Then I got The Florida Answer: "We've been waiting for someone to ask us that." The clerk then pulled out a huge multicolor sheet, listing, for every Florida county, the number of ballots not counted. In a presidential race decided by 537 votes, Florida simply did not count 179,855 ballots. And whether your vote counted depended a lot on your color. In Leon (Tallahassee), a White county, only one in 500 ballots was spoiled. In neighbouring Gadsden, with a high population of Black voters, one in eight ballots were rejected, never counted. In the Black counties, for example, some voters had checked off and written in the name "Al Gore" - yet their vote did not count for Gore.
Here's the breakdown of ballots not counted in Florida's blackest and whitest counties:
Black counties 25+ per cent African-American residents Ballots not counted
Gadsden 52 per cent 12 per cent Madison 42 per cent 7 per cent Hamilton 39 per cent 9 per cent Jackson 26 per cent 7 per cent
White counties Fewer than 5 per cent African-American residents Citrus 2 per cent X per cent Pasco 2 per cent 3 per cent Santa Rosa 4 per cent 1 per cent Sarasota 4 per cent 2 per cent
Detect a pattern? And as the Tallahassee officials demonstrated to me, whether a ballot was counted or not had almost nothing to do with the voters' education or sophistication - but an awful lot to do with the type of machine and how the buttons are set. Was the governor or Katherine Harris aware of this racially-loaded technical problem? Their offices were literally a stone's throw away from the test machine. The technicians told me, "That's why we set up this machine, so they could see it - before the election."
Cover-up and counterspin
While virtually none of the new investigative material reached America's shores, the counterspin machine was in full throttle. The Wall Street Journal, usually unbiased, ignored the racial demographics of the mountains of spoiled ballots and proclaimed that there was no racial difference in the geographic division of sophisticated voting machines.
My felon purge reports got Florida's press poodles up in arms. Months after the election, Palm Beach Post, ChoicePoint DBT's home-town paper, announced dramatically, "thousands of felons voted in the presidential election last year ... It's likely they benefited Democratic candidate Al Gore." Wow! Thousands!
The Post's FELONS VOTED! shock-horror story run one week before the US Civil Rights Commission aimed to blast the state/DBT purge list as garbage. What did the Post's sleuths use to hunt for felons? The DBT list. They then looked for voters who matched, by name, birthday, race and gender, "felons" among the six million Florida voters. It was DBT Lite. They failed to do even the lame cross-checks done by the state and counties.
The Post did not find "5,643 felons voted", or anything close to it. Rather, they simply had a list of common names (e.g. John Jackson) and birthdays, maybe some misdemeanor violators or felons with clemency. (Think of this: if every birthday were a city, America would have 365 cities with 750,000 people in it. How many in that city's phone book would have the name "Joe White"?)
This was just not bad journalism, it smacked of a disinformation campaign. There's good reason to suspect the motive and method of the Post's story. This is the paper, remember, that began to sniff the fake purge before the election, but then swallowed what a secret pre-election memo from the state to DBT's Bruder called the "Department of Elections News Coverage Game Plan". In that memo, discovered after the election by our researchers, the Department of Elections gloat how they got the Palm Beach Post to, "correct" their story and planted happy-talk stories in the Sun-Sentinel and other papers. ( E-mail dated June 26, 2000, from Janet Carabelli, Department of Elections, to Dee Smith, Bruder, others; obtained through Florida Open Records Act.)
The ultimate measure
And there's the ultimate test of the veracity of DBT and Post lists: the Attorney General of Florida, Bob Butterworth, told me he absolutely would prosecute anyone who illegally voted or registered. A felon voting has committed a new felony - that means jail time. The idea that 57,700 Floridians - or even 5,643 - would chance years in pokey to vote was on its face incredible. If DBT and the Post found criminals, why haven't they been arrested? Butterworth is now checking a handful, and as of this writing, has not busted one single "felon voter".
The Theft of the Presidential Election - 2004
From the Washington Post
Twisted press coverage murdered the story of ethnic cleansing of the voter rolls. But that wasn't good enough for the New York Times, Washington Post, CNN and the other keepers of the New Information Order. With other major new outlets joined together as "The Consortium", they spent a wagon-load of cash to hire the National Opinion Research Center (NORC), of the University of Chicago, to conduct what was wrongly called a "recount" of the ballots. For months they held back the results. Finally, more than a year after the election, they released their findings. "Bush would have won anyway," healdlines reassured us. So shut up, move on, get over it: the Lion of Kabul won fair and square.
Or did he? First, understand that NORC did not "recount" the ballots. Rather, its teams described each of the 180,000 ballots that Katherine Harris barred counties from including in the official total. This was the flrst count of these ballots. Second, NORC "coders" were not allowed to state the intent of the voter, merely provide physical descriptions of each ballot. They could note, in code, "Paper ballot, Gore circled," but could not count that ballot as a vote for Gore. The newspaper and television executives and editors, not the NORC experts, called the "winner" in this one.
Most Americans would have thought the news groups spent millions to found out whom Floridians wanted to vote for. That tends to be what we mean by "democracy". But the news bosses were in no mood for a democracy that threatened the legitimacy of authority, especially with a war on in Afghanistan and an economy in the toilet. So, despite the fact that NORC coders clearly found that the majority of Florida voters thought they had voted for Gore, the papers called the NORC findings for Bush. Like, huh? NORC has put its data on the web, so the Gore majority is there for all to see (for those who bother to look). The media chiefs' trick was to say that, going by various Florida rules, which knock out ballots with stray markings, Bush would have won. Well, we knew that. That's how Katherine Harris called it for Bush - on technicalities, not votes. Through this editorial three-card monte, the Republic was saved. I watched the NORC operation at first hand in Miami in February 2001. There was an Alice in Wonderland weirdness in the process - "First we announce the winner, then we count the ballots." It was not difficult to discern whom the voters wanted. "It screamed at you," said one counter. If someone circled "Gore" exactly whom do you think they wanted as president? Yet, such ballots were not included in the official count simply because of a wrongly placed or stray mark - often made by the voting machine itself, as it turns out. The Consortium members did not comment on this exclusion of tens of thousands of clearly marked ballots, which the NORC data reveal - or on the effect of this exclusion: the inauguration of the wrong person.
Still, the big theft of voting rights was not the failure to count the ballots (though that nailed the election shut), but the blocking of voters through the felon purge. It would be unfair of me to say the big-dog US papers refused to run my story. It took six months, but the Washington Post finally, cautiously, re-reported the Salon and Nation stories on the theft of the last election - and gave me a platform to warn about the theft of the next election, In "The Wrong Way to Fix the Vote" I commented:
Lord, save us from "reform". If you liked the way Florida handled the presidential vote in November, you'll just love the election reform laws that have passed since then in ten states, and have been proposed in 16 others. These laws mandate a practice that was at the heart of the Florida debacle: computer-aided purging of centralized voter files. The laudable aim is to rid registries of the names of the dead, as well as of felons and others legally barred from voting. But the likely result will be the elimination of a lot of legitimate voters and an increased potential for political mischief.
You would think other states would run from Florida's methods. But in their current legislative sessions, Colorado, Indiana, South Dakota, Texas, Virginia, Georgia, Kansas, Montana and Washington have passed bills that - while varying in specifics - would follow the Sunshine State's lead in centralizing, computerizing and cleansing voter rolls. Senator Christopher S. Bond (R-Mo.) has introduced a bill in which certain conditions in an state would trigger mandatory voter list purges.
To a large extent these bills are a response to "motor voter" legislation, which has added millions of citizens, particularly minorities, to voter registries. Since minority voters tend to be Democratic, it is not surprising that "motor voter" laws are popular among Democrats, and most of the bills attempting to purge the roles are sponsored by Republicans.
But many factors go into the ill-advised rush to reform. Take the case of Georgia. The day before the November 2000 election the Atlanta journal-Constitution and WSB-TV jointly reported that records indicated that deceased Georgians had voted 5,412 times over the last 20 years. They specifically cited one Alan J. Mandel, who apparently cast his ballot in three separate elections after his demise in 1997. Subsequently, a very live Alan J. Mandell (note the two L's) told the secretary of state that local election workers had accidentally checked off the wrong name on the list. That may or may not explain what really happened - but in the midst of the chad mania that dominated the headlines last autumn, details became less important than the newly energized drive for so-called reform.
If the reformers succeed, look out. Florida's Black-hunt purge began under the cover of the voting "reform" law passed by the state in 1998.
Here I wanted to include that the law was promoted in Florida, and pushed nationwide, by the Voter Integrity Project of Washington DC, founded by a Republican operative. Just before Bush's election, VIP presented its special Voter Integrity Award to DBT, the ChoicePoint company - at a VIP conference sponsored by: DBT. But the Post Preferred not.
I wrote more in the Washington Post about voting reform, which I won't bother you with here, because, at bottom, this story of a stolen election - the last one, the next one - is not about machines, nor computers, nor database management.
Democracy and the people who count
If the theft of the US election came down to fixing our voting machines or procedures, we could solve our problems by the means suggested last year by the Russian Duma: "Taking into consideration the growing influence of the USA upon the affairs of the world community" American presidential elections, like Haiti's and Rwanda's, should be held under the auspices of the United Nations.
The solution to democracy's ills cannot be found in computers or in banning butterfly ballots. All that stuff about technology and procedure is vanishingly peripheral to this fact: the man who lost the vote grabbed the power. I report from Europe, where simple minds think that the appropriate response to the discovery that the wrong man was elected would be to remove him from office.
So where do we turn? The Democrats' employing William Daley, son of Chicago's old Boss Daley, as their spokesman during the Florida vote count, and Al Gore's despicably gracious concession speech, show that both political parties share, though in different measure, a contempt for the electorate's will.
