SELL THE LEXUS, BURN THE OLIVE TREE: Globalization and Its Discontents
I was getting myself measured for a straitjacket when I received an urgent message from Bolivia.
The jacket 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 in Cleveland to debate Friedman at the Council on World Affairs meeting in May 2001. Globalization, he told the council, is all about the communications revolution. It’s about the Internet. It’s about how you can sit in your bedroom, buy shares in Amazon.com and send e-mails to Eskimos all at the same time, wearing your pajamas.
According to Friedman, we are “connected” and “empowered” and “enabled.” And if that isn’t cool enough by itself, globalization makes economies grow. Any nation on the planet that takes the pledge and follows the map can open the hidden gold mine. Poverty will end, as will the tyrannies of government. And every Bolivian will 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 political economic garment of globalization,” Friedman says. And, he explains, the tighter you wear it, “the more gold it produces.”
Friedman is talking—figuratively, of course—about the latest economic fashion, “tailored by Margaret Thatcher.” Ronald Reagan, he adds, “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 and capital markets, free the banks to speculate in currency and shift capital across borders. But don’t stop there. Open every nation’s industry to foreign trade, eliminate those stodgy old tariffs and welcome foreign ownership without limit; wipe away national border barriers to commerce; let the market set prices on everything from electricity to water; and let the arbitrageurs direct our investments. Then haul those old government bureaucracies to the guillotine: cut public pensions, cut welfare, cut subsidies; let politics shrink and let the marketplace guide us.
Selling these rules is easy work, he said and grinned, as there is no dissent. Yes, there were tree-hugging troublemakers demonstrating in Seattle. But as Britain’s prime minister Tony Blair said, “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 let’s 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 then I received this note-an e-mail—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 the Bolivians were protesting that they couldn’t unload their Amazon.com shares.
The message ended: “Oscar is missing. His whereabouts are unknown.” Didn’t Oscar know that he was “connected and enabled”?
This reminded me that a large cache of documents had recently fallen into my hands. They came from the deepest files of the World Bank and 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, memos from the secretariats—the real stuff of globalization—from inside the organizations that dream up, then dictate, the terms of the new international economics.
There was nothing here about Eskimos on cell phones, but I did find an awful lot about cutting Argentine pensions by 13 percent, breaking up unions in Brazil. . . and raising water prices in Bolivia, all laid out in chilling techno-speak 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 that work to suck the blood of Bolivians and steal gold from Tanzania. But the tree huggers are wrong; the details are far more stomach-churning than they even imagine. In March 2001, when Ecuador’s government raised the price of cooking 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 80 percent increase in the price of domestic fuel, knowing this could set the nation ablaze. It’s as if the riots were scheduled right into the plan.
And they were. That’s 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 as well as the response were programmed, the latter referred to euphemistically as”resolve”—the police, the tanks, the crackdown.
I threw off my straitjacket and began to write. And that’s what you’ll find in this chapter: my reports explicating lists of “conditionalities” (167 for Ecuador) required by the World Bank and IMF for their loans; unpublished proposed terms for implementing article VIA of the GATS treaty under the World Trade Organization; intellectual property rules under something called the “TRIPS” agreement, which determines everything from breast cancer treatment to Dr. Dre’s control of rap music: all the dirty little facts of globalization as it is actually practiced. And you can read it in your pajamas.
You’ll also find out why Oscar was missing; he was seized, in fact, by Bolivia’s own globalization enforcement army.
Friedman ended his talk—it turns out 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
Get this: I was standing in front of the New York Hilton Hotel during the big G7 confab in 2000, the meeting of presidents, prime ministers and their financiers, when the limousine carrying International Monetary Fund director Horst Kohler zoomed by and hit a bump. Out of the window flew a report titled “Ecuador Interim Country Assistance Strategy.” It was marked “Confidential. Not for distribution.” You may 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 International Monetary Fund had it all wrong. Globalization, Giddens seemed 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.) Why on earth would anyone protest against this happy march into the globalized future?
So I thumbed through my purloined IMF “Strategy for Ecuador” searching 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 percent by November 1, 2000.* Also, the government had to eliminate twenty-six thousand jobs and cut real wages for the remaining workers by 50 percent in four steps and on a timetable specified by the IMF. By July 2000, Ecuador had to transfer ownership of its biggest water system to foreign operators, then grant British Petroleum rights to build and own an oil pipeline over the Andes.
