21. 3rd World Austerity Policies: Coming Soon To a City Near You

by Project Censored
Published: Last Updated on


Title: “Resolved to Ruin”
Author: Greg Palast

Title: “Global Rollback”
Author: Michael Parenti

Title: “Mistakes Were Made” (a book review of Globalization and Its Discontents by Joseph Stiglitz)
Author: Gabriella Bocagrande

Evaluators: Eric McGuckin Ph.D., Linda Nowak Ph.D.
Researched by: Tony Cullen, Scott Frazier

Policies traditionally carried out overseas by “international lending institutions” such as the World Bank or International Monetary Fund (IMF) are quickly becoming part of the U.S. domestic economy. Privatization, loss of social services, bifurcation of the economy and an overall decline in the lives of working people are an ongoing reality in the U.S.

Officially, IMF and World Bank measures were imposed to curb inflation, increase exports and strengthen the fiscal condition of debtor nations, allowing them to pay back their loans. In actuality, however, the common result of structural adjustments has been depressed wages, reduced consumer purchase-power, and environmental degradation, while boosting profit rates for multinational investors. Small farmers, having lost their subsidies and import protections, are driven off their land into overcrowded cities. According to a number of economists, including the former chief economist for the Wold Bank, as western investment in the Third World increased throughout the ‘90s, so did poverty and social instability.

The World Bank and IMF have a four-step “reform” formula for each country. The formula includes Capital-market liberalization, privatization, market-based pricing, and, finally, the introduction of “free trade.” In step one, capital is freed up to flow in and out across the borders. Generally the result is the increased flow of capital out to external businesses with no guarantee that the money will flow in through foreign investment.

Privatization is the second step. This refers to the transfer of traditionally state-run services and utilities like gas, oil, roads, water, post offices, and banks to private companies. The problem, say critics, is that private ownership of a country’s framework leaves it unable to protect its citizens or natural resources from abuses of power.

Step three of the program, market-based pricing, is the point at which consumer purchase-power drops and the local economy really begins to suffer. The country’s political leaders no longer have the ability to place local controls on economic trends and the country and its citizens become vulnerable to the whims of the global market.

The final step in the formula is free trade. But “free” is a relative term when referring to import/export values and global trade agreements. Third World nations are not on the same economic footing as their industrialized trade partners. Industrialized countries, influenced by their corporate backers, usually override attempts at import protections by Third World countries in order to procure local industries, cheap labor, and natural resources.

Many of these policies had been established slowly in the United States over a number of years, but the intensity and speed with which they are now emerging is unprecedented. After 9-11, with much of the public distracted by terrorism and the desire for national defense, business litigators and anti-labor politicians stepped up the process of rolling back laws enacted over the last 100 years to protect workers, the public, and the environment from the excesses of industry. Just as with World Bank/IMF policies in other countries, the goal is to privatize profits and socialize losses. The vast majority of profits made by a company will be concentrated in a few private hands, while economic losses will be borne by the taxpayers through increased taxation and denial of social benefits. This is a trend that represents a huge shift in social and economic policy in the United States, with long lasting implications.

UPDATED BY GABRIELLA BOCAGRANDE: The appearance of Joseph Stiglitz’ book Globalization and Its Discontents, in 2002 was widely greeted as a radical departure by a World Bank insider from the neo-liberal policies of the international financial institutions in Washington. While it was gratifying to see Mr. Stiglitz lambaste the International Monetary Fund for promoting indigence, unemployment, and organized crime every time it gained control over a distressed economy in the developing world, an alternative interpretation of Mr. Stiglitz’ observations suggests that he recommended no fundamental changes in the neo-liberal approach to ‘development.’ He suggested milder forms of fiscal intervention in economies in crisis and more generous ‘social safety nets,’ but this is rather like recommending the distribution of pith helmets to protect people from nuclear combat.

Nor has the IMF changed its ways. Throughout ‘02 and ‘03, it continues to strangle the economy of Argentina by exacting continuing budget cuts in repayment of the external debt. Most recently, the IMF has threatened the new Argentine government with another credit cutoff for not allowing private banks holding household mortgages to foreclose more rapidly on delinquent homeowners, 50 percent of whom are now impoverished, thanks to the IMF itself. Stiglitz’ response to this position would most likely be to argue that it is not sound economic policy to create more homeless people, since it weakens consumer demand. After all, homeless people are only a market for canned goods, plastic sheeting and pots and pans to bang, while people who own residences buy appliances and cookware, not to mention Play Stations, Next-Day-Blinds, and DVDs.

There is something fundamentally wrong with the IMF and the World Bank, but Joseph Stiglitz did not finger it: these institutions represent the interests of First World finance capital, but they are never charged with this. Not by Mr. Stiglitz and not by the mainstream press. They represent themselves publicly as charitable institutions sincerely seeking to promote job growth and prosperity around the world, and Mr. Stiglitz let them get away with it. Coverage of them by Stiglitz and the press attributes increasing world misery to well-intentioned ‘mistakes’ on their part, rather than the systematic operation of the structural machinery of greed.

Organizations which genuinely oppose the policies of the IMF and the World Bank are Public Services International, which advocates on behalf of public sector trade unions, the Bank Information Center, which promotes transparency at the Banks, and the Citizens’ Network for Essential Services (Note: As of 9/12/2023, this source URL no longer exists).