Two other presidential elections were nearly stolen in the year 2000, in Peru and in Yugoslavia. How ironic that in those nations, not the United States, the voters' will ultimately counted. Peruvians and Yugoslavs took to heart Martin Luther King's admonition that rights are never given, only asserted. They knew: when the unelected seize the presidential palaces, democrats must seize the streets.
I was getting myself measured for a straitjacket when I received an urgent message from Bolivia.
First let me tell you about this jacket. It was Thomas Friedman's idea. He's the New York Times columnist and amateur economist who wrote The Lexus and the Olive Tree, which is kind of a long, deep kiss to globalization.
I was about to debate with Friedman in Cleveland at a Council on World Affairs meeting last May. Globalization, he said, was all about the communications revolution. It was about the Internet. You could sit in your bedroom, buy shares in Amazon.com and send e-mails to Eskimos all at the same time, wearing your pajamas.
We were "connected" and "empowered" and "enabled". And if that wasn't cool enough by itself, globalization made economies grow. Any nation on the planet that simply took the pledge and followed the map could open the hidden gold mine. Poverty would end, and so would the tyrannies of government and every Bolivian would get their own e-mail address.
The end of world poverty! Eskimos! E-mail! I wanted this brave new future and I wanted it now! All I had to do, said Friedman, is change into something a little more form-fitting. "The Golden Straitjacket is the defining politicaleconomic garment of globalization." And, the tighter you wear it, "the more gold it produces".
Friedman was talking figuratively, of course, about the latest economic fashion, "tailored by Margaret Thatcher". Ronald Reagan, he said, "sewed on the buttons". There are about a dozen specific steps, but the key ones are: cut government, cut the budgets and bureaucracies and the rules they make; privatize just about everything; deregulate currency markets, capital markets, free the banks; open every nation's industry to foreign trade, without tariffs, and foreign ownership without limit; wipe away border barriers to commerce; let the market rule, on setting prices, on investments; cut pensions, welfare, subsidies; let politics shrink and let markets guide us.
Selling the rules is easy work; there is no dissent. OK, there were green-hairs in Seattle and Genoa and so on. As Tony Blair said, "The protests and people who indulge in the protests are completely misguided. World trade is good for people's jobs and people's living standards. These protests are a complete outrage."
But we have to forgive youth its lack of sophistication. What the kids in the street didn't know is that history's over with, done, kaput. Friedman tells us: "The historical debate is over. The answer is free-market capitalism." And whether Republicans or Democrats, Tories or New Labour, Socialists or Christian Democrats, we're all signed on, we're all laced up in our straitjackets, merely quibbling about the sleeve length.
I was about to say, "Strap me in." But, I had just received this note - an email - from Cochabamba, Bolivia. It was about Oscar Olivera, a community leader I knew through my work with Latin American labor unions. It said:
Close to 1,000 heavily armed members of the Bolivian security forces dispersed peaceful marchers with tear gas, beating them and confiscating their personal possessions.
What was the problem? Maybe the Internet was down and they couldn't unload their Amazon.com shares.
The message ended: "Oscar is missing. His whereabouts are unknown."
Something else bothered me. A large cache of documents had fallen into my hands. They came from the deepest files of the International Monetary Fund, from the desk drawers of officials at the European Commission and the World Trade Organization: Country Assistance Strategies, an Article 133 diplomatic letter, the GATS committee memos - the real stuff of globalization - from inside the organizations that dream up, then dictate, the terms of the new international economics.
In the deep pile, there was nothing about Eskimos on cell phones, but I found an awful lot about cutting Argentine pensions by 13 per cent, breaking up unions in Brazil ... and raising water prices in Bolivia, all laid out in chilling technospeak and stamped "for official use only".
The spiky-haired protesters in the streets of Seattle believe there's some kind of grand conspiracy between the corporate powers, the IMF, the World Bank and an alphabet soup of agencies which work to suck the blood of Bolivians and steal the gold from Tanzania. But the tree-huggers are wrong; the details are far more stomach-churning than they imagine. In March 2001, when Ecuador's government raised the price of domestic gas and hungry Indians burned the capital, I was reading the World Bank's confidential plan issued months before. The bank, with the IMF, had directed this 60 per cent increase in the price of domestic fuel, predicting coldly this could set the nation alight. It's as if the riots were scheduled right into the plan.
And they were, at least according to one of the only inside sources I can name, Joseph Stiglitz, former chief economist of the World Bank. "We called them the IMF riots." The riots were programmed as well as the response, what the document called "resolve" - the police, the tanks, the crackdown.
And that's what you'll find in this chapter: explication of the lists of "conditionalities" (167 for Ecuador) required by the World Bank and IMF for their loans, the unpublished proposed terms for implementing article VI.4 of the GATS treaty under the World Trade Organization; intellectual property rules under something called the "TRIPS" agreement and how this determines everything from breast cancer treatment to Dr Dre's control of rap music; and all the other dirty little facts of globalization as it is actually practiced. And you can read it in your pajamas.
Friedman ended his talk - he won't debate face-to-face, so we had to speak on separate days - by quoting with joyous approval the wisdom of Andy Grove, the chairman of Intel Corporation: "The purpose of the new capitalism is to shoot the wounded."
That day, for Oscar's sake, I was hoping Friedman was wrong.
Dr Bankenstein's Monsters: The World Bank, The IMF and the Aliens Who Ate Ecuador
So call me a liar, I was standing in front of the New York Hilton Hotel. It was during the big G7 confab in 2000, when the limousine carrying IMF director Horst Kohler zoomed by, hit a bump and out flew a report, "Ecuador Interim Country Assistance Strategy'. It was marked, 'Confidential. Not for distribution. ' You suspect that's not how I got this document, but you can trust me that it contains the answer to a very puzzling question.
Inside the Hilton, Professor Anthony Giddens explained to 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 screeching green-haired freakers outside the hotel demonstrating against the IMF had it all wrong. Globalization, Giddens seems to say, is all about giving every villager in the Andes a Nokia Internet-enabled mobile phone. (The man had obviously memorized his Thomas Friedman.) What puzzled me is why anyone would protest against this happy march into the globalized future.
So I thumbed through my purloined IMF "Strategy for Ecuador" looking for a chapter on connecting Ecuador's schools to the world wide web. Instead, I found a secret schedule. Ecuador's government was ordered to raise the price of cooking gas by 80 per cent by November 1, 2000, it says. Also, the government had to eliminate 26,000 jobs and cut real wages for the remaining workers by 50 per cent in four steps in a timetable specified by the IMF. By July 2000, Ecuador had to transfer ownership of its biggest water system to foreign operators, then Ecuador would grant British Petroleum's ARCO unit rights to build and own an oil pipeline over the Andes.
That was for starters. In all, the IMF's 167 detailed loan conditions looked less like an "Assistance Plan" and more like a blueprint for a financial coup d'etat.
The IMF would counter that it had no choice. After all, Ecuador is flat busted, thanks to the implosion of the nation's commercial banks. But how did Ecuador, an OPEC member with resources to spare, end up in such a pickle? For that, we have to turn back to 1983, when the IMF forced Ecuador's government to take over the soured private debts Ecuador's elite owed to foreign banks. For this bail-out of US and local financiers, Ecuador's government borrowed $1.5 billion.
For Ecuador to pay back this loan, the IMF dictated price hikes in electricity and other necessities. And when that didn't drain off enough cash, yet another "Assistance Plan" required the state to eliminate 120,000 workers.
Furthermore, while trying to pay down 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 I - M - F - which made liberalization of the nation's banking sector a condition of another berserker Assistance Plan. The facts of this nasty little history come from yet another internal IMF report that flew my way marked "Please do not cite." Pretend I didn't.
The IMF and its sidekick, the World Bank, have lent a sticky helping hand to scores of nations. Take Tanzania. Today, in that African state, 1.3 million people are getting ready to die of AIDS. The IMF and World Bank have come to the rescue with a brilliant neoliberal solution: require Tanzania to charge for hospital appointments, previously free. Since the Bank imposed this requirement, the number of patients treated in Dar Es Salaam's three big public hospitals has dropped by 53 per cent. The Bank's cure must be working.
The IMF/World Bank also ordered Tanzania to charge fees for school attendance, then expressed surprise that school enrolment dropped from 80 per cent to 66 per cent.
Altogether the Bank and IMF had 157 helpful suggestions for Tanzania. In April 2000, the Tanzanian government secretly agreed 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 per year by studiously following the reverse of IMF policies).
The IMF and World Bank have effectively controlled Tanzania's economy since 1985. Admittedly, when they took charge they found a socialist nation mired in poverty, disease and debt. Their neoliberal experts wasted no time in cutting trade barriers, limiting government subsidies and selling off state industries. The Bank's shadow governors worked wonders. According to Bankwatcher Nancy Alexander of Globalization Challenge Initiative (Washington), in just 15 years, Tanzania's GDP dropped from $309 to $210 per capita, literacy fell and the rate of abject poverty jumped to 51 per cent of the population.
Yet, despite this neoliberal effort, the World Bank failed to win the hearts and minds of Tanzanians for its free market game plan. In June 2000, the Bank reported in frustration, "One legacy of socialism is that most people continue to believe the State has a fundamental role in promoting development and providing social services."
It wasn't always thus. The World Bank and IMF were born in 1944 with simple, laudable mandates - to fund post-war reconstruction and development projects (the World Bank) and lend hard currency to nations with temporary balance-of-payments deficits (the IMF).
Then, beginning in 1980, the Banks seem to take on an alien form. In the early 1980s, Third World nations, haemorrhaging after the five-fold increases in oil prices and a like jump in dollar interest payments, brought their begging bowls to the IMF and World Bank. But instead of debt relief, they received Structural Assistance Plans listing an average of 114 "conditionalities" in return for capital. While the particulars varied from nation to nation, in every case the roll-over of debts dangled from edicts to remove trade barriers, sell national assets to foreign investors, slash social spending and make labor "flexible" (read, "crush your unions").