*It annoys me something fierce when I expose some institution and they don’t respond with a complaint, comment or a lawsuit. But from the IMF and World Bank honchos—nothing. Turns out I hadn’t looked on the right continent: in fact, the World Bank wrote a long response to this expose and published it in an African newspaper. That was odd. Odder still, in defense of their wacko, destructive plans for Ecuador, they simply denied the documents existed. Figure 4.1 shows a page from one of the documents that doesn’t exist.
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’état.
The IMF would counter that it had no choice. After all, Ecuador was flat busted, thanks to the implosion of the nation’s commercial banks. But how did Ecuador, once 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 the nation’s government to take over the soured private debts Ecuador’s elite owed to foreign banks. For this bailout of U.S. and local financiers, Ecuador’s government borrowed $1.5 billion from the IME 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.
Fig. 4.1. IMF and World Bank documents. Several stacks of documents walked out of the IMF and World Bank that dictate everything from the price of cooking oil in Ecuador to a $40 cut in the monthly pay of Argentines on a public works program.
[Figures can be seen here, in the PDF at the end of the article.]
How the IMF Cured AIDS
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 what were previously free hospital appointments. Since the Bank imposed this requirement, the number of patients treated in Dar es Salaam’s three big public hospitals has dropped by 53 percent. The Bank’s cure is working!
The IMF World Bank helpers also ordered Tanzania to charge fees for school attendance, then expressed surprise that school enrollment dropped from 80 percent to 66 percent.
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 from any commercial bank without IMF blessing (except China, whose output grows at 5 percent 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. The IMP’s love-the-market experts wasted no time in cutting trade barriers, limiting government subsidies and selling off state industries. The World Bank’s shadow governors worked wonders. According to World Bank watcher Nancy Alexander of Citizens’ Network on Essential Services (Maryland), in just fifteen years Tanzania’s GDP dropped from $309 to $210 per capita, literacy fell and the rate of abject poverty jumped to 51 percent of the population. Yet, the World Bank did not understand why it 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.”
When Larry Landed
It wasn’t always thus, this affection for pricing, not people. The World Bank and IMF were born in 1944 with simple, laudable mandates—to fund postwar 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, hemorrhaging 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 loans. While the particulars varied from nation to nation, in every case the rollover 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’ policies after 1980 resulted from Ronald Reagan’s election that year as president, the quickening of Mrs. Thatcher’s powers in England and the ascendancy of “neoliberal” (free market) policy. My own theory 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 U.S. 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, the Financial Times’ 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. Before 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 was built through government investment and high tariffs, anathema to the free marketeers. In those Dark Ages (1960-80) of increasing national government control and new welfare schemes, per capita income grew 73 percent in Latin America and 34 percent in Africa. By comparison, since 1980, the Reagan/Thatcher model has seen Latin American growth come to a virtual halt—growth of less than 6 percent over twenty years and African incomes decline by 23 percent.
Now let’s count the corpses: From 1950 to 1980, socialist and welfare statist 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 gotten brutish and decidedly shorter. Since 1985, in fifteen 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.” No, 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 one-fifth of the world population has regressed. This is arguably,” the IMF concedes, “one of the greatest economic failures of the 20th Century.” And that, Professor Giddens, is a fact.
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 in a scene out of a Le Carre novel. 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. Here before me was a catch far bigger 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 during a big confab of the World Bank and the International Monetary Fund in April 2001. Instead of chairing the meetings of ministers and central bankers as he used to, Stiglitz was kept safely exiled 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 a discreet “retirement”; U.S. Treasury Secretary Larry Summers, I’m told, demanded a public excommunication for Stiglitz’s having expressed his first mild dissent from globalization World Bank-style. In Washington we talked about the real, often hidden, workings of the IMF, World Bank and the bank’s 51 percent owner, the U.S. Treasury.*
*The interviews were for the London Observer and BBC Television’s Newsnight. See a tape of a segment of the interview and read a long excerpt from the interview with the Dangerous Dissenter at www.GregPalast.com/Stiglitz/.
In addition to the Ecuador document, I had by 2001 obtained a huge new cache of documents, from sources unnamable, from inside the offices of his old employer, marked “confidential,” “restricted” and “not otherwise [to be] disclosed without World Bank authorization.” Stiglitz helped translate these secret “Country Assistance Strategies” from bureaucratese.*
*The documents did not come from Dr. Stiglitz. I’m not kidding. He never, ever gave me a confidential document. He didn’t have to: So many people in the IMF and World Bank are sick to death of what their bosses make them do, I’m never short of inside info.
