Global Policy Forum

By Gregory Pallast

So call me a liar, I was standing in front of the New York Hilton Hotel when the limousine carrying the director of the International Monetary Fund, Horst Kohler, zoomed by, hitting a bump. Out flew a confidential report, Ecuador Interim Country Assistance Strategy. You suspect that's not how I got it, but you can trust me that it contains the answer to a puzzling question.

Inside the hotel Professor Anthony Giddens told an earnest crowd of London School of 'Economics alumni that "globalization is a fact, and it is driven by the communications revolution". Wow. That was an eye-opener. The green-haired freaks outside the hotel demonstrating against the IMF had it all wrong. Globalization, Giddens seems to say, is about giving every villager in the Andes a Nokia internet - enabled mobile phone. What puzzled me is why anyone would protest against this happy future.

So I thumbed through my purloined IMF strategy for Ecuador seeking a chapter on connecting the country's schools to the world wide Web. Instead, I found a secret schedule. By November 1, it says, its government is ordered to raise the price of cooking gas by 80 per cent. It must eliminate 26,000 jobs and halve real wages for the remaining workers by 50 per cent in four steps in a few months specified by the IMF. It must begin to transfer ownership of its biggest water system to foreign operators by next July, and grant BP's Acro subsidiary the right to build and own an oil pipeline over the Andes.

That's for starters. In all, the IMF's 167 loan conditions look less like an assistance plan and more like a blue print for a financial coup d'etat. The IMF would say it has no choice. Ecuador is broke, thanks to the implosion of its commercial banks. But how did Ecuador, an OPEC member with resources to spare, get in such a pickle? For that, we have to go back to 1983, when the IMF forced its government to take over soured private debts owed by Ecuador's elite to foreigners and borrowed US $1.5 bn. To repay this loan the IMF dictated price hikes for electricity and other necessities. And when that didn't drain off enough cash, yet another assistance plan required the state to eliminate 120,000 jobs.

Furthermore, while trying to meet the mountain of IMF obligations, Ecuador foolishly "liberalized" its tiny financial market cutting local banks loose from government controls and letting private debt and interest rates explode. Who pushed Ecuador into this nutty romp with free-market banking? Hint: the initials are IMF. It made bank liberalization a condition of another berserk assistance plan. The IMF and the World Bank have lent a sticky helping hand to scores of nations.

Take Tanzania. Today 1.4m people there are getting ready to die. They are the 8 per cent of the population who have the Aids Virus. The financial "rescuers" found a brilliant neo-liberal solution: require Tanzania to charge for hospital visits, previously free. This cut the number of patients treated in the three big public hospitals in the capital, Dar-es-Salaam, by 53 per cent. The financial cures must be working. The bodies told Tanzania to charge school fees. Now the bank expresses surprises that school enrolment is down from 80 per cent to 66 per cent.

Altogether the Bank and IMF have 157 other helpful suggestions for Tanzania, and the Tanzanian government secretly agreed in April to adopt them all. It was sign or starve. No developing nation can borrow hard currency without IMF blessing (except China, whose output grows at 5 per cent a year thanks to following the reverse of IMF policies). The IMF and World Bank have effectively controlled Tanzania's economy since 1985. Admittedly, they found a socialist nation mired in poverty, disease and debt. Their experts wasted no time in cutting trade barriers, limiting government subsidies and selling off state industries. This worked wonders.

According to Nancy Alexander of the Washington based Globalization Challenge Initiative, in 15 years Tanzania's GDP per capita has dropped from $309 to $210, the literacy rate is falling and the rate of abject poverty has jumped to 51 per cent of the population. The World Bank and the IMF were born in 1944 with simple, laudable mandates: between them to fund post-war reconstruction and development projects and lend hard currency to nations left skint by temporary balance of payments deficits.

But in 1980 they seemed to take on an alien form. In the early 80s third world nations, hemorrhaging after five fold rises in oil prices and a similar jump in dollar interest payments, brought their begging bowls to the two bodies. But instead of debt relief, they received structural assistance plans listing an average of 114 "conditionalities" in return for capital. The particulars vary from nation to nation, but in every case they had to remove trade barriers, sell national assets to foreign investors, slash social spending and make labour "flexible" (that is, crush unions). So what have the free-market prescriptions accomplished?

An article by Samuel Brittan in the Financial Times last week declared that the new capital markets and free trade have "brought about an unprecedented increase in world living standards". Brittan cites the huge growth in GDP per capita, life expectancy and literacy in the less developed world from 1950 to 1995. Now hold on a minute. Until 1980 virtually every nation in his survey was either socialist or welfare statist. In those dark ages of increasing national government control and ownership (1960 - 1980) per capita income grew by 73 per cent in Latin America and by 34 per cent in Africa. By comparison, since 1980, Latin American growth has come to a virtual halt, growing by less than 6 per cent over 20 years - and African incomes have declined by 23 per cent.

Now let's count the corpses. From 1950 to 1980 socialist and statist welfare policies added more than a decade of life expectancy to virtually every nation on the planet. From 1980 to today life under structural assistance has become brutish and shorter. Since 1985 the total number of illiterate people has risen, and life expectancy is falling in 15 African nations. Brittan attributes this to "bad luck, (not) the international economic system".

In the former Soviet states, where IMF and World Bank plans hold sway, life expectancy has plunged, adding 1.4m a year to the death rate in Russia alone. Recently, the IMF admitted that "in the recent decades, nearly one-fifth of the world population have regressed" - arguably "one of the greatest economic failures of the 20 century" And that, Professor Giddens, is a fact.

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