Some say the radical and vicious change in the Banks in 1980 resulted from Ronald Reagan's election that year as president, the quickening of Mrs Thatcher's powers and the beginning of the "neoliberal" (free market) ascendancy in policy. (My own information is that the IMF and World Bank were taken over by a space alien named Larry. It's obvious that "Larry" Summers, once World Bank chief economist, later US Treasury Secretary, is in reality a platoon of extraterrestrials sent here to turn much of the human race into a source of cheap protein.)
So what have the aliens accomplished with their structural assistance free market prescriptions? Samuel Brittan, Financial Times columnist and globalization knight errant, declares that new world 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 Third World survey was either socialist or welfare statist. They were developing on the "Import Substitution Model" by which locally-owned industry built through government investment and high tariffs, anathema to the neoliberals. In those dark ages of increasing national government control (1960-80) and new welfare schemes, per capita income grew 73 per cent in Latin America and 34 per cent in Africa. By comparison, since 1980, under the Reagan/Thatcher model 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 got brutish and shorter. Since 1985, in 15 African nations the total number of illiterate people has risen and life expectancy fallen - which Brittan attributes to "bad luck, [not] the international economic system". In the former Soviet states, where IMF and World Bank shock plans hold sway, life expectancy has fallen off a cliff - adding 1.4 million a year to the death rate in Russia alone. Tough luck, Russia! Admittedly, the World Bank and IMF are reforming. No longer do they issue the dreaded "Structural Assistance Plans". They now call them "Poverty Reduction Strategies". Doesn't that make you feel better?
In April 2000, the IMF reviewed the fruits of globalization. In its "World Outlook" report, the Fund admitted that, "in the recent decades, nearly onefifth of the world population have regressed. This is arguably," the IMF concedes, "one of the greatest economic failures of the 20th Century."
And that, Professor Giddens, is a fact.
It annoys me something fierce when I expose some institution and they don't respond with a complaint, comment or a lawsuit. But firom the IMF and World Bank honchos - nothing. But I hadn't looked on the tight continent, in fact, the World Bank wrote a long response to this expos and published it in an African newspaper. That was odd, but odder still, as to the wacko, destructive plan for Ecuador, they simply denied the documents existed. Figure 7 shows a page from one of the documents that don't exist.
The Globalizer Who Came in from the Cold: The IMF's Four Steps to Economic Damnation
"It has condemned people to death," the former apparatchik told me. This was like a scene out of Le Carr~. The brilliant old agent comes in from the cold, crosses to our side and in hours ordebrieflng, empties his memory of horrors committed in the name of a political ideology he now realizes has gone rotten.
And here before me was a far bigger catch than some used Cold War spy. Joseph Stiglitz was chief economist of the World Bank. To a great extent, the new world economic order was his theory come to life.
I "debriefed" Stiglitz over several days, at Cambridge University, in a London hotel and finally in Washington in April 2001 during the big confab of the World Bank and the International Monetary Fund. Instead of chairing the meetings of ministers and central bankers, Stiglitz was kept exiled safely behind the blue police cordons, the same as the nuns carrying a large wooden cross, the Bolivian union leaders, the parents of AIDS victims and the other "antiglobalization" protesters. The ultimate insider was now on the outside.
In 1999 the World Bank fired Stiglitz. He was not allowed quiet retirement; US Treasury Secretary Larry Summers, I'm told, demanded a public excommunication for Stiglitz having expressed his first mild dissent from globalization World Bank-style.
Here in Washington we completed the last of several hours of exclusive interviews for the Observer and Newsnight about the real, often hidden, workings of the IMF, World Bank and the bank's 51 per cent owner, the US Treasury.
And here, from sources unnamable (not Stiglitz), we obtained a cache of documents marked "confidential", "restricted" and "not otherwise (to be] disclosed without World Bank authorization". Stiglitz helped translate one, a "Country Assistance Strategy", from bureacratese. There's an Assistance Strategy for every poorer nation, designed, says the World Bank, after careful in-country investigation. But according to insider Stiglitz, the Bank's staff "investigation" consists of close inspection of a nation's five-star hotels. It concludes with the Bank staff meeting some begging, busted finance minister who is handed a "restructuring agreement" pre-drafted for his "voluntary" signature (I have a selection of these).
Each nation's economy is individually analyzed, then, says Stiglitz, the Bank hands every minister the exact same fourstep program.
Step 1 is Privatization - which Stiglitz said could more accurately be called "Briberization". Rather than object to the sell-offs of state industries, he said 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 per cent commissions paid to Swiss bank accounts for simply shaving a few billion off the sale price of national assets.
And the US government knew it, charges Stiglitz, at least in the case of the biggest "briberization" of all, the 1995 Russian sell-off. "The US Treasury view was this was great as we wanted Yeltsin re-elected. We don't care if it's a corrupt election. We want the money to go to Yeltzin" via kick-backs for his campaign.
Stiglitz is no conspiracy nutter ranting about Black Helicopters. The man was inside the game, a member of Bill Clinton's cabinet as chairman of the president's Council of Economic Advisers.
Most ill-making for Stiglitz is that the US-backed oligarchs stripped Russia's industrial assets, with the effect that the corruption scheme cut national output nearly in half, causing depression and starvation.
After briberization, Step 2 of the IMF/World Bank one-size-fits-all rescueyour-economy plan is "Capital Market Liberalization". In theory, capital market deregulation allows investment capital to flow in and out. Unfortunately, as in Indonesia and Brazil, the money simply flowed out and out. 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 per cent, 50 per cent and 80 per cent.
"The result was predictable," said Stiglitz of the hot money tidal waves in Asia and Latin America. Higher interest rates demolished property values, savaged industrial production and drained national treasuries.
At this point, the IMF drags the gasping nation to Step 3: Market-Based Pricing, a fancy term for raising prices on food, water and domestic gas. This leads, predictably, to Step 3-1/2: what Stiglitz calls "The IMF riot."
The IMF riot is painfully predictable. When a nation 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" - as when the IMF eliminated food and fuel subsidies for the poor in Indonesia in 1998. Indonesia exploded into riots, but there are other examples - the Bolivian riots over water prices in April 2000 and, in February 2001, the riots in Ecuador over the rise in domestic gas prices imposed by the World Bank. You'd almost get the impression that the riot is written into the plan.
And it is. Stiglitz did not know about the documents the BBC and the Observer obtained from inside the World Bank, stamped over with those pesky warnings "confidential", "restricted", "not to be disclosed". Let's get back to the "Interim Country Assistance Strategy" for Ecuador. In it the Bank several times states - with cold accuracy - that they expected their plans to spark "social unrest", to use their bureaucratic term for a nation in flames.
That's not surprising. The secret report notes that the plan to make the US dollar Ecuador's currency has pushed 5 1 per cent of the population below the poverty line. The World Bank "Assistance" plan simply calls for facing down civil strife and suffering with "political resolve" - and still higher prices.
The IMF riots (and by riots I mean peaceful demonstrations dispersed by bullets, tanks and tear gas) cause new panicked flights of capital and government bankruptcies. This economic arson has its bright side - for foreign corporations, who can then pick off remaining assets, such as the odd mining concession or port, at fire sale prices.
Stiglitz notes that the IMF and World Bank are not heartless adherents of market economics. At the same time the IMF stopped Indonesia "subsidizing" food purchases, "when the banks need a bail-out, intervention [in the market] is welcome". The IMF scrounged up tens of billions of dollars to save Indonesia's financiers and, by extension, the US and European banks from which they had borrowed.
A pattern emerges. There are lots of losers in this system, but one clear winner: the Western banks and US Treasury, making the big bucks from this crazy new international capital churn. Stiglitz told me about his unhappy meeting, early in his World Bank tenure, with Ethiopia's new president in the nation's first democratic election. The World Bank and IMF had ordered Ethiopia to divert aid money to its reserve account at the US Treasury, which pays a pitiful 4 per cent return, while the nation borrowed US dollars at 12 per cent to feed its population. The new president begged Stiglitz to let him use the aid money to rebuild the nation. But no, the loot went straight off to the US Treasury's vault in Washington.
Now we arrive at Step 4 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 nineteenth century, Europeans and Americans today are kicking down the barriers to sales in Asia, Latin American and Africa, while barricading their own markets against Third World agriculture.
In the Opium Wars, the West used military blockades to force open markets for their unbalanced trade. Today, the World Bank can order a financial blockade that's just as effective - and sometimes just as deadly.
Stiglitz is particularly emotional over the WTO's intellectual property rights treaty (it goes by the acronym TRIPS, of which we have more to say later in this chapter). it is here, says the economist, that the new global order has dt condemned people to death" by imposing impossible tariffs and tributes to pay to pharmaceutical companies for branded medicines. "They don't care," said the professor of the corporations and bank ideologues he worked with, "if people live or die."
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. In fact, said Stiglitz, the IMF requires nations to accept trade policies more punitive than the official WTO rules.
Stiglitz's greatest concern is that World Bank plans, devised in secrecy and driven by an absolutist ideology, are never open for discourse or dissent. Despite the West's push for elections throughout the developing world, the so-called Poverty Reduction Programs "undermine democracy". And they don't work. Black Africa's productivity under the guiding hand of IMF structural "assistance" has gone to hell in a handbag.
Did any nation avoid this fate? Yes, said Stiglitz, identifying Botswana. Their trick? "They told the IMF to go packing."
So then I turned on Stiglitz. OK, Mr Smart-Guy Professor, how would you help developing nations? Stiglitz proposed radical land reform, an attack at the heart of "landlordism", on the usurious rents charged by the propertied oligarchies worldwide, typically 50 per cent of a tenant's crops. So I had to ask the professor: as you were top economist at the World Bank, why didn't the Bank follow your advice?
