The true face of globalization: how IMF destroys countries
- Thread starter Ratty Sr.
- Start date
TheWesDude
Sonny, I Watched the Vault Bein' Built!
some things to keep in mind.
1) free trade is great as long as there is no noticeable debt either per-country or as a total. the moment you have a negative debt, the more problems you invite.
2) welsh did make some good points, but you can never truely trust a solution/study of an issue that one or two economics people say. there is a reason their "solutions" always encompass 4-5 parts because they know roughly where the problem is, but not where the exact problem is specifically.
3) economies are slow things. one action typically takes 4-5 months up to 3-4 years to show up. like in the US the current president is usually blamed for the economy when it is the fault/benifit of the previous president, or even the one before that.
4) governmental corruption will always cause a nation to fail, and capitalisim will always cause an economy to fail. it just takes time measured in decades to centuries depending on corruption of capitalisim and government. socialisim will always succeed as long as there is no governmental corruption and taxes are not too low.
5) governments run on taxes. governments cannot control nations or economies without resources. if a nation consistantly and constantly wants lower taxes, they help remove the resources from the government to control and guide the nation.
6) any nation without the ability to make basic goods such as clothing, shelter, food, and minor local sale goods will always fail. see point #1. any nation that imports a lot of clothing and/or food will always fail. it might take decades, but it will fail.
1) free trade is great as long as there is no noticeable debt either per-country or as a total. the moment you have a negative debt, the more problems you invite.
2) welsh did make some good points, but you can never truely trust a solution/study of an issue that one or two economics people say. there is a reason their "solutions" always encompass 4-5 parts because they know roughly where the problem is, but not where the exact problem is specifically.
3) economies are slow things. one action typically takes 4-5 months up to 3-4 years to show up. like in the US the current president is usually blamed for the economy when it is the fault/benifit of the previous president, or even the one before that.
4) governmental corruption will always cause a nation to fail, and capitalisim will always cause an economy to fail. it just takes time measured in decades to centuries depending on corruption of capitalisim and government. socialisim will always succeed as long as there is no governmental corruption and taxes are not too low.
5) governments run on taxes. governments cannot control nations or economies without resources. if a nation consistantly and constantly wants lower taxes, they help remove the resources from the government to control and guide the nation.
6) any nation without the ability to make basic goods such as clothing, shelter, food, and minor local sale goods will always fail. see point #1. any nation that imports a lot of clothing and/or food will always fail. it might take decades, but it will fail.
John Uskglass said:
ahahahahahaha!
Yeah, because you live in a country of free trade!
Not a country that places unfair trade concessions towards China in an effort to stem its growing economic threat. Thankfully not as ridiculous as the EU and its textile-quotas.
Not a country that overly subsidizes its farmers effectively killing off any chance of international competition and creating food-surplusses that kill the growth of agriculture in the Sub-Sahara
"Free" trade is a legend, a fairy tale, it does not exist anywhere on this planet.
Maphusio said:
"Africa" is not a nation.
Blaming all their problems on themselves is retarded even though they're part of the problem. The entire world is pitted with unfair trade concessions which means only a number of countries can claw their way up, noticeably those with huge internal markets, like China, India, Indonesia and Russia.
I don't care how uncorrupted and economically flailing Africa will grow, they can't beat those odds
welsh said:
Most? All. Taxes are a form of state inverventionism into free trade, not to mention huge import taxes and fees and quotas that negate any existence of international free trade.
Welsh said:
It is also somewhat nonsensical. It's a proven historical fact that different levels of corruption do not automatically negate economic growth. Russia and Indonesia are examples of this as well as other smaller Asian states.
Blaming Africa's problems on corruptions seem a bit CTS to me. Democracy does not equal economic health. But you mentioned this yourself.
I would think one of the major problems of corruption is when it causes instability. But democracy is equally capable of doing so, so pretending that making a country democratic will fix things is a bit off.
welsh said:
If man defines a situation as real it is real in its consequences. The old William I Thomas theorem
welsh said:
As if it is somehow more fitting when the Russian companies went to the maffia instead, which many of them did. Overly hasty privatization is always an f'ed up matter whether it is corrupt or not
welsh said:
US and EU companies aren't competitive either, it doesn't seem to hurt us much
Bradylama
So Old I'm Losing Radiation Signs
The problem is, however, that it will, assuming that the "globalization" trend becomes increasingly prevalent. The French want to preserve a 35 hour work week while Indians are working 35 hour work days. Realistic? Only if the West continues it's economic Frat Club. Something that causes developed nations to risk being overtaken economically and militarily by more productive trade alliances.
By remaining interventionalist, we risk becoming isolationist. Globalization is a significant threat because we have no choice but to globalize and attempt to become competitive.
"Free Trade" in this sense, is mostly a buzzword to describe an ideal of minimalist state-influence in economic affairs, and I think we're losing sight of the issue.
It's funny - I've just been reading about the collapse of the globalisation process in the interbellum; and the parallels here are hilarious.
Anyway, I think we can all see where this thing is going. Quota's on all kinds of imports, complaints against rapid industrialisation in semi-peripheral areas, growing nationalism,...
