necessary, the authors note here, to
"accomodat[e] the increase in interest obligations." These obligations, the
report did not need to add, were largely to foreign creditors, including the
IMF and World Bank themselves. Since 1994, in fact, Argentina's budget
deficits had been entirely attributable to interest payments on foreign
loans. Excluding such payments, spending had remained constant at 19 percent
of GDP. Despite the visible harm caused by cuts, the new plan ordered more.
This, the report promised, would "greatly improve the outlook for the
remainder of 2001 and 2002, with growth expected to recover in the later
half of 2001." The Bank was slightly off the mark. By December 2001, Buenos
Aires' middle class, unaccustomed to hunting the streets for garbage to eat,
joined the poor in mass demonstrations.

How had Argentina arrived at such an impasse? In the 1990s the nation was
the poster child for globalization, having followed without question the IMF
and World Bank program. The "reform" plan for Argentina, as for every
nation, has four steps. The first of these, capital market liberalization,
was achieved by 1991's "Convertibility Plan," which pegged the Argentine
peso in a one-to-one relationship with the U.S. dollar. This peg was
designed both to keep inflation low and to make deficit spending difficult,
in hopes of attracting and comforting foreign investors. Liberalized markets
free capital to flow in and out across borders. But once Argentina's economy
began to wobble, money simply flowed out....

The second step in the IMF/World Bank regimen is privatization. Both at the
urging of lenders and out of financial necessity, Argentina throughout the
nineties sold off what Argentines now ruefully call "las joyas de mi
abuela," grandmother's jewels: the state's oil, gas, water, and electric
companies and the state banks. It was quite a fire sale. Vivendi of France
won rural water systems; Enron of Texas the pipes of Buenos Aires; Fleet of
Boston took the provincial banks....

In 1994, at the World Bank's urging, Argentina partially privatized even its
social security system, diverting much of it into private accounts. The
U.S.-based Center for Economic and Policy Research calculated the revenue
loss from this decision alone to be almost equal to the nation's budget
deficit during the period.

The third prong of the laissez-faire putsch is market-based pricing. In
Argentina, the main target of this initiative has been labor, that most
inflexible of commodities. "A major advance was made to eliminate outdated
labor contracts," states this report, noting approvingly that "labor costs"
(i.e., wages) had fallen due to "labor market flexibility induced by the de
facto liberalization of the market via increased informality." Translation:
workers who lost unionized jobs were forced into ad hoc arrangements, with
far less protection. Here, the report asks the government to decentralize
collective bargaining, a move that would reduce union power..

Far from achieving this goal of "unemployment in single digits," the World
Bank and IMF saw the jobless figure in the Buenos Aires area rise from 17
percent to a staggering 22 percent in the year after the report's issuance.
The violence and looting that rocked that rocked the city in December 2001
thus represents a stage in the "austerity" process that Stiglitz terms the
"IMF riot." When a nation, he said, "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."....

Step four of the IMF/World Bank program is free trade. The loan terms of the
two institutions had required Argentina to accept "an open trade policy." As
recession set in, Argentina's exporters-whose products were effectively
priced, via the peg, in U.S. dollars-were forced into a spectacularly
unequal competition against Brazilian goods priced in that nation's devalued
currency. Argentina grows a special kind of long-grain rice favored by
Brazilians, and yet even as Brazil faced a hunger crisis tons of rice went
unsold....

Before 1980, when the World Bank and IMF set out to rearrange the economies
of developing nations, nearly all of them adhered to Keynesianism or
socialism. Following the "import-substitution model," they build locally
owned industry through government investment, behind a protective wall of
tariffs and capital controls. In those supposed economic dark ages, spanning
roughly from 1960 to 1980, per-capita in-come grew by 73 percent in Latin
America and by 34 percent in Africa. By comparison, since 1980, Latin
American income growth has slowed to a virtual halt-to less than 6 percent
over twenty years-while African incomes have declined by 23 percent. The IMF
itself, in a statement accompanying its April 2000 "World Economic Outlook"
report, noted that "in recent decades, too many countries, and nearly
one-fifth of the world population, have regressed. This is arguably one of
the greatest economic failures of the 20th Century." On this, at least, the
IMF had it right.

On February 25, Plume/Penguin USA will release the new, expanded American
edition of Greg Palast's New York Times bestseller The Best Democracy
Money Can Buy: An Investigative Reporter Exposes the Truth About
Globalization, Corporate Cons and High-Finance Fraudsters. You can view
Palast's reports for BBC Television's Newsnight and his columns for the
Guardian papers of London at www.gregpalast.com.