"If you challenge [land ownership], that would be a change in the power of the elites. That's not high on their agenda." Apparently not.
Ultimately, what drove him to put his job on the line was the failure of the banks and US Treasury to change course when confronted with the crises - failures and suffering perpetrated by their four-step monetarist mambo. Every time their free market solutions failed, the IMF simply demanded more free market policies.
"It's a little like the Middle Ages," the insider told me. "When the patient died they would say, 'Well, he stopped the bloodletting too soon; he still had a little blood in him'."
I took away from my talks with the professor that the solution to world poverty and crisis is simple: remove the bloodsuckers.
Joe Stiglitz survived his sacking from the World Bank and complaints about our interviews. In September 2001, he was awarded the Nobel Prize in Economics. A version of this story was first published as 'The IMFs Four Steps to Damnation' in the Observer and another version in the Big Issue - that's the magazine that the homeless flog outside London tube stations. Big Issue offered equal space to the IMF, whose "deputy chief media officer' wrote:
... I find it impossible to respond given the depth and breadth of hearsay and misinformation in [Palast's] report.
Of course it was difficult for him to respond. The so-called 'misinformation" came from the unhappy lot inside the Deputy Chiers own agency and the World Bank; unhappy whistleblowers who also quietly provided me with key intelligence for the next story.
New British-American Empire of the Dammed
In April 2000 the front pages of British newspapers were splattered with photos of two dead white farmers in Zimbabwe. The news from Bolivia - "Protests claim two lives' - was pushed into a teeny 'World in Brief' in the Guardian. (In US papers Bolivia vanished, replaced by Monica Lewinsky's dress.) What a shame. The Zimbabwe murders merely exercised a suppressed nostalgia for England's imperial past. But Bolivia is the story of Britain (and America's) imperial future.
First, let's correct the arithmetic. The count in Bolivia was six dead, 175 injured including two children blinded after the military fired tear gas, then bullets, at demonstrators opposing the 35 per cent hike in water prices imposed on the city of Cochabamba by the new owners of the water system, International Waters Ltd (IWL) of London.
Following the Cochabamba killings, Hugo Banzer (once Bolivia's dictator, then the elected president) declared a nationwide state of siege, setting curfews and abolishing civil liberties. On April 12, 2000, just after the martial law declaration, World Bank Director James Wolfensohn took time out from his own preparations against protests in Washington to comment to reporters, "The riots in Bolivia, I'm happy to say, are now quieting down."
I contacted Oscar Olivera, leader of the Cochabamba protests, to ask him how he organized the riots. On April 6, following the first protests against the price increases, Olivera, a trade union official, with a coalition of 14 economists, parliamentarians, lawyers and community leaders, accepted a government invitation to discuss the IWL price hikes. After entering the government offices in Cochabamba, Olivera and his colleagues were arrested. With Olivera in chains, the riot outside the building could only have been directed by the leader of the 500 protesters, Cochabamba's Roman Catholic archbishop. There is, of course, the possibility that the World Bank's Wolfensohn had it wrong, and that what he calls rioters were in fact innocent victims of deadly repression. Olivera, one of five protest leaders released (the government banished the 17 others to internal exile), flew to Washington to try to speak with Wolfensohn. But the director is a busy man and Olivera left without a meeting.
Never heard of International Water Limited (IWL)? Like many of Britain's multinationals, it is controlled by a larger US corporation - in this case, construction giant Bechtel of San Francisco.
From its US headquarters, Bechtel issued a statement flatly denying the upheaval in Bolivia had anything to do with its water price hikes. Rather, IWL's American owner hinted darkly that the revolt was partly the work of those opposing a "crackdown on coca-leaf production". Olivera responds that neither he nor the archbishop traffics in narcotics.
The price hikes that triggered the water war were driven by IWL's need to recover the cost of the huge Misicuni Dam project. Water from the Misicuni Dam system costs roughly six times that of alternative sources. Why would IWL buy water from a ludicrously expensive source? Just possibly because IWL owns a part of the Misicuni Dam project.
The public had one other objection with IWL's charging for the dam project: there is no dam. It has not yet been built.
Now, it is a basic tenet of accounting that investors, not customers, fund capital projects. The risk-takers then recover their outlay, with profit, when the project produces a product for sale. This is the heart, soul and justification of the system called "capitalism". That's the theory. But when a monopoly operator gets its fist round a city's water spigots, it can pump the funds for capital projects (even ones that cost 600 per cent over the market) from captive customers rather than its shareholders.
Samuel Soria, the Bolivian government's former consultant on the water projects, said he was unable to extract from IWL evidence it had put in any funds at all into the operation. Soria, chairman of Cochabamba's Council of Economists, was told the water system's purchasers had deposited $10 million into a Citibank account in New York, but Soria found no evidence of its transfer to Bolivia. Water prices, he fears, could eventually rise 150 per cent under IWL management.
"No money was shelled out by anybody" for the water company, Luis Bredow, the editor of Cochabamba's newspaper Gente [People], told me. Bredow's own investigation concluded that the operators grabbed the entire system for nothing. He attributes these exceptionally favorable terms to IWL's partnering with former Bolivian president Jaime Pasamora, leader of a political party allied to Banzer.
I contacted IWL's London spokesman who said little more than, "How did you find out that IWL was involved in Cochabamba?" (The company's Bolivian group is called Aguas de Tunari.) In fact, the British company's involvement is getting to be, to use Bredow's term, "misterioso". President Banzer, to quell the spreading demonstrations, announced cancellation of the water privatization on April 5.
A day later, word leaked that IWL was back in the saddle at the water company and people took to the streets again, nationwide. On April 10, the panicked government declared that the foreign consortium had "abandoned" their franchise when its British CEO supposedly fled the country. But I was able to track down the IWL executive to a La Paz hotel where, his associates told me, they were about to open negotiations with the Banzer government.
It can't be said that the British-American operators brought misery to Cochabamba; they found plenty already there. Intestinal infections leading to diarrhoeal illness is Bolivia's number one disease and child killer, the result of water hookups and sanitation reaching only 31 per cent of rural homes.
World Bank Director Wolfensohn has a solution to the lack of water: raise the price. So pay up, Wolfensohn demanded of the protesting Bolivian water users in his extraordinary April 12 diatribe against the "rioters" .
Wolfensohn's shut-up-and-pay-up outburst contradicts the internal counsel of his own experts. In July 1997, at a meeting in Washington, the Bank's technocrats laid out to the Bolivians the case against Misicuni and even warned about social upheaval if prices rose. According to World Bank insiders (I won't get them fired by using their names), the Bank's hydrologists and technicians devised a water plan for Cochabamba at a fraction of Misicuni's bloated cost. This alternative could be paid off without raising prices on current customers. Water supply and distribution would be divided between two companies to avoid the kind of self-dealing inherent in IWF's Aguas de Tunari set-up.
So why did Wolfensohn attack protests against a project the World Bank itself found dodgy and damaging? There are larger plans not discussed with the Bank's low-level minions. Long before ministerial limousines clogged the US capital for the April 2000 World Bank "Ministerial" meeting, the big policy decisions were settled in far-flung "sectoral" meetings. In the case of water, nearly 1,000 executives and bureaucrats gathered in The Hague in March 2000 to review and refine a program to privatize the world's water systems.
But these private operators who carved up the planet into "market segments" in March can only turn in profits if prices rise radically and rapidly. IWF secured from Bolivia a 16 per cent real guaranteed return. This profit boost itself was enough to account for the initial 35 per cent hike in rates. The ransacking of Bolivia's water supply would not have occurred without a bit of helpful arm-twisting by the World Bank.
The IMF, World Bank and Inter-American Development Bank have written water system sell-offs into what they modestly term "master plans" for each Latin American nation. Consortia such as IWL were formed to capture these cast-off public assets.
The IMF and World Bank justify the sell-offs by claiming that privateers are committed to deliver capital for desperately needed water system repairs and expansion. But like a gigolo's flowers, the promises rapidly wilted. Cochabamba's protest organizers knew that just across the border in Buenos Aires, the region's first privatization consortium eliminated 7,500 workers, the system bled from lack of maintenance and prices jumped, repeating the story of virtually every water privatization from the Philippines to East Anglia. In Argentina, the new owners of the Buenos Aires system include, notably, the World Bank itself.
Britain is re-establishing imperial reach, albeit in the shadow of Americans, through rapid low-capital takeovers of former state assets, concentrated in infrastructure where monopoly control virtually guarantees outsized profit. From the British Gas takeover of the Sao Paolo, Brazil, gas company to United Utilities' buy-out of the Manila water company, it all seemed a riskless romp - until a few thirsty, angry peasants in the Andes decided they could stop the New Imperium in the streets.
Bolivia vanishes: see Style section
You didn't read this story about the killings in Bolivia in your newspaper? Come now, it was right there in the Washington Post ... in paragraph 10 of the story on page 13 of the Style section. I kid you not: the Style section. It dangled from the bottom of a cute little story on the lifestyle of some local anti-WTO protesters.
And so one of the most extraordinary international stories of the year just went PFZZZT! - and disappeared from sight.
Some vital stories get buried because they fail the "sex" test of hot photos or have no domestic news hook. But Bolivia had it all. Networks could obtain high-quality video footage of the military gunning down civilians. At the center of this story were huge American and British corporations, including Bechtel of San Francisco. Most important, this general strike in South America offered a dramatic and bloody parallel to protests in Washington occurring on the very same days. By any normal news measure, this was a helluva story of globalization stopped dead in its tracks ... all while the McDonald's burned in Washington.
When Wolfensohn, president of the World Bank, called the massacred protesters "rioters" he was hoping to discourage the press from writing sympathetically about the Bolivians. He need not have worried. There was nothing on the tube; and aside from the mention in the Post's Style section and a few news wire paragraphs in the New York Times, for the mainstream media, the Bolivians simply vanished.