I see a big, mean collapse looming just beyond the horizon. Not that I'm looking forward to it or anything, but it's going to be fun to see all those so-called free market advocates squirming around to protect their domestic labour force and purchase power again. Really.
Anyway, I think we can all see where this thing is going. Quota's on all kinds of imports, complaints against rapid industrialisation in semi-peripheral areas, growing nationalism,...
I see a big, mean collapse looming just beyond the horizon. Not that I'm looking forward to it or anything, but it's going to be fun to see all those so-called free market advocates squirming around to protect their domestic labour force and purchase power again. Really.
welsh
Junkmaster
Thanks for the kind words. A lot of this is dissertation research so it’s nice to be able to discuss it. Keeps it interesting. I am also very critical of the World Bank/IMF. Had they not been so kind of Doe and Mobutu, perhaps those governments might have changed sooner- support from international lenders helped keep those predators in power. I posted a response to some of the earlier posts but apparently it didn’t work and there is more to respond to but I don’t have time.
So a few quick points-
US and European companies often succeed because they are really fucking big. I mean there are companies that make more than some countries GNPs. That plus lots of influence and control over local markets goes a long way.
Jebus- actually the world goes through peaks and valleys of globalization. One big peak of globalization ended right before World War 1. Another peak of anti-globalization ended after World War 2.
Corruption happens everywhere. The US has plenty of corruption and states vary in how corrupt they are. Just in New York, some political districts are more corrupt than others. In the south corruption takes many forms. Part of the problem lies in what you call corruption. Is it just rent seeking? Or are there differences in the kinds of corruption. For instance both the Philippines and South Korea had corruption (as Kang’s book Crony Capitalism points out). But in one country, the economy was crippled, while another had tremendous growth.
But maybe the problem isn’t whether corruption, but what controls the corruption and the kind of corruption you have. Institutions, even corrupt ones, are the creations of men who often organize in groups. So we should not think in terms of institutions, which have no life but that given to them by men, but the people who are served by institutions. Again, the point- institutions are the consequence of distributional struggles among social groups. This includes whether you have a democracy or a authoritarian state, or even how much either is corrupt.
Kharn is right that democracies can be as corrupt as authoritarians. Saying that taxes are a form of intervention, yes. But what determines tax policies- who has the burden of taxation, who does the government subsidies or penalize,. Who gets favor in credit or contracts? Again those are political decisions.
It is interesting that democracies with a per capital income of $6,000 don’t become authoritarian. However, democracies that make less than that are often very prone to authoritarian reversal. Why? Because it’s a damn difficult jump up to $6K per capital GNPS, and economic transition isn’t easy. More about that later.
Saying that corruption leads to collapse- not exactly. The US was very corrupt at the turn of the 19th to 20th centuries, yet this was also a time of tremendous economic growth. Roosevelt becomes popular in part because he fights corruption. Wilson gets elected because the political bosses think they can control him. That all the supreme court judges are corporate lawyers reflects the power of big business vs other groups (labor) to determine what the law means. Yet, things can also change.
Assuming that government leaders are beholded to some higher than life normative rules may be a bit foolish. More importantly, they are constrained by their political conditions which give them limited autonomy to do what they want. As Tilly says, earlier state builders were less men with vision to create lasting legacies, but more like criminals of mafias trying to stay in power and get more power. Things haven’t changed that much.
And its foolish to say all intervention is bad. Examples given above illustrate that intervention is often necessary for economies to undergo transition and its foolish to think that governments will keep their hands out of the economy, from which they extract the revenue to function as states as well as make the ruling class rich. If the economy falls apart, so might their tenure of rule. In developed democracies politicians who neglect the economy lose elections (or pick on minorities as targets), in developing states they might end up getting shot.
Ok, back to the point about Romania and Ratty’s arguments- If you look at countries that are undergoing economic transition now among former communist states of Eastern Europe you might find they are very similar to what the states of South America suffered. And it should be noted that countries of South America were often corporatist states in which economic and political elites often worked hand-in-hand.
Like Eastern Europe, these states suffered, and continue to suffer economic transition. Privatization leads to foreign companies buying up their assets, cuts in social spending hurt subordinate classes, unemployment is the result of companies being broken up or cut apart and lose government support, corrupt politicians seek opportunities, and bureaucracies are bloated and inefficient if not corrupt.
But let’s also be clear about a few things. No one invites the World Bank or the IMF into their country unless they are already in economic trouble. Sometimes, as in Indonesia during the ’97 crisis, the economy had melted and needs to go to the IMF/WB to get out of it. Other times, state leaders realize that they are facing inevitable downtrends and need to make changes, and furthermore need outside help. In any event, these are folks looking at a longterm, downward trend and need help.
The job of the World Bank and the IMF is not to cure all ills, especially not the IMF (the World Bank is a bit more socially sensitive). The IMF is about putting the economic house back in order and to do it quickly. The World Bank is a bit more about long-term change.
So you have what might be a long and inevitable decline in the economy or a collapsed economy- either way the people are going to feel the pain and either way they are going to suffer. So blaming the IMF and the World Bank for the suffering tends to miss the point that those economies are already in trouble- often from domestic causes.