There is an Assistance Strategy specially designed for each nation, says the World Bank, following careful in-country investigations. 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,” predrafted for his “voluntary” signature (I have a selection of these).
Each nation’s economy is individually analyzed; then, according to Stiglitz, the Bank hands every minister the exact same four-step program.
Step 1 is Privatization—which Stiglitz says could more accurately be called “Briberization.” Rather than object to the sell-offs of state industries, he says national leaders—using the World Bank’s demands to silence local critics—happily flog their electricity and water companies. “You could see their eyes widen” at the prospect of 10 percent commissions paid to Swiss bank accounts for simply shaving a few billion off the sale price of national assets.
And the U.S. government knows it, charges Stiglitz—at least in the case of the biggest “briberization” of all, the 1995 Russian sell-off. “The U.S. Treasury view was this was great as we wanted Yeltsin reelected. We don’t care if it’s a corrupt election. We want the money to go to Yeltsin” via kickbacks for his campaign.
I have to interject that 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 heinous for Stiglitz is that the U.S.-backed oligarchs’ corruption stripped Russia’s industrial assets, cutting national output nearly in half, causing economic depression and starvation.
After briberization, Step 2 of the IMF/World Bank’s one-size-fits-all rescue-your- economy plan is Capital Market Liberalization. This means repealing any nation’s law that slows down or taxes money jumping over the borders. In theory, capital market deregulation allows foreign banks’ and multinational corporations’ investment capital to flow in and out. Unfortunately, in countries like 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 percent, 50 percent and 80 percent.
“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 and the nation exploded into riots. There are other examples—the Bolivian riots over water price hikes pushed by the World Bank in April 2000 and, in early 2001, the riots in Ecuador over the rise in domestic gas prices that we found in the secret Ecuador “Assistance” program. You’d almost get the impression that the riot is written into the plan.
And it is. For example, we need only look at the confidential “Interim Country Assistance Strategy” for Ecuador. In it the Bank states—with cold accuracy—that they expected their plans to spark “social unrest,” their bureaucratic term for a nation in flames.
Given the implosion of the economy, that’s not surprising.
The secret report notes that the plan to make the U.S. dollar Ecuador’s currency has pushed 51 percent of the population below the poverty line, what Stiglitz called their squeeze-until-they-explode plan. And when the nation explodes, the World Bank “Assistance” plan is ready, telling the authorities to prepare for civil strife and suffering with “political resolve.” In these busted nations, “resolve” means tanks in the street.
Each new riot (and by “riot” I mean “peaceful demonstration dispersed by batons or bullets”) causes panicked flights of capital and government bankruptcies. Such economic arson has its bright side, of course—foreign corporations can then pick off a nation’s 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 to 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 the country’s financiers and, by extension, the U.S. and European banks from which they had borrowed.
A pattern emerges. There are lots of losers in this system, but two clear winners: the Western banks and U.S. Treasury. They alone make the big bucks from this crazy new international capital chum. For example, Stiglitz told me about an unhappy meeting, early in his World Bank tenure, with the president who had just been elected in Ethiopia’s first democratic election. The World Bank and IMF had ordered Ethiopia to divert European aid money to its reserve account at the U.S. Treasury, which pays a pitiful 4 percent return, while the nation borrowed U.S. dollars at 12 percent 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 U.S. 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 America and Africa, while barricading their own markets against Third World agriculture.
In the Opium Wars, the West used military blockades to force markets open 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 “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 they unpleasantly call “triggers.” Taking a World Bank loan for a school “triggers” a requirement to accept every “conditionality”—they average 114 per nation—laid down by both the World Trade Organization and IME 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 are never instituted democratically, and thereby, says Stiglitz, “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. Okay, Mr. Smart-Guy Professor, how would you help developing nations? Stiglitz proposed radical land reform, an attack at the heart of what he calls “landlordism,” on the usurious rents charged by propertied oligarchies worldwide, typically 50 percent of a tenant’s crops. 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 [the Bank's] agenda.” Apparently not.
Ultimately, what drove Stiglitz to put his job on the line was the failure of the Bank and U.S. 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 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.