However, the little bit of coverage obtained was actually worse than none. The Financial Times sent a reporter to Bolivia. The lead paragraph of his report informed us that on the wall of the protesters' headquarters hung "faded portraits of Che Guevara and Fidel Castro". There was no mention at all that six people had died.
The FT reporter, who should know better, picked up the line that drug traffickers were somehow behind the water protests. The fanciful accusation was put out on a Bechtel Corporation news release, but hey, a corporate press release is better than a fact.
Bolivians themselves were also denied the full story, but by more direct means. The courageous editor of the Bolivian newspaper Gente published an investigative series exposing the sweetheart deals between the US-European investors and politically connected Bolivians. At the end of April, Gente's publishers, admitting to threats of financial ruin by the water system's Bolivian partners, demanded that their editor, Luis Bredow, print a retraction of his reports. Instead, Bredow printed his resignation.
As to the Cochabamba protest leader Oscar Olivera, his release was secured by an international campaign (more than once - he has been arrested three times). That was good news, then I received this.
IN A MESSAGE DATED 9/5/00 9:29:32 AM EASTERN DAYLIGHT
TIME, SENDER WRITES:
SUBJECT HEADING: BOLIVIA DEAD
ON THE AFTERNOON OF SATURDAY APRIL 8TH 17 YEAR OLD VICTOR HUGO DAZA WAS
KILLED BY A SHOT THROUGH HIS FACE. A FRIEND OF MINE KNOWS HIS FAMILY AND SAYS
HE WAS IN TOWN RUNNING AN ERRAND FOR HIS MOTHER.
Who Shot Argentina? The Fingerprints on the Smoking Gun Read "IMF"
In August 2001, 1 received the sad news that Argentina had died, or at least its economy. Officially, unemployment hit a grim 16 per cent - unofficially another quarter of the workforce was either unpaid, locked out or getting too little to survive on. Industrial production, already down 25 per cent hallway through the year, fell into a coma induced by interest rates which, by one measure, have jumped to over 90 per cent on dollar-denominated borrowings.
This was an easy case to crack. Next to the still warm corpse of Argentina's economy, the killer had left a smoking gun with his fingerprints all over it. The murder weapon: "Technical Memorandum of Understanding", dated September 5, 2000. It was signed by Pedro Pou, president of the Central Bank of Argentina for transmission to Horst Kohler, Managing Director of the International Monetary Fund.
I received a complete copy of the "Understanding" along with attachments and a companion letter from the Argentine Economics Ministry to the IMF from ... well, let's just say the envelope had no return address.
Close inspection leaves no doubt that this "Understanding" fired the fatal bullets into Argentina's defenseless body. To begin with, the Understanding required Argentina cut the government budget deficit from US$5.3 billion in 2000 to $4.1 billion in 2001. Think about that. That September, Argentina was already on the cliff-edge of a deep recession. Even the half-baked economists at the IMF should know that holding back government spending in a contracting economy is like turning off the engines on an aeroplane in stall. Cut the deficit? As my four-year-old daughter would say, "That's stooopid."
Later, as the economy's wings fell off, the IMF brains trust ordered the elimination of the deficit, causing the economy to implode.
The IMF is never wrong without being cruel as well. And so we read, under the boldface heading "Improving the Conditions of the Poor", agreement to drop salaries under the government's emergency employment program by 20 per cent, from $200 a month to $160.
But you can't save much by taking $40 a month from the poor. For further savings, the Understanding also promised, "a 12-15 percent cut in salaries" of civil servants and the "rationalization of certain privileged pension benefits".
In case you haven't a clue what the IMF means by "rationalization", it means cutting payments to the aged by 13 per cent under both public and private plans. Cut, cut, cut in the midst of a recession. Stooopid.
Salted in with the IMF's bone-head recommendations and mean-spirited plans for pensioners and the poor are economic forecasts that border on the delusional. In the Understanding, the globalization geniuses projected that, if Argentina simply carried out their plans to snuff consumer spending power, somehow the nation's economic production would leap by 3.7 per cent and unemployment decline. In fact, by the end of March 2001, the nation's GDP had already dropped 2.1 per cent below the year earlier mark, and has nosedived since.
What on earth would induce Argentina to embrace the IMF's goofy program? The payoff was an $8 billion aid package put together by the IMF, World Bank and private lenders.
But there is less to this generosity than meets the eye. The Understanding also assumed that Argentina will continue to "peg" its currency, the peso, to the dollar at an exchange rate of one to one. The currency peg doesn't come cheap. American banks and speculators have been charging a whopping 16 per cent risk premium above normal in return for the dollars needed to back this currency scheme.
Now do the arithmetic. On Argentina's $128 billion in debt, normal interest plus the 16 per cent surcharge by lenders comes to about $27 billion a year. In other words, Argentina's people don't net one penny from the $8 billion loan package. None of the bail-out money escapes New York where it lingers to pay interest to US creditors holding the debt, big fish like Citibank and little biters like Steve Hanke.
Hanke is president of Toronto Trust Argentina, an "emerging market fund" which loaded up 100 per cent on Argentine bonds during the last currency panic, in 1995. Cry not for Steve, Argentina. His annual return that year of 79.25 per cent put the fund at the top of the speculation league table.
Hanke profits by betting on the failure of IMF policies. But "vulture" investing is merely Hanke's avocation. In his day job as professor of economics at Johns Hopkins University, Maryland, he generously offers straightforward advice to end Argentina's woe, although his recommendation would put him out of the speculation game: "Abolish the IMF."
To begin with, Hanke would do away with the "peg" - that 1 peso for 1 dollar exchange rate - which has proved a meat-hook on which the IMF hangs Argentina's finances.
But it's not the peg itself that skewers Argentina. The peg causes suffering only when combined with the Four Horsemen of IMF neoliberal policy: liberalized financial markets, free trade, mass privatization and government surpluses.
"Liberalizing" financial markets means allowing capital to flow freely across a nation's borders. Indeed, since liberalization, the capital has flowed freely, with a vengeance. Argentina's panicked rich have dumped their pesos for dollars and sent the hard loot to investment havens abroad. In June 2001 alone, Argentinians withdrew 6 per cent of all bank deposits.
Once upon a time, Argentina's government-owned national and provincial banks supported the nation's debts. But in the mid-1990s, the government of Carlos Menem sold these off to Citibank of New York, Fleet Bank of Boston and other foreign operators.
I spoke with Charles Calomiris, a former World Bank adviser, who describes these bank privatizations as a "really wonderful story". Wonderful for whom? Argentina has bled out as much as $750 million a day in hard currency holdings.
There's more cheer for creditors in the Understanding, including "reform of the revenue sharing system". This is the kinder, gentler way of stating that the US banks will be paid by siphoning off tax receipts earmarked for education and other provincial services. The Understanding also finds cash in "reforming" the nation's health insurance system.
But when cut cut cut isn't enough to pay the debt holders, one can always sell "las joyas de mi abuela", grandma's jewels, as journalist Mario del Cavril describes his nation's privatization scheme. The French picked up a big hunk of the water system and promptly raised charges in some towns by 400 per cent.
The Understanding's final bullet is the imposition of "an open trade policy". This puts Argentina's exporters, with their products priced via the "peg" in US dollars, into a pathetic, losing competition against Brazilian goods priced in a devaluing currency. Stooopid.
Still, in the IMF's tiny minds their scheme could work. All that is required is a "flexible" workforce, willing to bend to lower pensions, lower wages or no wages at all. But, to the dismay of Argentina's elite, the worker bees are proving inflexibly obstinate in agreeing to their own impoverishment,
One inflexible worker, Anibal Veron, a 37-year-old father of five, lost his job as a bus driver; his company owes him nine months' pay. Veron joined the "piqueros", the angry unemployed who blockade roads (39 blockades in August 2001 alone). In clearing a blockade in November, he was killed with a bullet to the head, allegedly by the military police. The death in Genoa of anti-globalization protester Carlo Guiliani was page 1 news in the US and Europe. Veron's death was page 0. It took our top researcher, Oliver Shykles, two days just to find Veron's name. Nor did you read about Carlos Santilldn, 27, or Oscar Barrios, 17, gunned down in a church courtyard in Salta Province when the police fired on a protest against the IMF austerity plan.
Globalization boosters like Tony Blair prefer to portray resistance as a lark of pampered Western youth curing their ennui by "indulging in protest, misguided" by naive notions. The media plays to this theme, focusing on the white kids marching in Genoa, but not the 80,000 in the streets of Buenos Aires in May 2000, or the general strike honoured by seven million Argentine workers in June 2000.
In Argentina, President Fernando de la Rua blames violence on the protesters. But the Peace and justice Service (SERPAJ) charges de la Rua's government with using hunger and terror to impose the IMF plans. I reached SERPAJ leader Adolfo Perez Esquivel in Buenos Aires. He told me he is documenting cases of torture of protesters by police in the town where Santilldn and Barrios died. To Perez Esquivel (who won the Nobel Peace Prize in 1980) repression and IMF "liberalization" are handmaidens. He told me he has just filed a complaint charging police with recruiting children as young as five into paramilitary squads, an operation he compares to the Hitler Youth.
But Perez Esquivel, who led protests against the Free Trade Agreement of the Americas, doesn't agree with my verdict against the IMF in Argentina's death. He notes that the economically fatal "reforms" are embraced with enthusiasm by the nation's finance minister, Domingo Cavallo, best remembered as the head of the central bank during the military dictatorship. For the ageing pacifist, that suggests that the untimely demise of the nation's economy wasn't murder, but suicide.
Bad Trips at the WTO
In July 2000, the New York Times reported that Bill Clinton had saved Africa. That big-hearted lug proposed lending African nations a billion dollars a year for AIDS drugs which - more joy! - the pharmaceutical companies have agreed to just give away at 75 per cent off list price.
