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Joseph Stiglitz on the hidden workings of the IMF, World Bank, and US Treasury

What is the often hidden workings of the IMF, World Bank –and the World Bank’s 51% owner, the US Treasury? How do they interact with various countries?

According to insider Joseph Stiglitz, World Bank staff meet some begging, busted finance minister who is handed a ‘restructuring agreement’ pre-drafted for his ‘voluntary’ signature. The Bank hands every minister the same exact four-step program.

Step One is Privatization – which Stiglitz said could more accurately be called, ‘Briberization.’ Rather than object to the sell-offs of state industries, national leaders – using the World Bank’s demands to silence local critics – happily flogged their electricity and water companies. “You could see their eyes widen” at the prospect of 10% commissions paid to Swiss bank accounts for simply shaving a few billion off the sale price of national assets.

Step Two of the IMF/World Bank one-size-fits-all rescue-your-economy plan is ‘Capital Market Liberalization.’ Stiglitz calls this the “Hot Money” cycle. Cash comes in for speculation in real estate and currency, then flees at the first whiff of trouble. A nation’s reserves can drain in days, hours. And when that happens, to seduce speculators into returning a nation’s own capital funds, the IMF demands these nations raise interest rates to 30%, 50% and 80%.

At this point, the IMF drags the gasping nation to Step Three: Market-Based Pricing, a fancy term for raising prices on food, water and cooking gas. This leads, predictably, to Step-Three-and-a-Half: When a nation is, “down and out, the IMF takes advantage and squeezes the last pound of blood out of them.

Now we arrive at Step Four of what the IMF and World Bank call their “poverty reduction strategy”: Free Trade. This is free trade by the rules of the World Trade Organization and World Bank.

Stiglitz the insider likens free trade WTO-style to the Opium Wars. “That too was about opening markets,” he said. As in the 19th century, Europeans and Americans today are kicking down the barriers to sales in Asia, Latin American and Africa, while barricading our own markets against Third World agriculture.

By the way, don’t be confused by the mix in this discussion of the IMF, World Bank and WTO. They are interchangeable masks of a single governance system. They have locked themselves together by what are unpleasantly called, “triggers.” Taking a World Bank loan for a school ‘triggers’ a requirement to accept every ‘conditionality’ – they average 111 per nation – laid down by both the World Bank and IMF.

[Excerpt of an article by Greg Palast]

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One Response to “Joseph Stiglitz on the hidden workings of the IMF, World Bank, and US Treasury”

  1. Despite criticisms and blatant examples of its shortcomings, the Washington Consensus regretablte remains as strong as ever.

    I’ll caution simply lumping the WTO in the same vein as the WB and IMF. THe WTO’s governing and organisational structure has led for extensive debate, depsite it’s neo-liberal cloud. Even Pascal Lamy has sometmes played an alternative view with regards to developing countries.


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