Whether that’s because of globalization? Globalization has been great for developed and middle income countries. Poor countries often get screwed by increased inequalities. Why? Most poor countries export primary commodities and over the last 30 years primary commodities have generally lost value in relation to manufactured goods and services. Poor get poor and the rich get richer. The trick, if you’re poor is to diversify and industrialize, and if not that, at least start making a profit on your commodities. That has also been difficult. Taxes on commodity exports are often so high they promote moving those commodities outside the formal market and into the informal markets (in other words, you are better off smuggling your coffee over the border than working through the government’s marketing board). Why are those taxes so high? Because countries have to tax those exports for the revenue they need to function and for the ruling class to stay in power. This also maintains an urban bias (discussed in Bates, mentioned in the last post) at the expense of rural classes.
Supporting primary commodity production (natural resources or cash crops) is one of the big mistakes of the IMF/World Bank- fostering commodity production over industrialization. Again, it’s the liberal faith in comparative advantage- but by favoring commodities you not only force economies to rely on a very unstable international exchange, but you also saturate the market with cheap goods. Ratty- this is where the developed states really make a killing through world bank/IMF policies- cheaper primary commodities means cheaper manufactured goods.
Ok, back to our problem. The economies already in trouble, or it soon will be. The IMF’s job is to clean house and make changes. The World Bank is a bit different in trying for more social beneficial social changes. The question is whether the policies of the World Bank will hurt more than not.
Part of this goes to the problem of Structural Adjustment Policies and Conditionalities. If the international lenders don’t make both chances are those economies will do the same thing as was before, and thus perpetuate the problem. In the late 1970s many African countries borrowed extensively from private lenders to continue making payoffs to favored companies and bloated bureaucracies- perpetuating their problem. Since the goal of the IMF/World Bank is to prevent future problems- they want to condition changes in those economies so they don’t do another nose dive.
Ratty what you are talking about is that chances are things get worse before they get better. Thus the dramatic and very painful transitions- the idea is that the economy will reform and come out stronger. But sometimes to create you must destroy first. And economic transitions are going to painful. But they are often unavoidable.
Thus the shock treatment. The belief is that if you don’t do everything at the same time, you won’t fix all the problems. And furthermore, transitions take time and some faith in market forces, yet the future is unknown.
This also creates a question, did these countries suffer so much because of the changes or because they often resist the changes and don’t fully implement them? Sometimes half measures may be worse. Do the shock treatments work? Don’t forget that it often takes many years for a economies to change and often a long time to get back to the levels of quality (GNP per capita, standards of living) that existed before crisis became inevitable.
But is that necessarily imperialism of the US? Does it foretell coup d’etat.
Remember, these economies are already in trouble. The examples in the last post suggest that whether the economies are in trouble has much to do with the domestic policies of states prior to crisis. Let’s also go back to that idea- institutions are a consequence of distributional struggles between social actors over material gains. When material gains become fewer, those struggles become increasingly intense. SO during economic crisis students protest, labor strikes, business leaders bribe, and the military coups. When things get intense, the military has an interest to see that it’s interests are sustained. So they coup.
Not to say the US doesn’t sometimes encourage coups, but not all coups during transition periods are the fault or expected by the US.
For example, it is doubtful that the US wanted a coup against Tolbert in Liberia or expected the coup by Doe. Taylor, who leads the effort against Doe was supported by Libya, not the US. The US certainly didn’t want a coup against Mobutu during most of Mobutu’s tenure. When the US decides to favor Kabila, it’s partially because the French are supporting the Hutus against the Tutsis and the Hutus are launching raids against Rwanda from Congo territory. The US had also been favorable to Suharto for a long time before he fell from power. The regime change is largely orchestrated by the military without become a real coup, and mostly because the military wants to keep the country stable.
Nor does all that that the World Bank/IMF do lead to evil. In Mauritius, the IMF helped overcome a period of trouble when a cyclone devastated the sugar crop. World Bank officials helped the Government Botswana carry out inoculations against diseases that protected that countries cattle. In Indonesia, the IMF/World Bank demanded that Suharto divest itself from a number of banks that were held by the Suharto family and which had allowed the Suharto clan to have a piece of every major economic project in that country (making them very rich).
But at the same time, countries often don’t comply with World Bank conditions, and sometimes it’s the failure to abide that allows them to perpetuate the problem. The World Bank and the IMF eventually gave up on giving money to Suharto because the guy never made significant political changes. Same with Doe. Frustration in paying for those predatory leaders led the US to abandon them after the Cold War ended. The US quits Doe in Liberia in 1989, the same year Taylor invades and within a year Doe is killed by other warlords. Mobutu hangs on a bit more by being pals with the French after the US quits him, but is gone by ’94 as he dies of prostate cancer and Kabila is conquering the country. They are not give a coup, but are left to domestic rivals.
Both Doe and Mobutu stayed in power not just because they got money, but also because they were able to manipulate domestic markets to their own ends.
But then you got to consider Ghana.