But just when I thought I could announce Christmas in July, I came into possession of a twelve-page document from Argentina. It appears to have originated in the Office of the United States Trade Representative in Geneva (which does not deny the document's authenticity). The confidential official missive threatened Argentina for opening its borders to the drugs trade - not the fun stuff, but sales of legal, licensed medicines. If Argentina does not end its commitment to free crossborder trade in pharmaceuticals, wrote the US Trade Rep, America would keep Argentina on the "Section 301 Watch List", a kind of death row for trading partners.
If you read the gospels of globalization apostles, you might get the impression that the World Trade Organization is all about doing away with tariffs and trade barriers. Only in your dreams. In the real world, the WTO is the mechanism for privatizing the tariff system. Once, countries protected their workers and local industry behind taxes at national borders. In the new world trade order, global corporations may demand levies against nations which sell or buy products outside the zones they have marked out by brand names and market segments. The WTO's penal system for prohibited importing and exporting goes under the psychedelic title TRIPS (Trade-Related Intellectual Property Rights).
TRIP-ing, Argentina and Africa - it all fits together. The story begins with this un-fun fact: 25.3 million people in Southern Africa are going to die of AIDS unless medicine arrives now. Luckily, Brazil, India and, most aggressively, Argentina can make the drugs dirt cheap and ship them to the dying. But US, British and Swiss pharmaceuticals giants howled about the proposed crossshipments. The US trade cops, led by then Vice-President Al Gore, backed by Big Pharma, halted the life-saving plan - Nelson Mandela's pleas, Nobel Prize and flowered shirts notwithstanding.
Unfortunately for Gore, running for president at the time, his let-them-eataspirin policies resulted in his every campaign stop attracting packs of enraged Gay-mericans, who hollered about his killing more Africans than Michael Caine in Zulu. This did not make good TV for Al. So his buddy President Bill found a few billion to quell the restless natives.
However, the billions come with strings attached or, more accurately, chains and manacles. South Africa must buy 100 per cent of the medicine from the US and pay back all the cash at "commercial interest rates".
The US Trade Rep's poison pen letter to Argentina is the supply side of this scheme to stop South Africa breaking the de facto embargo on free trade in pharmaceuticals. South Africa hoped to use a loophole in TRIPS which permits importing of patent drugs in extreme emergencies, even without the patentholders' approval. Initially, the US retaliated against South Africa by taxing some of its imports to the US - until the anti-Gore demos. The US Trade Rep's threat against Argentina indicates that the Clinton administration re-aimed the sanctions missiles at Argentina to avoid the impolitic Mandela imagery while cutting off South Africa's AIDS drugs supply at the source.
If Argentina didn't back down, this would have happened: after an expected WTO show trial, Argentina's economy would be hung from a pole in Geneva as an example for India and Brazil, other potential exporters.
Maybe I'm not being fair. After all, TRIPS seeks to protect and compensate manufacturers for their risky investments and inventiveness in creating medicines like AZT, Glaxo-Wellcome's anti-AIDS drug.
Glaxo was inventive, all right, but not in discovering AZT. A professor, Jerome Horowitz, synthesized the drug in 1964, under a grant from the US government's National Institutes of Health (NIH). A Glaxo unit bought the formula to use on pet cats.
In 1984, an NIH lab discovered the HIV virus. The government lab urgently asked drug makers to send samples of every anti-retrovirus drug on their shelves. NIH spent millions inventing a method to test these compounds. When the tests showed AZT killed the virus, the government asked Glaxo, as the compound's owner, to conduct lab tests.
Glaxo refused. You can't blame them. HIV could contaminate labs, even kill researchers. So the NIH's Dr Hiroaki Mitsuya, combining brilliance, bravery and loads of public cash, performed the difficult proofs on live virus. In February 1985, NIH told Glaxo the good news and asked the company to conduct human trials.
Glaxo refused again. Here's where Glaxo got inventive. Within days of the notice, the company filed a patent in Britain for its "discovery". Glaxo failed to mention the US government work.
But Glaxo has a heart. The Americo-British behemoth announced it would sell South Africa an AZT-based drug for only $2 a day per patient, more than 75 per cent off the price charged in America and Europe. I called Glaxo USA to say thanks but, after a few questions, it became clear that the $2 price merely matched the Brazilian/Argentine prices, still about triple the cost of production.
Think about that. If $2 is the free market price, then Americans and Europeans pay 400 per cent over the odds, price discrimination explicitly protected by TRIPS. That's the funny thing about the WTO's expansion of socalled intellectual property rights. TRIPS trade barriers are sold in the West on the slick line that those people- the dark, unindustrious tribes of the southern hemisphere - are trying to steal our inventions. In fact, says expert Jamie Love of the Consumer Project on Technology in Washington, Western patients have as much to lose as Africans under the new regime of thought ownership.
This came to Love graphically in 1997 when Maude Jones, a 30-year-old London woman, called him, begging help to obtain Taxol. The drug could have cured her breast cancer, but the National Health Service did not prescribe it because of its stratospheric cost.
There is no patent on Taxol. The US government discovered it. But pharmaceutical behemoth Bristol-Myers Squibb, because it performed minor work calculating dosage levels, holds the intellectual property rights on dose-related data, even though the data were originally collected by government. Even without a patent, Britain's data protection laws give BristolMyers lock-up control on Taxol in the UK for ten years.
Bristol-Myers takes no chances with its cancer monopoly. Taxol comes from the yew tree. While Western drug companies have long argued that Asian rain forest plants are theirs for the taking without paying royalties, Bristol-Myers obtained from Congress the exclusive right to harvest yew trees on US government lands, about the only place it grows on the planet. For these public assets, B-M paid nothing. But Maude Jones paid. Ultimately, the company was shamed into offering her the medicine for free, if she moved to America. However, doctors concluded the offer was probably too late. As her family already faced bankruptcy, Maude (not her real name) phoned Love to say she had chosen to die.
From her death, Love told me the young woman hoped South Africans, Americans and Europeans would discover "a helpful solidarity". In AIDS and breast cancer, the stricken North and South share a horrific commonality as the new landless peasantry in the apartheid of intellectual property rights.
Dr Dre Guards Sony's Plantation House
The Doctor didn't mince words with me. 'Now shut the fuck up and get what's coming to you!' In my exchange with Endre Young, the artist known as Dr Dre, this was the example he gave of his copyright intellectual property, which he fears is reproduced, without compensation, by ne'er-do-wells accessing www.napster.com,
Mr Young filed suit and a California judge, to protect this gentleman beset by copyright pirates, effectively ordered Napster's closure. Mr Young was philosophical about the ruling, "I'm in a murderous mind-state with a heart full of terror. "
Yo, what's going on here? Behind the angry black face of the rapper's assault on Napster are the grinning white faces of his co-plaintiffs, Recording Industry Association of America, front for the Big Six record companies - Sony, EMI, BMG, Universal, Warner and Polygram. Together, these six media megaliths distribute over 95 per cent of all music CDs sold in the Western world. Behind their public tears shed for compensating their artists - and since when did that become a concern of the music industry? - is the deeper agenda of protecting this musical OPEC.
According to consent decrees in little noticed cases filed by the US Federal Trade Commission, the Six Bigs have for years bullied retailers to ensure that you get whacked for $36 for that Abba Tribute CD you just had to have.
Now let's look at the B-side of the recording industry combine. As Bill Gates teaches us, a well-functioning monopoly fleeces its customers at one end while simultaneously squeezing suppliers at the other. In the case of the music cartel, the suppliers of raw material - the musicians - have to get through one of six tightly guarded gateways. (The six companies distribute 95 per cent of all CDs in the Western world.) As a result, the only stuff that makes it out the other end of these resistant sphincters onto the airwaves and into the big stores are Spicebunnies, Eric Clapton de-plugged, pre-fabricated bad boys like Eminem and middle-aged moguls' talent-free trophy wives (which should not be taken as a dig at the gifted Mariah Carey). In other words, the Big Six don't just control how you buy what you want, they tell you what you want.
It used to be that industry's inputs, the talent, railed against this closed system. That's where Dre's posse comes in. His tinker-toy "ganstas" give street cred to the moguls' assault on the Internet, the first serious alternative route for distributing music Time-Warner hasn't chosen for you. The system suits rap producer Dre just fine as the cartel allows him and Puff Daddy to jointly lock out musicians that could replace them or the artists in their stable, such as Mr Marshall Mathers (Eminem), author of the "get what's coming to you" lyric. Dre's no fool. He knows that control of his little patch is dependent on his defending his bosses' intellectual property plantation.
Dre v. Napster is the musical sideshow of the bigger war over ownership of intellectual property, ranging from ditties to DNA. In my prior story, I described how the Clinton administration blocked South Africa's purchasing of low-cost drugs to stem the spread of AIDS. To protect the right of Glaxo-Wellcome plc to embargo cross-border sales of AZT that did not meet the company's terms, Clinton threatened South Africa with trade sanctions under the World Trade Organization's TRIPS rules.
I am pleased to report that one nation has finally displayed the huevos to stand up to America's bully-boy enforcement of WTO diktat: the US Congress voted, and Bush may have to sign, America's unilaterally exempting itself from TRIPS. US retailers will be free to import any cheap drugs they desire from Canada and Mexico though the legal patent holders may howl and bray. Ah, the privileges of empire. And when "intellectual property rights" threatens US privileges, suddenly WTO rules don't apply.
When Nelson Mandela suggested that South Africa could issue "compulsory licences" for local manufacture of cheap AIDS drugs, Al Gore threatened him with the WTO hammer. Yet, at the same time, at the behest of the "GoreTechs", Al's Silicon Valley billionaire buddies from AOL and Oracle, the US Justice Department compelled Microsoft to divulge its proprietary codes and license Windows software to the Gore-Techs at a government-capped price. Hey, I'm all for the US seizure of Gates's intellectual property, but I can't ignore the rank whiff of hypocrisy.
