Chapter 5
LESSER DEVELOPED COUNTRIES

5.1 Empowering Third World Governments
5.2 The Sell Off

 

 

5.1 EMPOWERING THIRD WORLD GOVERNMENTS

AFRICA

Mr Ian Smith, Prime Minister of Rhodesia 1964-1979, often said: "we were never beaten by our enemies - we were betrayed by our friends". The West essentially promised white leaders in South Africa that they would be allowed to continue practicing apartheid if they would stop arming Rhodesia in her war against communism.

 

Between 1979 and 1980, Rhodesia fell into Marxist dictatorship under Mugabe and had its name changed to Zimbabwe.(1) The World Bank provided loans to Mugabe up until May 2000.(2) This is not an academic issue since millions face starvation because of Mugabe's Marxist policy of seizing the nation's farms. Ominously, Mugabe has turned to communist China to run farms in Zimbabwe.(3)

In the 1980s the world saw starving children in Ethiopia, but what they did not realize was that this was a planned famine. The Marxist regime of Mengistu Haile Mariam undertook nationalization of agriculture and massive population resettlement program modeled on Stalin and Mao's starvation programmes in the 1930s and 40s which killed millions. Meanwhile the World Bank continued to send Mengistu millions of dollars, much of it intended for the ministry of agriculture undertaking the resettlement programme.(4)(5) The Wall St. Journal recently reported on a study by the The Free Africa Foundation which concluded that,

In country after country in Africa, there has been no accountability in the use of World Bank loans... Billions in World Bank loans have been embezzled in Africa and rarely anyone is held accountable and prosecuted.(6)

It comes as no surprise then that by its own admission, the World Bank's purported policy of strengthening African free market economies by lending $50 billion for 'Structural Adjustment programs' and other projects over the past thirty years has been an abject failure. That's because their real purpose was the exact opposite: The destruction of the property rights and the creation of socialist dictatorships. What else could possibly have happened after handing over $50 billion to undemocratic governments with no accountability?

Given a political system that is based upon a patronage system and governments run by uniformed bandits, the commitment to reform is almost non-existent as genuine economic reform would be politically suicidal. The result is a 'reform charade,' where "reforming" governments take one step forward and three steps backward.(7)

The Bank's own reports in the 1980s revealed that it played a major role in nationalizing the development process throughout the Third World. Regarding these so-called harsh conditionalities imposed by the structural adjustment loans, a 1985 confidential bank report by leading development experts concluded that 'the SAL's seemingly hard and all-encompassing conditionality is largely illusory'.

The bank and some proponents of foreign aid claim that a wave of privatization swept the Third World but actually 'privatization was almost all talk'. World Bank loans either go directly to the recipient government or must be guaranteed by the government. So, by inevitably increasing the politicization of Third World economies, World Bank aid was the economic tranquilizer dart which created a weaker domestic market for the foreign multinationals to feed on.(8)
 


LATIN AMERICA

By 1982 almost every Third World government was running behind on its payments and Latin America was no exception. Over the next seven years, multi-billion dollar bailout packages failed to stem the economic decline. That's because they were used to build cumbersome nationalized industries at the expense of the private sector. For example, the western banks funded large government run companies such as Petroleo Brasilerio S.A. in Brazil and Petroleus Mexicanos in Mexico.

 

By 1990 these companies were failing miserably and dragging the rest of the economy down with them. Brazil was unable to produce enough petrol and Mexico became a food importer. Brazil is now controlled by the military and government run companies consume 65% of all industrial investment. Exactly the same process brought Argentina's economy to its knees. It had an expanding middle class until its government became the recipient of massive loans from the World Bank and U.S. commercial banks during the 1980s.