In the late 1970s Ghana was essentially a collapsed state in which coups were the main way regimes changed leading to a series of inept military leaders. Jerry Rawlings, a Flight Lieutenant, gets fed up with it, and launches a coup, captures the former tyrants and kill them all in a very violent purge. Then he puts a democratic leader in power and quits. But the leader doesn’t quite work out, so Rawlings launches a second, less violent coup, and takes over.
Rawlings is a populist and something of a Marxist. He things western capitalism hasn’t worked and doesn’t believe in multiparty democracy. Rather he wants public committees to run the country. He’s basically Marxists but also pragmatic. No faith in the West he goes to the USSR for money. “Hey Russia can you spare a dime for an African country that’s been down on its luck and is going Marxist?”
But this is now the early 1980s and Soviets are broke. “We appreciate the love,” Says the Soviets, “But we’re broke.”
For Jerry Rawlings, this sucks. He knows he’s about a year from a complete economic meltdown and he needs some credit to maintain liquidity for his economy. So he goes over to the World Bank/IMF and asks for a help.
“OK,” Says the Washington boys, “We’ll help you out but you are going to have to make some changes and they are going to hurt.”
Rawlings says ok, and it does hurt. Social services are cut, bureaucrats are downsized. Privatization, death to subsidies, the usual. Things look dicey for Rawlings. But Rawlings does something smart- he knows he needs to make the changes and begins to pursue a very pro-rural policy and starts providing services to the agricultural groups. This works and things start looking better.
But then the World Bank/IMF says, “Well you’ve done what we’ve asked economically, but we also want to see some political changes. We want good government.” Good government is another way for the World Bank to say democracy.
Now Rawlings hates democracy, but again he hates the thought of getting whacked even more. He hates parties, but he figures he’s got no choice.
So he runs, on a pro-rural platform, and wins.
So yeah, the Washington powerbrokers got what they wanted, but not necessarily a coup d’etat. They didn’t get what they wanted in Liberia and Zaire, but they also didn’t go coup happy. So the connection between the World Bank/IMF and coups is over-extended conspiracy theory.
That the World Bank/IMF often complies with US policy- yeah, absolutely.
So a few quick points-
US and European companies often succeed because they are really fucking big. I mean there are companies that make more than some countries GNPs. That plus lots of influence and control over local markets goes a long way.
Jebus- actually the world goes through peaks and valleys of globalization. One big peak of globalization ended right before World War 1. Another peak of anti-globalization ended after World War 2.
Corruption happens everywhere. The US has plenty of corruption and states vary in how corrupt they are. Just in New York, some political districts are more corrupt than others. In the south corruption takes many forms. Part of the problem lies in what you call corruption. Is it just rent seeking? Or are there differences in the kinds of corruption. For instance both the Philippines and South Korea had corruption (as Kang’s book Crony Capitalism points out). But in one country, the economy was crippled, while another had tremendous growth.
But maybe the problem isn’t whether corruption, but what controls the corruption and the kind of corruption you have. Institutions, even corrupt ones, are the creations of men who often organize in groups. So we should not think in terms of institutions, which have no life but that given to them by men, but the people who are served by institutions. Again, the point- institutions are the consequence of distributional struggles among social groups. This includes whether you have a democracy or a authoritarian state, or even how much either is corrupt.
Kharn is right that democracies can be as corrupt as authoritarians. Saying that taxes are a form of intervention, yes. But what determines tax policies- who has the burden of taxation, who does the government subsidies or penalize,. Who gets favor in credit or contracts? Again those are political decisions.
It is interesting that democracies with a per capital income of $6,000 don’t become authoritarian. However, democracies that make less than that are often very prone to authoritarian reversal. Why? Because it’s a damn difficult jump up to $6K per capital GNPS, and economic transition isn’t easy. More about that later.
Saying that corruption leads to collapse- not exactly. The US was very corrupt at the turn of the 19th to 20th centuries, yet this was also a time of tremendous economic growth. Roosevelt becomes popular in part because he fights corruption. Wilson gets elected because the political bosses think they can control him. That all the supreme court judges are corporate lawyers reflects the power of big business vs other groups (labor) to determine what the law means. Yet, things can also change.
Assuming that government leaders are beholded to some higher than life normative rules may be a bit foolish. More importantly, they are constrained by their political conditions which give them limited autonomy to do what they want. As Tilly says, earlier state builders were less men with vision to create lasting legacies, but more like criminals of mafias trying to stay in power and get more power. Things haven’t changed that much.
And its foolish to say all intervention is bad. Examples given above illustrate that intervention is often necessary for economies to undergo transition and its foolish to think that governments will keep their hands out of the economy, from which they extract the revenue to function as states as well as make the ruling class rich. If the economy falls apart, so might their tenure of rule. In developed democracies politicians who neglect the economy lose elections (or pick on minorities as targets), in developing states they might end up getting shot.
Ok, back to the point about Romania and Ratty’s arguments- If you look at countries that are undergoing economic transition now among former communist states of Eastern Europe you might find they are very similar to what the states of South America suffered. And it should be noted that countries of South America were often corporatist states in which economic and political elites often worked hand-in-hand.
