The New Imperial Age

Journalists today are writing tomes about the American Empire. In fact the Bush administration policies seem clearly to be moving relentlessly in the direction of a global empire. And serious journalists are writing columns and books in support of those policies. For example, Thomas Friedman, who is the N.Y. Times correspondent for the State Dept. has stated that “the U.S. had to make clear to Iraq and the U.S. allies that…America will use force without negotiation, hesitation or U.N. approval. And further he has written that “the hidden hand of the market will never work without a hidden fist.” Major corporations cannot profit globally without the safety of the U.S. military. Corporate globalization and the free market economy as applied to the third world countries, as Arundhati Roy, India’s dissident political essayist has stated, is “the perfect vehicle for endless expansion of American Imperialism.”

Friedman, although a three- time winner of the Pulitzer prize for journalism, is considered by some critics as a “blowhard”. Nevertheless, he does have the ear of the administration and he believes that Iraq will not be controlled without a strong leader with an iron fist and the presence of a strong military force. He believed that the invasion of Iraq was the correct policy to depose Saddam but he tended to ignore the administration lies about WMD and the supposed Iraqi connection to Al Qaeda. Of course, Saddam used the iron fist to prevent chaos, but he was no longer “our guy”. We could not control him. And we require obedience from third world leaders.

In any case, there has been developing for some time a new world government that answers to the needs and is controlled by “an international corporate ruling class”. It is an actual world government based on international trade agreements, viz. NAFTA and GATT. And these agreements are linked to the International Monetary Fund (IMF), the World Bank and the World Trade Organization (WTO). The purpose is “to centralize power in a world economic system” and to make sure that the world’s population plays no role in decision making. The planning of policy is raised to such a level that the ordinary citizen has no idea what decisions are being made and if he did would not be able to understand or influence them in anyway. In short, a country could have all the democracy it wanted, but if the people have no say in the decision making, they are no threat to the corporate elite. Clearly that is a democracy that is not real because in that system the press only pretends to be free and the criminal justice system only pretends to administer justice. The reality is a corrupt government that uses a paramilitary force to suppress populist uprisings.

In the last decade what has corporate globalization produced? The total income of the world has increased by 2.5% annually. That’s the good news but the bad news is that at the same time the total poor in the world has increased by 100 million. And the “War Against Terror” is playing the role of increasing the disparity. Corporate globalization and widespread privatization is forcing people off their land and increasing joblessness. As the poor get poorer popular unrest spreads throughout the third world. In order to control extensive dissent these movements are tagged as “terrorists” and are suppressed by brutal paramilitary forces financed by the power elite, viz. the U.S. and the huge trans- national corporations. It is in this way that democracy to the extent that it exists at all is totally subverted.

Now what does the World Bank and the IMF offer third world countries in distress that in the end destroys their economy and hands over their national resources to the mega-corporations of the world? The philosophy of the IMF World Bank is based in what has come to be known as neo-liberalism. This political economic framework is founded on a free market that promotes and supports private enterprise, prizes entrepreneurial aptitude
and discourages bureaucratic government through widespread economic deregulation. In the end private investors control the economic and social life of a country in order to achieve maximum profit.

So let’s look at the African country of Tanzania to see how the IMF World Bank puts into practice the neo-liberal policies. Tanzania today is on the verge of losing 1.3 million people to AIDS. There is no money to treat this dying population despite IMF control for the last 15 years. In order for a third world country to get a loan the World Bank requires the country to meet certain requirements. According to Greg Palast, the first requirement placed on Tanzania was to charge for hospital appointments that were formerly free. As a result, the number of patients treated in three major hospitals dropped by 53%. Next it required that the schools charge attendance fees and the attendance thus dropped from 80% to 66%. So far so good, is the situation improving? Then the IMF World Bank required a total of 157 additional changes and Tanzania had no option but to accept, otherwise no loan. This took place in 1985 when the country was suffering under a socialist regime characterized by deep poverty and disease. So then the IMF went on to reduce trade barriers, cut subsidies and sell the nationalized industries. The net result after 15 years was a GDP (Gross Domestic Product) that dropped from $309 to $210 per capita, poverty rose to 51% of the total population and literacy decreased. According to Greg Palast, the World Bank did not understand why it failed. After so many years of Socialism the population still felt that the state should provide social services.

