The Globalizer Who Came in from the Cold

By Greg Palast, AlterNet. Posted March 19, 2002.

"It has condemned people to death," the former apparatchik told me. This was like a scene out of Le Carré. The brilliant old agent comes in from the cold, crosses to our side and in hours of debriefing, 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 bureaucratese. 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 four-step 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.

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