Like Eastern Europe, these states suffered, and continue to suffer economic transition. Privatization leads to foreign companies buying up their assets, cuts in social spending hurt subordinate classes, unemployment is the result of companies being broken up or cut apart and lose government support, corrupt politicians seek opportunities, and bureaucracies are bloated and inefficient if not corrupt.
But let’s also be clear about a few things. No one invites the World Bank or the IMF into their country unless they are already in economic trouble. Sometimes, as in Indonesia during the ’97 crisis, the economy had melted and needs to go to the IMF/WB to get out of it. Other times, state leaders realize that they are facing inevitable downtrends and need to make changes, and furthermore need outside help. In any event, these are folks looking at a longterm, downward trend and need help.
The job of the World Bank and the IMF is not to cure all ills, especially not the IMF (the World Bank is a bit more socially sensitive). The IMF is about putting the economic house back in order and to do it quickly. The World Bank is a bit more about long-term change.
So you have what might be a long and inevitable decline in the economy or a collapsed economy- either way the people are going to feel the pain and either way they are going to suffer. So blaming the IMF and the World Bank for the suffering tends to miss the point that those economies are already in trouble- often from domestic causes.
Whether that’s because of globalization? Globalization has been great for developed and middle income countries. Poor countries often get screwed by increased inequalities. Why? Most poor countries export primary commodities and over the last 30 years primary commodities have generally lost value in relation to manufactured goods and services. Poor get poor and the rich get richer. The trick, if you’re poor is to diversify and industrialize, and if not that, at least start making a profit on your commodities. That has also been difficult. Taxes on commodity exports are often so high they promote moving those commodities outside the formal market and into the informal markets (in other words, you are better off smuggling your coffee over the border than working through the government’s marketing board). Why are those taxes so high? Because countries have to tax those exports for the revenue they need to function and for the ruling class to stay in power. This also maintains an urban bias (discussed in Bates, mentioned in the last post) at the expense of rural classes.
Supporting primary commodity production (natural resources or cash crops) is one of the big mistakes of the IMF/World Bank- fostering commodity production over industrialization. Again, it’s the liberal faith in comparative advantage- but by favoring commodities you not only force economies to rely on a very unstable international exchange, but you also saturate the market with cheap goods. Ratty- this is where the developed states really make a killing through world bank/IMF policies- cheaper primary commodities means cheaper manufactured goods.
Ok, back to our problem. The economies already in trouble, or it soon will be. The IMF’s job is to clean house and make changes. The World Bank is a bit different in trying for more social beneficial social changes. The question is whether the policies of the World Bank will hurt more than not.
Part of this goes to the problem of Structural Adjustment Policies and Conditionalities. If the international lenders don’t make both chances are those economies will do the same thing as was before, and thus perpetuate the problem. In the late 1970s many African countries borrowed extensively from private lenders to continue making payoffs to favored companies and bloated bureaucracies- perpetuating their problem. Since the goal of the IMF/World Bank is to prevent future problems- they want to condition changes in those economies so they don’t do another nose dive.
Ratty what you are talking about is that chances are things get worse before they get better. Thus the dramatic and very painful transitions- the idea is that the economy will reform and come out stronger. But sometimes to create you must destroy first. And economic transitions are going to painful. But they are often unavoidable.
Thus the shock treatment. The belief is that if you don’t do everything at the same time, you won’t fix all the problems. And furthermore, transitions take time and some faith in market forces, yet the future is unknown.
This also creates a question, did these countries suffer so much because of the changes or because they often resist the changes and don’t fully implement them? Sometimes half measures may be worse. Do the shock treatments work? Don’t forget that it often takes many years for a economies to change and often a long time to get back to the levels of quality (GNP per capita, standards of living) that existed before crisis became inevitable.
But is that necessarily imperialism of the US? Does it foretell coup d’etat.
Remember, these economies are already in trouble. The examples in the last post suggest that whether the economies are in trouble has much to do with the domestic policies of states prior to crisis. Let’s also go back to that idea- institutions are a consequence of distributional struggles between social actors over material gains. When material gains become fewer, those struggles become increasingly intense. SO during economic crisis students protest, labor strikes, business leaders bribe, and the military coups. When things get intense, the military has an interest to see that it’s interests are sustained. So they coup.
Not to say the US doesn’t sometimes encourage coups, but not all coups during transition periods are the fault or expected by the US.
For example, it is doubtful that the US wanted a coup against Tolbert in Liberia or expected the coup by Doe. Taylor, who leads the effort against Doe was supported by Libya, not the US. The US certainly didn’t want a coup against Mobutu during most of Mobutu’s tenure. When the US decides to favor Kabila, it’s partially because the French are supporting the Hutus against the Tutsis and the Hutus are launching raids against Rwanda from Congo territory. The US had also been favorable to Suharto for a long time before he fell from power. The regime change is largely orchestrated by the military without become a real coup, and mostly because the military wants to keep the country stable.