But then, hypocrisy is the oxygen of the new imperial order of thought ownership. Every genteel landlord of fenced-in intellectual real estate began life as a thief. Under WTO and US law today, how many products built on ideas of others could never have made it to market? (I bet Mr Gates, so quick to shout "piracy!" could name two products that depend heavily on lifting the intellectual discoveries of others: MS-DOS and Windows.) As Isaac Newton would say now, "If I see further than others, it is because I stand on the shoulders of giants too dumb to patent their discoveries."
Not everyone is entitled to compensation. The WTO requires, on penalty of sanctions, that every nation pass laws granting patents on "life-forms", by which Americans and Europeans mean genetically modified Frankenstein seeds or drugs, often remakes of traditional genomes shoplifted from Third World forests. When Thailand mischievously registered traditional medicines as that nation's intellectual property, the US Trade Representative wrote that turning nature's bounty into patent property could "hamper medical research" (reinforcing the notion that Americans are incapable of irony).
WTO is sold as the defender of unfettered markets. But Lori Wallach of Ralph Nader's Global Trade Watch notes that WTO's TRIPS exists to prevent free trade. No pharmaceutical or media magnate has to suffer lectures, as do workers who lose their jobs to uncontrolled imports, that sales lost to open borders will benefit them in the long run.
As the Napster case shows, the new expansion of intellectual property rights has little to do with compensation for the creator and everything to do with corporate control.
Still, shouldn't originators receive remuneration? Well, Dr Dre swears his touching soliloquies about his piteous "bitch mama" are taken from The Streets. Has he sent royalty checks to the brothers?
I confess I never interviewed Dre. He didn't return my call. But the words quoted here are, unarguably, his intellectual property, and I wish to compensate him. I want to make sure that you, Dre - and Sony and Microsoft and Glaxo-Wellcome get what's coming to you.
After I printed this fantasy interview with Dre I received this bitchy little note from record company BMG.
You assert that six companies dominate the industry. [Due to] takeovers, there is [sic] currently five, and will soon be four when Warner and EMI merge.
The industry spokesman avers that my error should convince readers that there is no monopoly control of the market.
I stand corrected.
GATS Got His Tongue
Secret trade treaty documents reveal the shark hidden in the free trade swimming pool ...
When Churchill said, "democracy is the worst form of government except all the others," he simply lacked the vision to see that, in March 2001, the WTO would design a system to replace democracy with something much better - Article VIA of GATS.
Some months ago, an extraordinary document, dated March 19, 2001, marked "confidential", came through my fax machine from the WTO Secretariat. This unassuming six-page memo the WTO modestly hid away in secrecy may one day be seen as the post-democratic Magna Carta. It contained a plan to create an international agency with veto power over parliamentary and regulatory decisions.
The memo begins with considering the difficult matter of how to punish nations that violate "a balance between two potentially conflicting priorities: promoting trade expansion versus protecting the regulatory rights of governments".
Think about that. For a few centuries Britain, America and now almost all nations have relied on elected parliaments, congresses, prime ministers and presidents to set the rules. It is these ungainly deliberative bodies that "balance" the interests of citizens and businesses.
Now kiss that obsolete system goodbye. Once nations sign on to the GATS, Article VIA, called The Necessity Test, will kick in. Then, per the Secretariat's secret program outlined in the March 19 memo, national parliaments and regulatory agencies will be demoted, in effect, to advisory bodies. Final authority will rest with the GATS Disputes Panel to determine if a law or regulation is "more burdensome than necessary". And the GATS panel, not Parliament or Congress, will tell us what is "necessary".
As a practical matter, this means nations will have to shape laws protecting the air you breathe, the trains you ride in and the food you chew by picking, not the best or safest means for the nation, but the cheapest methods for foreign investors and merchants.
Let's get down to concrete examples. The Necessity Test had a trial run in North America via inclusion in NAFTA, the region's free trade agreement. The state of California had banned a gasoline additive MBTE, a chemical cocktail that was found to contaminate water supplies. A Canadian seller of the "M" chemical in MBTE filed a complaint saying California's ban on the pollutant fails the Necessity Test.
The Canadians assert, quite logically, that California, rather than ban MBTE, could require all petrol stations to dig up storage tanks and reseal them, and hire a swarm of inspectors to make sure it's done perfectly. The Canadian proposal might cost Californians a bundle and might be impossible to police. But that's just too bad. The Canadians assert their alternative is the least trade restrictive method for protecting the California water supply. "Least trade-restrictive" is NAFTA's Necessity Test. If California doesn't knuckle under, the US Treasury may have to fork out over $976 million to the Canadian pollutant's manufacturer.
The GATS version of the Necessity Test is NAFTA on steroids. Under GATS, as proposed in the memo, national laws and regulations will be struck down if they are "more burdensome than necessary" to business. Notice the subtle change from banning "trade restrictive" rules (NAFTA) to "burdensome rules". Suddenly the GATS treaty is not about trade at all, but a sly means to wipe away restrictions on business and industry, foreign and local.
What burdensome restrictions are in the corporate cross-hairs? The US trade representative has already floated proposals on retail distribution. Want to preserve Britain's greenbelts? Well, forget it - not if some bunch of trees are in the way of a Wal-Mart superstore. Even under the current, weaker GATS, Japan was forced to tear up its own planning rules to let in the retail monster boxes.
The government assures us that nothing threatens the right to enforce laws in the nation's public interest. But not according to the March 19 memo. The WTO report that, in the course of the secretive multilateral negotiations, trade ministers have agreed that, before the GATS tribunal, a defense of "safeguarding the public interest ... was rejected".
In place of a public interest standard, the Secretariat proposes a deliciously Machiavellian "efficiency principle". "It may well be politically more acceptable to countries to accept international obligations which give primacy to economic efficiency." This is an unsubtle invitation to load the GATS, with requirements which rulers know their democratic parliaments could not accept. This would be supremely dangerous if, one day, the US elected a president named "Bush" who wanted to shred air pollution rules or, say, Britain elected a prime minister named "Blair" with a mad desire to sell off his nation's air traffic control system. How convenient for embattled chief executives: what elected congresses and parliaments dare not do, GATS would require.
Britain's government can brush off the green-haired anti-GATS protester, but can't ignore the objections of the British Medical Association (BMA) jittery about GATS' control over Britain's National Health Service, In its journal, the Lancet, the BMA nervously questions Pascal Lamy's assurances that "interpretation of the rules [must not be] settled by disputes procedures," that is, the GATS panel. One defender of GATS calls the BMA's accusation "hysterical".
But after reading the March 19 internal memo, hysteria may be the right prescription. The Secretariat's memo makes no concession to sovereign interpretation of the rules. Under the post-democratic GATS regime, the Disputes Panel, those Grand Inquisitors of the Free Market, will decide whether a nation's law or a regulation serves what the memo calls a "legitimate objective".
While parliaments and congresses are lumbered with dated constitutional requirements to debate a law's legitimacy in public, with public evidence, with hearings open to citizen comment, GATS panels are far more efficient. Hearings are closed. Unions, consumer, environmental and human rights groups are barred from the participating - or even knowing what is said before the panel.
Is the March 19 memo just a bit of wool-gathering by the WTO Secretariat? Hardly. The WTO was working from the proposals suggested in yet another confidential document also sent to me by my good friend, Unnamable Source. The secret memo, "Domestic Regulation: Necessity and Transparency", dated February 24, 2001, was drafted by the European Community's own "working party" in which the UK ministry claims a lead role.
In letter to MPs, Trade Minister Dick Caborn swears that, through the EC working party, he will insure that GATS recognizes the "sovereign right of government to regulate services" to meet "national policy objectives". Yet the February 24 memo, representing the UK's official (though hidden) proposals, rejects a nation's right to remove its rules from GATS jurisdiction once a service industry is joined to the treaty. Indeed, this official and officious document contains contemptuous attacks on nations claiming "legitimate objectives" as potential "disguised barriers" to trade liberalization. Moreover, that nasty little codicil borrowed from NAFTA, that regulation must not be "more trade restrictive than necessary", is promoted in the secret EC document, ready for harvesting by the WTO Secretariat's free market fanatics.
Not knowing I had these documents in hand, Britain's Trade Ministry still insisted when I called that GATS permitted nations a "right of to regulate to meet national policy objectives". I was not permitted to question Dick Caborn himself (and in the post-GATS future, I understand, no mortal may gaze directly upon him). But let us suppose, for a moment, that Caborn believes what his press office says on his behalf, that there is nothing to fear from GATS, especially because the UK can opt in or out of clauses as it chooses.
Don't count on it. According to Professor Bob Stumberg of Georgetown University, Washington DC, the WTO is now suggesting that the Necessity Test, the shark in the swimming pool, will be applied "horizontally", that is, to all services. No opt-outs.
A Caborn letter to MPs admits that his pleasant interpretation of GATS has not been "tested in WTO jurisprudence". In other words, he doesn't actually know if a GATS panel will rule as in his fantasies. This is, after all, the minister who, with his European counterparts, just lost a $194 million judgment to the US over the sale of bananas.
(Now, I can understand how Caborn goofed that one. Europe argued that bananas are a product, but the US successfully proved that bananas are a service - try not to think about that - and therefore fall under GATS.)
And note: America doesn't grow bananas - so how did it get in this dispute anyway? Did it have anything to do with the fact that Carl Lindner, Chief of the " Chiquita "Banana Company, is one of the top donors to both Democrats and Republicans?
And that illustrates the key issue. No one in Britain should bother with what some UK trade minister thinks. The only thing that counts is what George W. Bush thinks. Or at least, what the people who think for George think. Presumably, the UK's minister won't sue his own country for violating the treaty. But the US might. It has. Forget Caborn's assurance - we need assurance from President Bush that he won't use GATS to help Wal-Mart, Citibank or Chevron Oil beat the hell out of Britain or Canada (or California for that matter).