 

By 1989 inflation averaged 5000% and thousands of corporate bankruptcies followed. Government figures showed that in 2002, about 100,000 people dropped out of the middle class each week to become the new poor. A country that only 10 years earlier had Latin America's highest standard of living was now on a level with Jamaica; half of Argentina's 37 million people lived below the poverty level. The Government had subsidy programmes for about 2 million malnourished Argentines, but millions more got nothing. Some subsisted by scavenging through garbage. (10) (11)

Furthermore the West has supplied physical weapons for military governments to spend their free money on. Britain is the world's second largest arms exporter after the U.S. with 20% market share.(12) A U.S. military training school, the School of the Americas, has trained many of the worst human rights violators and dictators in various Latin American countries, including Roberto D'Aubisson from El Salvador and Manuel Noriega of Panama.(13)
 


ASIA

Joseph Stiglitz's discussion of the role of bankruptcy laws in the 1997 Asian financial crisis reveals how the IMF deliberately undermined domestic property rights. Here the bankers exploited the absence of the legal framework for implementing trusteeships when large numbers of firms were going bankrupt.

 

The IMF encouraged the state to get involved in restructuring the companies, i.e. telling them how to run themselves instead of sorting out who really owns the firm. Countries such as Thailand followed their advice and languished whilst Korea and Malaysia ignored it and prospered.(14)
 

 

5.2 THE SELL OFF

By the end of the 1980s the banks had successfully empowered and corrupted Third World governments with billions in bank loans. Liberal democracy and the free market had been strangled. Now for the second play: The sell off. The directive for the sell off came from the World Bank and IMF at the end of the 1980s as shown by World Bank documents signed by James Wolfensen and leaked to a BBC investigative journalist, Greg Palast.

 

The World Bank flew in their teams who dictated their plans, an average of 111 conditions in a pre-written document, to each nation's finance minister. If he refused he would be denied any further loans and the life blood which had sustained his government would be cut. These conditions included selling off the natural resources and national industries to foreign multinationals. In the case of Argentina, they required the nation to give up its gas water and oil to Vivendi, Repsol, Enron and a few other multinationals.

 

In 1988 Jeb Bush made a call to an Argentine senator asking him to sell a gas pipeline to Enron at one fifth of its market value. In return, a percentage of the discount would be deposited in the senator's Swiss bank account. The process has been called 'briberization' rather than privatization.(15)

The Water Barons report for the Center for Public Integrity deals in-depth with the sale of national water supplies.

 

"Surgery without anesthesia," was how Menem described his policies in 1989 as he set out to make Argentina one of the world's leading models for privatization. Faced with rampant inflation - caused by the banks and who were suddenly "reluctant" to make further loans - Menem won passage of the National Administrative Reform Law, which declared a state of economic emergency and gave him the power to privatize public utilities by decree.

 

As a result World Bank money came flowing back to Argentina. On 18 Dec. 1990, the World Bank approved a loan (a bribe) of $300 million for "The new adjustment projects in Argentina".

 

None applauded louder than Santiago Soldati, a businessman and close Menem ally who would end up as the lead Argentine partner in the privatization of water.

 

Soldati later sold his interest in the water company, making a tidy $100 million in the process. In 1993, the Government granted a 30-year concession to run the water system to Aguas Argentinas a consortium controlled by two French corporate giants, Compagnie Générale des Eaux (now Vivendi )and Lyonnaise des Eaux (now Suez).

 

Soon after, the World Bank declared the Buenos Aires privatization an overwhelming success, and made it a model for privatization's of water that followed in the Philippines, Indonesia, Australia and South Africa.(16)

The investigation showed that the enormous expansion of these water companies could not have been possible without the World Bank and other international financial institutions, such as the IMF, the Inter-American Development Bank, the Asian Development and the European Bank for Reconstruction. In countries such as South Africa, Argentina, Philippines and Indonesia, the World Bank has been advising the leaders to 'commercialize' their utilities as part of an overall bank policy of privatization and 'free-market' economics. (17)

The World Bank calculates that privatization projects in developing countries in 2002 alone totaled (U.S) $24 billion.(18) Having become impatient with the sluggish pace of progress on this issue, the World Bank launched an internet toolkit for privatization in developing countries, providing on-line advice on how to sell off highways, water, waste systems, ports, and telecoms industries!(19)
 

 


CONCLUSION

When making the case for such a grand conspiracy as this, it is helpful to call a whistleblower to the witness stand. Published in November 2004, the book entitled Confessions of an Economic Hit Man by John Perkins (now a New York Times best seller) is a public confession by an insider about the real purpose of Western loans to developing countries. Working in a private consulting firm, Perkins was one of the 'economic hit men' who carried out the plan detailed in the World Bank documents.