Nor does all that that the World Bank/IMF do lead to evil. In Mauritius, the IMF helped overcome a period of trouble when a cyclone devastated the sugar crop. World Bank officials helped the Government Botswana carry out inoculations against diseases that protected that countries cattle. In Indonesia, the IMF/World Bank demanded that Suharto divest itself from a number of banks that were held by the Suharto family and which had allowed the Suharto clan to have a piece of every major economic project in that country (making them very rich).
But at the same time, countries often don’t comply with World Bank conditions, and sometimes it’s the failure to abide that allows them to perpetuate the problem. The World Bank and the IMF eventually gave up on giving money to Suharto because the guy never made significant political changes. Same with Doe. Frustration in paying for those predatory leaders led the US to abandon them after the Cold War ended. The US quits Doe in Liberia in 1989, the same year Taylor invades and within a year Doe is killed by other warlords. Mobutu hangs on a bit more by being pals with the French after the US quits him, but is gone by ’94 as he dies of prostate cancer and Kabila is conquering the country. They are not give a coup, but are left to domestic rivals.
Both Doe and Mobutu stayed in power not just because they got money, but also because they were able to manipulate domestic markets to their own ends.
But then you got to consider Ghana.
In the late 1970s Ghana was essentially a collapsed state in which coups were the main way regimes changed leading to a series of inept military leaders. Jerry Rawlings, a Flight Lieutenant, gets fed up with it, and launches a coup, captures the former tyrants and kill them all in a very violent purge. Then he puts a democratic leader in power and quits. But the leader doesn’t quite work out, so Rawlings launches a second, less violent coup, and takes over.
Rawlings is a populist and something of a Marxist. He things western capitalism hasn’t worked and doesn’t believe in multiparty democracy. Rather he wants public committees to run the country. He’s basically Marxists but also pragmatic. No faith in the West he goes to the USSR for money. “Hey Russia can you spare a dime for an African country that’s been down on its luck and is going Marxist?”
But this is now the early 1980s and Soviets are broke. “We appreciate the love,” Says the Soviets, “But we’re broke.”
For Jerry Rawlings, this sucks. He knows he’s about a year from a complete economic meltdown and he needs some credit to maintain liquidity for his economy. So he goes over to the World Bank/IMF and asks for a help.
“OK,” Says the Washington boys, “We’ll help you out but you are going to have to make some changes and they are going to hurt.”
Rawlings says ok, and it does hurt. Social services are cut, bureaucrats are downsized. Privatization, death to subsidies, the usual. Things look dicey for Rawlings. But Rawlings does something smart- he knows he needs to make the changes and begins to pursue a very pro-rural policy and starts providing services to the agricultural groups. This works and things start looking better.
But then the World Bank/IMF says, “Well you’ve done what we’ve asked economically, but we also want to see some political changes. We want good government.” Good government is another way for the World Bank to say democracy.
Now Rawlings hates democracy, but again he hates the thought of getting whacked even more. He hates parties, but he figures he’s got no choice.
So he runs, on a pro-rural platform, and wins.
So yeah, the Washington powerbrokers got what they wanted, but not necessarily a coup d’etat. They didn’t get what they wanted in Liberia and Zaire, but they also didn’t go coup happy. So the connection between the World Bank/IMF and coups is over-extended conspiracy theory.
That the World Bank/IMF often complies with US policy- yeah, absolutely.
Phil the Nuka-Cola Dude
Sonny, I Watched the Vault Bein' Built!
Dude...thats a damn book!
TheWesDude
Sonny, I Watched the Vault Bein' Built!
i also think that the IMF/WB are far too invasive on their required changes especially when economies start making an upturn under an exsiting government.
c0ldst33ltrs4u
Vault Dweller
The IMF/World Bank is made up of the best economists and such Europe has to offer so they are pretty sure they are giving the right advice and they expect it to be followed. On the other hand theories that look good on paper may be shit when put into practice...
welsh
Junkmaster
I agree. The World Bank and the IMF take too much sovereignty away from the state, rob them of necessary revenue, and don't have any real notion of the local contextual factors. All valid problems.
Yes, the World Bank is made up of some of the best economicst, but not just of Europe but all over the world. Lots of folks from Latin America and Europe.
And once they get to Washington they don't want to leave. Rather they want to toe the line and keep their nice house, SUVs and send their kids to good american schools becuase of their nice living standards- so the rule of thumb is worry about your own career. Plus you get a brain drain from countries that can't afford to lose good people.
Economic theories change all the time. Washington Consensus became the Post Washington Consensus.
And they make some pretty stupid fucking arguments.
This is what inspired my dissertation work-
http://www.worldbank.org/research/conflict/papers/greedandgrievance.htm
Is wrong, yet because its World Bank stuff shapes policies.
That said, I think a lot of this -
http://www.worldbank.org/research/conflict/papers/fajnzy.htm
and
http://www.worldbank.org/research/conflict/crime.htm
is pretty good. It's nice to see someone is thinking about these questions at least.
Yes, the World Bank is made up of some of the best economicst, but not just of Europe but all over the world. Lots of folks from Latin America and Europe.
And once they get to Washington they don't want to leave. Rather they want to toe the line and keep their nice house, SUVs and send their kids to good american schools becuase of their nice living standards- so the rule of thumb is worry about your own career. Plus you get a brain drain from countries that can't afford to lose good people.
