Posted by: Skeptical Moose | September 9, 2009

Aid, Globalisation and our Instruments of Foreign Policy

Oooh, heavy title, but bear with it; it gets good … promise!!

 

The world’s poorest countries are currently being hit hard by (a) the world recession; (b) decreasing aid; and (c) decreasing Foreign Direct Investment and capital inflow (FDI). We know that the Western model has failed us (Gordon Brown announced the death of the ‘Washington Consensus’[1] at this years G20 summit) but nonetheless continue to pour money into the IMF.

 

The UN’s trade and development arm (UNCTAD) suggested some practical ideas:

Þ     Government guarantees for long-term loans to fledgling businesses (to boost domestic industry)

Þ     Part-nationalised development banks

Þ     Managed exchange rates

Þ     Central banks ignoring short-term inflation

 

I am not qualified enough to comment on the individual economic cases, but would also draw your attention to my article on The Future of Capitalism.

 

Ban Ki-moon, UN Secretary-General, has threatened wealthy nations that continuously fail to honour their long-standing commitments (and that’s pretty much all of them!). He reinforced the view that £300bn needs to go to poor nations immediately for poverty reduction and technology transfer.

 

Countries are not, however, giving their measly 0.7% as pledged, which is particularly dangerous right now as we all know that decreasing poverty is the key to national security.

 

But don’t we have large, international institutions to do this, like the World Bank and the International Monetary Fund (IMF)?

 

Yes, but a serious look at the history of the World Bank and IMF will tell you that were set up as tools of US (and to a lesser extent) European imperialism! A few facts about the World Bank:

 

Þ     Rich countries have more votes2

Þ     All Presidents have been Americans3 (IMF Presidents are all Europeans)

Þ     The US has a veto

Þ     There is no formal voting

Þ     There are no meeting transcripts

Þ     They invest only in major projects (with rather juicy private sector contracts) and not basic care (which is desperately needed)

 

In summary, it’s not far off a scam concocted in a dodgy Third World dictatorship. The Fund and the Bank are based in Washington and have ensured the dollar’s global hegemony to this day. Importantly, the rich countries lend only if they will gain commercially somewhere down the line.

 

Didn’t they wipe off plenty of recent debt?

 

They did indeed. Some caveats though:

 

Þ     Much of this debt was lent to corrupt dictators and should never have been pursued in the first place

Þ     However you spin it, in terms of looted resources, slave labour, climate change effects and so on, the rich owe the poor far more than the poor owe the rich

 

The Bank has bankrolled Mobutu and Suharto, deforested Nepal, flooded Laos, trashed the Amazon and promoted genocide in Indonesia.

 

Even considering that, it’s still not that simple! To qualify for debt relief, developing countries must “tackle corruption, boost private sector development” and eliminate “impediments to private investment, both domestic and foreign.”4

 

These ‘conditionalities’ seem sensible and I am certainly in favour of debt being properly accounted for. Upon investigation, though, we see that the only true determinant of whether debt is granted or written off is whether the country is willing to do business with the lender. These countries are thus forced into privatising state-owned assets and opening up to western investment far sooner than they would wish for. The US is sensational at this: protecting itself while deploring others for their lack of commitment to ‘free’ trade. If we in the West can’t grab their public services and resources at rock bottom prices, what are we doing there?!

 

As such, these entities actually accelerate the spread of poverty.

 

Take a look at this critique from BBC’s Newsnight, which includes an interview with a man that should know what he’s talking about, Joseph Stiglitz (ex-Chief Economist of the World Bank5). He reinforces everything stated in this article and also has swipe at that veritable bone of contention, the World Trade Organisation (WTO). He likens their trade practices to the British Empire in the opium wars, forcing China at gunpoint to open its markets.

 

As George Monbiot said,

 

“Attaching conditions like these to aid amounts to saying “we will give you a trickle of money if you give us the Crown Jewels.” Attaching them to debt relief is in a different moral league: “we will stop punching you in the face if you give us the Crown Jewels.” The G8’s plan for saving Africa is little better than extortion racket.”

 

Monbiot followed up these 2005 comments above by mocking the arrival of the 2005-2007 President, Paul Wolfowitz. How right he proved to be …

 

“One would think that steps to ensure whistle-blower protections would have followed in the wake of the Bank’s biggest black mark in history — the resignation of president Paul Wolfowitz, forced by anonymous staffers who exposed his cronyism, favoritism, incompetence and improper political dealings. He … received coordinated support from the Bank’s general counsel, the Department of Institutional Integrity, human resources, and the Ethics Committee of the Board of Directors.” 6

 

Are they at least held accountable?

 

Not really! The IMF and World Bank exist without any significant external oversight and are virtually impenetrable by the legislatures of their member governments. Labyrinthine bureaucracies, coupled with immunities from national and international laws, have become, in effect, impunity.

 

And it continues! The G20 countries agreed in April that nearly $1 trillion will be given to the IMF and the Multilateral Development Banks. So, just as the whole world is crying out for bank transparency, that $1 trillion is off to the most secretive establishment on the planet.

 

Learn more from perhaps the most thorough review: Catherine Caufield’s Masters of Illusion: the World Bank and the Poverty of Nations; and George Soros’ On Globalisation is also highly critical of the institutions.

                                                                                             

As all charity donors know, the only money that ever truly helps it that delivered by the people, for the people … on the ground, ‘bottom-up’. ‘Top-down’ funds have only ever led to corruption and mismanagement and the IMF and World Bank have specialised in supporting and, most shamefully, benefiting from that fact.


[1] Explained here

2 The ‘one-dollar, one-vote’ farce is outlined here

3 Here you are

4 Read it on the National Archives site here

5 Background on JS

6 Stated by Bea Edwards, International Reform Director of the Government Accountability Project, the US’ leading whistle-blower protection organization, http://www.whistleblower.org

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