The odd thing is, despite getting serviced in the bananas case, the Blair government and the European Commission have not demanded explicit language barring commerce-first decisions by a GATS panel. Instead, the secret February 14 EC paper encourages the WTO's Secretariat to use the punitive form of The Necessity Test sought by the US. So there you have it. Rather than attack the rules by which corporate America whipped the planet, Caborn and the EC are keen on handing George Bush a bigger whip.
To review the confidential WTO documents, visit http://www.corpwatch.org/issues/wto/featuredl2OO1/gpalast.html
Tinkerbell, Pinochet and the Fairy Tale Miracle of Chile - Questioning Globalization's Genesis Myth
Cinderella's Fairy Godmother, Tinkerbell and Senator Augusto Pinochet have much in common. All three performed magical good deeds. In the case of Pinochet, he is universally credited with the Miracle of Chile, the wildly successful experiment in free markets, privatization, deregulation and union-free economic expansion, whose laissez-faire seeds have spread from Santiago to Surrey, from Valparaiso to Virginia.
They may be a bit squeamish about the blood on his chariot, but all neoliberal 'reformers' must agree, globalization's free market revolution was born from the barrel of his guns. Whatever his shortcomings, they tell us, he was Chile's economic saviour and lit the world's future economic path.
But Cinderella's pumpkin did not really turn into a coach. The Miracle of Chile, too, is just another fairy tale. The claim that General Pinochet begot an economic powerhouse is one of those utterances, like "ethical foreign policy", whose truth rests entirely on its repetition.
Chile can claim some economic success. But that is the work of Salvador Allende - who saved his nation, miraculously, a decade after his death.
In 1973, the year the general seized the government, Chile's unemployment rate was 4.3 per cent. In 1983, after ten years of free market modernization, unemployment reached 22 per cent. Real wages declined by 40 per cent under military rule. In 1970, 20 per cent of Chile's population lived in poverty. By 1990, the year "President" Pinochet left office, the number of destitute had doubled to 40 per cent. Quite a miracle.
Pinochet did not destroy Chile's economy all alone. It took nine years of hard work by the most brilliant minds in world academia, a gaggle of Milton Friedman's trainees, the Chicago Boys. Under the spell of their theories, the general abolished the minimum wage, outlawed trade union bargaining rights, privatized the pension system, abolished all taxes on wealth and on business profits, slashed public employment, privatized 212 state industries and 66 banks and ran a fiscal surplus. The general goose-stepped his nation down the "neoliberal" (free market) path, and soon Thatcher, Reagan, Clinton, Blair, the IMF and the planet would follow.
But what actually happened in Chile? Freed from the dead hand of bureaucracy, taxes and union rules, the country took a giant leap forward ... into bankruptcy and depression. After nine years of economics Chicago-style, Chile's industry keeled over and died. In 1982 and 1983, gross domestic output dropped 19 per cent. That's a depression. The free market experiment was kaput, the test tubes shattered. Blood and glass littered the laboratory floor.
Yet, with remarkable chutzpa, the mad scientists of Chicago declared success. In the US, President Ronald Reagan's State Department issued a report concluding: "Chile is a casebook study in sound economic management." Milton Friedman himself coined the phrase "The Miracle of Chile". Friedman's sidekick, economist Art Laffer, preened that Pinochet's Chile was "a showcase of what supply-side economics can do".
It certainly was. More exactly, Chile was a showcase of deregulation gone berserk. The Chicago Boys persuaded the junta that removing restrictions on the nation's banks would free them to attract foreign capital to fund industrial expansion. (A decade later, such capital market liberalization would become the sine qua non of globalization.) On this advice, Pinochet sold off the state banks - at a 40 per cent discount from book value - and they quickly fell into the hands of two conglomerate empires controlled by speculators Javier Vial and Manuel Cruzat. From their captive banks, Vial and Cruzat siphoned cash to buy up manufacturers - then leveraged these assets with loans from foreign investors panting to get their piece of the state giveaways.
The banks' reserves filled with hollow securities from affiliated enterprises. Pinochet let the good times roll for the speculators. He was persuaded, to use Tony Blair's words 20 years on, that "Governments should not hinder the logic of the market."
By 1982, the Chilean pyramid finance game was up. The Vial and Cruzat "Grupos" defaulted. Industry shut down, private pensions were worthless, the currency swooned. Riots and strikes by a population too hungry and desperate to fear bullets forced Pinochet to reverse course. He booted his beloved Chicago experimentalists.
Reluctantly, the general restored the minimum wage and unions' collective bargaining rights. Pinochet, who had previously decimated government ranks, authorized a program to create 500,000 jobs. The equivalent in the US would be the government's putting another 20 million on the payroll. In other words, Chile was pulled from depression by dull old Keynesian remedies - all Franklin Roosevelt, zero Margaret Thatcher. The junta even instituted what remains today as South America's only law restricting the flow of foreign capital.
New Deal tactics rescued Chile from the Panic of 1983, but the nation's long-term recovery and growth since then is the result of - cover the children's ears - a large dose of socialism. To save the nation's pension system, Pinochet nationalized banks and industry on a scale unimagined by the socialist Allende. The general expropriated at will, offering little or no compensation. While most of these businesses were eventually reprivatized, the state retained ownership of one industry: copper. For nearly a century, copper has meant Chile and Chile copper. University of Montana metals expert Dr Janet Finn notes, "It's absurd to describe a nation as a miracle of free enterprise when the engine of the economy remains in government hands." (And not just any government hands. A Pinochet law, still in force, gives the military 10 per cent of state copper revenues.)
Copper has provided 30-70 per cent of the nation's export earnings. This is the hard currency that has built today's Chile, the proceeds from the mines seized from Anaconda and Kennecott in 1973 - Allende's posthumous gift to his nation.
Agribusiness is the second locomotive of Chile's economic growth. This also is a legacy of the Allende years. According to Professor Arturo Vasquez of Georgetown University, Washington DC, Allende's land reform, the break-up of feudal estates (which Pinochet could not fully reverse), created a new class of productive tiller-owners, along with corporate and cooperative operators, who now bring in a stream of export earnings to rival copper. "In order to have an economic miracle," says Dr Vasquez, "maybe you need a socialist government first to commit agrarian reform."
So there we have it. Keynes and Marx, not Milton Friedman, saved Chile.
But the myth of the free market miracle persists because it serves a quasi-religious function. Within the faith of the Reaganauts and Thatcherites, Chile provides the necessary genesis fable, the ersatz Eden from which the laissez-faire dogma sprang successful and shining.
Half a globe away from Chile, an alternative economic experiment was succeeding quietly and bloodlessly. The southern Indian state of Kerala is the laboratory for the humane development theories of Amartya Sen, winner of the 1998 Nobel Prize for Economics. Committed to income redistribution and universal social services, Kerala built an economy on intensive public education. As the world's most literate state, it earns its hard currency from the export of technical assistance to Gulf nations. If you've heard little or nothing of Sen and Kerala, maybe it is because they pose an annoying challenge to the free market consensus.
In the year Sen won the prize, the international finance Gang of Four - the World Bank, the IMF, the Inter-American Development Bank and the International Bank for Settlements - offered a $41.5 billion line of credit to Brazil then sinking in its debts. But before the agencies handed the drowning nation a life preserver, they demanded that Brazil commit to swallow the economic medicine that nearly killed Chile. You know the list by now: fire-sale privatizations, flexible labor markets (i.e. union demolition) and deficit reduction through Savage cuts in government services and social security.
In Sao Paulo, the public is assured these cruel measures will ultimately benefit the average Brazilian. What looks like financial colonialism is sold as the cure-all tested in Chile with miraculous results.
But that miracle was in fact a hoax, a fraud, a fairy tale in which everyone did not live happily ever after. Looking back
I have an advantage over Thomas Friedman. I was there at the beginning, at the moment of conception when the sperm of Milton Friedman's oddball economic theories entered the ovum of the fertilized mind of Ronald Reagan, who was then Governor of California. I witnessed the birth of Thatcherism before Thatcher - there, at the University of Chicago, in the early 1970s, the only American member of an elite group, later known as the 'Chicago Boys". Most were Latin Americans, a strange collection in white turtleneck sweaters and dark shades, fight out of the movie Z, who would turn Chile into an experiment in torture and free markets.
The group's official title, "Latin American Finance Workshop", was directed by a Professor Arnold Harshberger; Friedman's was the "Money and Banking Workshop". I worked my way in with both of them - even then I was undercover, operating for the electrical and steel workers' union leaders Frank Rosen and Eddie Sadlowski. Frank told me, "Keep your damn mouth shut, put away the childish Mao buttons, put on a suit and flnd out what these guys are up to. "
I wouldn't call Milton Friedman a midget, but what sticks in my mind is that his feet didn't touch the floor in the built-up chair in which he presided. Rhodesia (now Zimbabwe) was a hot topic. The nation was controlled by Whites, 5 per cent of the population, who kept the 95 per cent Black population in virtual slavery, without hope and certainly without the right to vote. Professor Friedman opined from his high chair, "Why are people attacking Rhodesia, the only democracy in Africa?" And I remember the professor was driven around in a black limousine by a Black chauffeur.
So, while the other students, the budding bankers and dictators-in-training are drooling in admiration, I'm reporting back, "This Friedman is one sick puppy. No one's going to buy this self-serving 'laissez faire' free market mumbo jumbo from some ultra-right wing-nut."
Twenty-five years later, Blair and Bush and Clinton and de la Rua and Putin open their mouths and out comes Milton Friedman. And everywhere I turn, the guys running the show are wearing their Golden Straitjackets and grinning and groping and agreeing with each other. And all I can think of is something another professor of mine, Allen Ginsberg, said: The soul should not die ungodly in an armed madhouse. continua >>>>
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