Economic theories change all the time. Washington Consensus became the Post Washington Consensus.
And they make some pretty stupid fucking arguments.
This is what inspired my dissertation work-
http://www.worldbank.org/research/conflict/papers/greedandgrievance.htm
Is wrong, yet because its World Bank stuff shapes policies.
That said, I think a lot of this -
http://www.worldbank.org/research/conflict/papers/fajnzy.htm
and
http://www.worldbank.org/research/conflict/crime.htm
is pretty good. It's nice to see someone is thinking about these questions at least.
Gonzalez
Sonny, I Watched the Vault Bein' Built!
I have been a bit distant from this forum, and haven’t been able to read this thread before, so my comment can reflect that, if that’s the case I apologize.
Well now, I think we have been saying this in Argentina for... I don't know, the last two decades? At least the last two decades.
Let me describe you the Argentinean case in a short condensed version. Most of the problems started under the last dictatorship (1970's) when the military government, a very brutal and repressive one, which committed numerous atrocities (political jailing, kidnaps, torture and murder) carried on an awful economical administration which leaded the country to accept huge loans from the IMF. The IMF fully supported this bloody regime, even providing loans to buy new weapons (some of those used in the Falklands War, like the French Exocet missile, which sunk several Royal Navy ships).
When the dictatorship retired and called upon elections, the country was left with an astronomical debt to be paid (at this point a rather illegal debt), that grows even grater with questionable policies that absorbs the debt of private companies and sum them up to the country's external debt.
At this day we are still paying that debt, based in the exportation of agricultural products mostly, while our internal market suffers from the high prices given by an economy which finds most of its profits from the international market. This leaves the Argentineans only with scraps (at a very high price, which is only maintained from growing even higher because of the low salaries), while our best production is exported abroad.
Now, let’s assume for a moment that money is noting but air, some numbers in a bank account that doesn’t really mean anything, except the hypothetical value humans give to it (which I think that is what money actually is). So this means Argentina is exporting most of its production to be consumed abroad for nothing but air (or call it debt interests), while most Argentinean citizens are left with minimal resources for basic subsistence and many others not even with that.
Well now, I think we have been saying this in Argentina for... I don't know, the last two decades? At least the last two decades.
Let me describe you the Argentinean case in a short condensed version. Most of the problems started under the last dictatorship (1970's) when the military government, a very brutal and repressive one, which committed numerous atrocities (political jailing, kidnaps, torture and murder) carried on an awful economical administration which leaded the country to accept huge loans from the IMF. The IMF fully supported this bloody regime, even providing loans to buy new weapons (some of those used in the Falklands War, like the French Exocet missile, which sunk several Royal Navy ships).
When the dictatorship retired and called upon elections, the country was left with an astronomical debt to be paid (at this point a rather illegal debt), that grows even grater with questionable policies that absorbs the debt of private companies and sum them up to the country's external debt.
At this day we are still paying that debt, based in the exportation of agricultural products mostly, while our internal market suffers from the high prices given by an economy which finds most of its profits from the international market. This leaves the Argentineans only with scraps (at a very high price, which is only maintained from growing even higher because of the low salaries), while our best production is exported abroad.
Now, let’s assume for a moment that money is noting but air, some numbers in a bank account that doesn’t really mean anything, except the hypothetical value humans give to it (which I think that is what money actually is). So this means Argentina is exporting most of its production to be consumed abroad for nothing but air (or call it debt interests), while most Argentinean citizens are left with minimal resources for basic subsistence and many others not even with that.
welsh
Junkmaster
Except Gonzales, those numbers are not just air but the means of exchange. Those numbers carry value.
The reason why countries don't cancel huge debts and must usually make payments on debts, is the same reason why the US government must pay off bonds- because it shows creditors that you honor your debt commitments and make good on the loans given you.
IMF, back in the 70s, was not about government reform- but about avoiding economic meltdown. World Bank is a little better, but they give a lot of money to poor countries.
1970s- Oil shocks lead to two different phenomena-
(1) Oil countries get really rich and have surplus capital and little to do with it- so they begin to deposit it in banks that are looking to extend credit as much as they can. And countries look like good risks (except that you can't foreclose on a country).
(2) Most of the developing countries need cash. Part of that has to do with the oil shocks that made the sheiks rich. The oil shocks hit the OECD countries hard, but really put a hurt on developing countries with their crappy infrastructure, high costs and need for agricultural inputs that often derive from petroleum products.
But developing countries are also trying to shore of quick industrialization that benefits internal elites- Import Substitition Strategies adn lots of protection of local industry. Plus big expensive national projects that get people employed but also show prestige. Case in point Brasilia is built over a practical swamp with the intention of being a modern city with modern architecture.
So these governments borrow heavy. But the problem becomes increased costs in exports of companies that can't compete. Domestic markets are not big enough for domestic industry, which is making it good do to protection by the state. Can't fire people from the bureaucracies because unemployment is a bad thing.
So the countries slip deeper and deeper into debt. But that's ok, because sooner or later the commodity markets will turn around.... but never do. Well, the banks are still willing to lend big bucks- because now they are so worried that the countries will default on their loans that they are willing to extend even more credit.