The West assured the third world countries that through the efforts of the IMF they would enjoy unparalleled prosperity. In many cases Globalization and the free market has instead increased the number of poor. Colonial independence rather than improving the plight of the African has, as Joseph Stiglitz, the former chief economist of the World Bank, points out, plunged the continent “deeper into misery” as incomes fell to less than a dollar a day. In those countries which were converting from communism to a market economy, the latter proved considerably worse than was predicted. Stiglitz compares Russia to China in 1990 when China’s GDP was 60% of Russia’s and by 2000 that number had reversed. China’s poverty had decreased while Russia’s had increased. And China’s economy was not controlled by any international institution as was Russia’s.

Again hypocrisy plays a big role in the application of the free market economy. The West insists that the third world drop its trade barriers while the West refuses to drop theirs. Thus the poor countries cannot export their agricultural products and are therefore robbed of their export income necessary to their survival. The U.S. was primarily guilty of this disgraceful offense. This obtuse policy was also costly to the American consumer in higher prices and to the taxpayer who was paying for expensive agricultural subsidies. The latter made it impossible for the poor countries to compete. It was impossible to change this policy because the power elite had control. The West obviously gains most of the benefits from globalization. In addition the “terms of trade” decided on in the trade agreement of 1995 resulted in lowering prices the poorest countries received in relation to “what they paid for their imports.” This in effect made the poorer countries poorer.

The World Bank offers every poor country that comes with a begging bowl in hand a document called “a restructuring agreement”. A careful analysis is supposedly done of the economic problems of the country and then a plan is designed to deal with them. The issue is that the plan as outlined is all smoke and mirrors because the investigators rarely leave their hotel to interact with the people. It helps to understand poverty when you re forced to face it in close proximity. As a result, the major weakness in the World Bank plan is that the same plan is handed out to every finance minister who appears at the door begging for aid.

It is usually a four-step program as described by Palast and Stiglitz. The first step is privatization. This means that the leaders of the country are forced to sell off their nationalized industries, e.g. water and electricity to foreign investors mainly the U.S. corporations at discount prices. In essence corrupt national leaders are bribed into selling at less then the value of the industry for a piece of the pie. Often a 10% commission went directly into a Swiss bank account. The worst case occurred in Russia where “industrial assets” were sold at a price that reduced domestic production by one half. The final result was a severe economic depression and starvation.

The second step is called Capital Market Liberalization. The deregulation of the capital market laws allows money to flow in and out of a country freely without taxation. The problem, however, was in certain countries capital just kept flowing out, e.g. Brazil. According to Stiglitz, this is “hot money” that enters the country for speculation in real estate or currency. Then if there is trouble that will jeopardize the funds, it immediately is pulled out. The reserves of a country can under these conditions be totally depleted. So then the IMF in order to attract that capital back into the country requires that the nation raise interest rates astronomically, viz. anywhere from 30% to as high as 80%. In Latin-America, for example, the higher rates destroyed property values, savagely reduced industrial production and emptied the national treasuries. Same problem occurred in Asia.

The third step is also disastrous. It is called Market Based Pricing which is simply raising the prices on necessary commodities, viz. food, water and domestic gas. This, of course, leads to the “IMF riot”, according to Stiglitz. The situation becomes so painful to the people of the country that a major blowup occurs. In every country where this was done riots were so intense that the paramilitary forces were called in to quell the uprising. And they are well known for their brutality. This happened in Indonesia, Bolivia and Ecuador to name just three. The riot caused capital to flee and widespread bankruptcies to occur. Then it is possible for foreign investors to step in and buy the national assets for pennies on the dollar. It would almost appear that the riots were written into the plan for this very reason. At this point the IMF steps in and raises tens of billions of dollars to save the financiers and the Western banks that are holding loans. This “churning” of capital is profitable for the Western banks and the U.S. Treasury, the latter owning 51% of the IMF.

The last step is called “poverty reduction” strategy, or free trade. Free trade according to the World Bank is reducing barriers to trade in the third world and at the same time blocking trade from the third world, e.g. agriculture.

The World Bank plans are designed in secrecy by a group of technocrats who are employed in essence by the huge international corporations. The plans are evolved by employees “insulated” from the public. The policies are developed undemocratically and are not open to discussion by outsiders. It is essentially an autocracy driven by a neo-liberal ideology for purposes of deriving maximum profit. There is much talk about free elections and democracy but the programs themselves destroy democracy. And even worse, as Stiglitz says, they don’t work.


References:


Chomsky, Noam . Profit Over People. Seven Stories Press, 1999
Chomsky, Noam . Understanding Power. New Press, 2002
Palast, Greg. The Best Democracy Money Can Buy. Penguin, 2003
Roy, Arundhati. War Talk. South End Press, 2003
Stiglitz, Joseph. Globalization and Its Discontents. Norton, 2003