 

Perkins describes a classical conspiracy between government and big business. The U.S. National Security Agency (NSA) recruited and trained the 'economic hit men' to carry out their duties through private consulting firms and other corporations. The beneficiaries of the conspiracy were the international bankers and shareholders in the multi-national corporations. Unable to repay the loans organized by the hit men, developing countries had to surrender their national resources to their Western creditors.

What an extraordinary scam: Destroy a country's domestic capitalism and free-markets, get it into massive debt and then with financial gun to its head, shake it down for everything its got. It is even more extraordinary for the fact that, because this piracy is conducted in international waters, it isn't even illegal!

 

One of the questions raised in the next chapter is whether or not these agents have been acting, to some degree, on Her Majesty's (secret) service.
 

 


Chapter 5 End Notes

  1. Peter Hammond, Not Defeated -Betrayed, Frontline Fellowship. See http://www.frontline.org.za/mission%20reports_prayer/not%20defeated_%20betrayed.htm 

  2. The Wall Street Journal, Opinion, 5 August 2003 (Review & Outlook). See http://www.freeafrica.org/commentaries15.html

  3. Andrew Meldrum, Mugabe hires China to farm seized land, The Guardian, London,13 February 2003. See http://www.guardian.co.uk/zimbabwe/article/0,2763,894421,00.html

  4. James Bovard, The World Bank vs The World's Poor, Cato Policy Analysis 1987, pp.4-6. See http://www.cato.org/pubs/pas/pa092.html

  5. G. Edward Griffin, The Creature from Jekyll Island, American Media, Fourth Edition, 2002, p.100

  6. The Wall Street Journal, op cit.

  7. The Failure of World Bank Programs in Africa, A Special Report by The Free Africa Foundation, March 2003. See summary at http://www.freeafrica.org/reports.html

  8. Bovard, op cit.,

  9. Griffin, op cit., ch's 5-6 especially pp.103-104 and 116

  10. Daniel Santoro, The 'Aguas' Tango: Cashing In On Buenos Aires' privatisation , The Water Barons. A report for The Center for Public Integrity, 2003. See http://www.icij.org/water/report.aspx?sid=ch&rid=50&aid=50

  11. Brian Wheeler, How big is the UK arms trade? BBC, London, 9 September, 2003. See http://news.bbc.co.uk/2/hi/business/3084718.stm

  12. Anup Shah, Globalissues.org, 30 October 2001. See http://www.globalissues.org/Geopolitics/ArmsTrade/TrainingViolators.asp

  13. Joseph Stiglitz, Globalization and its Discontents, Penguin Books, 2002, pp. 117-118

  14. Greg Palast, The Best Democracy Money Can Buy. Also see Greg Palast's website for discussions of the book at http://www.gregpalast.com/detail.cfm?artid=125&row=1  http://www.gregpalast.com/detail.cfm?artid=128&row=1  http://www.gregpalast.com/detail.cfm?artid=198&row=1

  15. Daniel Santoro, op cit.

  16. Bill Marsden, Cholera and The Age of The Water Barons, The Water Barons, A report for The Center for Public Integrity. See http://www.icij.org/water/report.aspx?sid=ch&rid=44&aid=44

  17. Private Participatiion in Infrastructure Project Database, The World Bank Group. See http://rru.worldbank.org/ppi/

  18. Toolkits, The World Bank Group. See http://rru.worldbank.org/Toolkits/

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