This is what creates roll-over deficit- when the country borrows to pay back prior loans, and while this happens the economy begins to slip and fall and the 1980s becomes a lost decade for many developing states.
So forgive the debt? Yeah. I'd like to see that debt go down and be forgiven because the truth is, part of the problem is that of the stupid bankers. But total debt relief? That would also cause some problems- because debt and credit have value too.
The reason why countries don't cancel huge debts and must usually make payments on debts, is the same reason why the US government must pay off bonds- because it shows creditors that you honor your debt commitments and make good on the loans given you.
IMF, back in the 70s, was not about government reform- but about avoiding economic meltdown. World Bank is a little better, but they give a lot of money to poor countries.
1970s- Oil shocks lead to two different phenomena-
(1) Oil countries get really rich and have surplus capital and little to do with it- so they begin to deposit it in banks that are looking to extend credit as much as they can. And countries look like good risks (except that you can't foreclose on a country).
(2) Most of the developing countries need cash. Part of that has to do with the oil shocks that made the sheiks rich. The oil shocks hit the OECD countries hard, but really put a hurt on developing countries with their crappy infrastructure, high costs and need for agricultural inputs that often derive from petroleum products.
But developing countries are also trying to shore of quick industrialization that benefits internal elites- Import Substitition Strategies adn lots of protection of local industry. Plus big expensive national projects that get people employed but also show prestige. Case in point Brasilia is built over a practical swamp with the intention of being a modern city with modern architecture.
So these governments borrow heavy. But the problem becomes increased costs in exports of companies that can't compete. Domestic markets are not big enough for domestic industry, which is making it good do to protection by the state. Can't fire people from the bureaucracies because unemployment is a bad thing.
So the countries slip deeper and deeper into debt. But that's ok, because sooner or later the commodity markets will turn around.... but never do. Well, the banks are still willing to lend big bucks- because now they are so worried that the countries will default on their loans that they are willing to extend even more credit.
This is what creates roll-over deficit- when the country borrows to pay back prior loans, and while this happens the economy begins to slip and fall and the 1980s becomes a lost decade for many developing states.
So forgive the debt? Yeah. I'd like to see that debt go down and be forgiven because the truth is, part of the problem is that of the stupid bankers. But total debt relief? That would also cause some problems- because debt and credit have value too.
An interesting read. It's still empty words on paper, however. The ones who have the power to commit such changes to world's economies are the ones who would find such changes most detrimental. If anything, economic trends in almost all countries are opposite to what World Bank (declaratively) encourages.
The study of economics can literally cause ones brain to melt if you delve to deep into the details and analysis of it, well, at least in my case. While Welsh makes some outstanding points I can’t help but consider how one can use the African example without making more than a passing mention of corruption. Having spent more time in some of the worse parts of that place than I care to recollect I can say that while on a global level part of the problem there may be the manipulations of super powers on a domestic level you can almost always find the first and largest point of failure in the corruption of the local governments.
It is not just the corruption mind you; I would dare say that every governmental organization has its fair share of corruption, grafts, bribes and the like, however in Africa there is a noticeable lack of accountability. The place is so barbaric and so un-civilized that for every attempt at making the place better, someone is paying a price for it and the vast majority of the time it is the people who would be helped. Then there is the AIDS issue, coupled with the apparent indifference to the plight of the people by most of the world… Heartbreaking.
I don’t trust the IMF and the like myself. I consider myself a reformist and to some degree an isolationist, and while I do appreciate the value of trying to help to there feet those that cannot stand on there own; the corruption inherent in such organizations of that size goes unchecked brings it to the point of where they may be better off if just left to their own devices.
I don’t believe that America is the evil beast some would make her out to be, but she has corruption issues and is without a doubt not benevolent or entirely altruistic entity some others would have her people believe her to be either. However, with that in mind the reference someone once made to throwing stones while living in a glass house holds some weight. After all the starving man or dying child does not care where the aid comes from or what the ulterior motives of the deliver are, they only care that it comes in time.
It is not just the corruption mind you; I would dare say that every governmental organization has its fair share of corruption, grafts, bribes and the like, however in Africa there is a noticeable lack of accountability. The place is so barbaric and so un-civilized that for every attempt at making the place better, someone is paying a price for it and the vast majority of the time it is the people who would be helped. Then there is the AIDS issue, coupled with the apparent indifference to the plight of the people by most of the world… Heartbreaking.
I don’t trust the IMF and the like myself. I consider myself a reformist and to some degree an isolationist, and while I do appreciate the value of trying to help to there feet those that cannot stand on there own; the corruption inherent in such organizations of that size goes unchecked brings it to the point of where they may be better off if just left to their own devices.
I don’t believe that America is the evil beast some would make her out to be, but she has corruption issues and is without a doubt not benevolent or entirely altruistic entity some others would have her people believe her to be either. However, with that in mind the reference someone once made to throwing stones while living in a glass house holds some weight. After all the starving man or dying child does not care where the aid comes from or what the ulterior motives of the deliver are, they only care that it comes in time.