Equal Time for Briberizers
Let’s be fair. There’s two sides to every story, so I sought the World Bank’s and the IMF’s. A version of this story was first published in The Big Issue—a magazine the homeless flog outside London tube stations. The 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.” At first, they denied the existence of quoted documents. . . such as the one whose cover is reproduced here as figure 4.1.
Denial is no longer an option for the IMF, but their attacks continue, most cruelly, against Professor Stiglitz. As to the World Bank, I had the opportunity to debate these matters with the Big Kahuna himself, James Wolfensohn, the World Bank’s president. After the initial publication of this book, on February 15, 2002, CNN Television asked me to appear in response to a Wolfensohn interview praising his own work at the World Bank. I thought, maybe he’d like to discuss some of these “assistance” plans; after all, they had his signature on them. But then I was called by an assistant producer. “If Greg Palast is allowed on,” she said, the World Bank would not let the Wolf appear, nor could they even use his prerecorded words. “They [the World Bank] really hate you.” Heavens! In the end, CNN did the courageous thing and barred me from the studio.*
*Like I say, every story has two sides—the truth and the spin. After the young CNN producer told me I was spiked, I said, “That will make a fun story.” I then received a parade of messages and calls from CNN network operatives with various conflicting stories of what happened, though none denied that the World Bank demanded I be silenced.
Trying to get a defense of “briberization” was even more difficult. Not many executives fess up to payments of easy squeezy. There was a Mobil Oil executive who told a court that it was “the normal course of things” for the oil company (now a division of ExxonMobil) to “buy off” (Mobil’s term) British members of parliament with consulting fees in return for support on legislation. (Because bribing a member of Parliament was not against the law until recently, Britain remains one of the few places where purchasing a politician remains a bargain.) But ExxonMobil won’t give me the list of their “consultants.”
But then I had a stroke of luck. A big-name London corporate lawyer told me that he’d met the chairman of international construction giant Balfour Beatty Corporation, which builds everything from Amtrak lines in the USA to giant hydroelectric dams, like the one at Pergau in Malaysia. The lawyer told me that in 1997, at a cocktail party, he and the corporate chief, “. . . were talking about corruption. He announced with enormous pride that he personally had handed over the check to the government minister for the Pergau Dam bribe.” My source then regretted his statement.
But it just so happened I had my tape recorder on. Yet, I recognized that, despite the stature of my source, it was still hearsay. So I sent Balfour Beatty a letter: “Did Balfour Beatty pay bribes in Malaysia—yes or no?” Receiving no response, I printed the accusation against Balfour Beatty among a list of several other grease jobs.
Now I was in Trouble. Balfour Beatty’s spokesman, Mr. Tim Sharp, called my paper in London to demand a retraction. There’s no religious doctrine of journalistic infallibility, so I was happy to withdraw the accusation if Mr. Sharp could answer this question in the negative:
QUESTION: Was a payment made to a government official by Balfour Beatty, its chairman or an agent for its chairman regarding the Pergau Dam project, yes or no?
BALFOUR B: I tell you I’ve worked with some journalists in my time!
QUESTION: Did you pay a bribe?
BALFOUR B: I like your approach.
QUESTION: I just want to know if you bribed the Malaysians.
BALFOUR B: We could spend the rest of the afternoon! [We nearly did. This continued for almost an hour.]
QUESTION: I’m worried about the issue of bribery and corruption. BALFOUR B: Aren’t we all? . . .
QUESTION: I’m happy to print “Balfour Beatty states unequivocally that no payment was made to a Malaysian official”
BALFOUR B: I suggested to you that you might have misled people. The thing you wrote has been denied flatly by your alleged source!
Really? I had a tape recording. After another half-hour joust, the company man read the letter from my source.
BALFOUR B: [reading from the letter] “I do not deny the accuracy of the words attributed to me in the article.”
Oh. For their helpful clarification, Balfour Beatty won my annual Golden Vulture Award, which I offered to deposit in a numbered Swiss account. And the Observer printed the following correction: We hereby retract the statements made regarding Balfour Beatty’s alleged boasting of corrupt practices on the grounds that our article was wholly accurate.
And Joe Stiglitz? He survived his sacking from the World Bank and IMF complaints about his bad attitude. In September 2001, he was awarded the Nobel Prize in economics. Stiglitz, remember, had been fired merely for seeking to study why IMF policies failed so often. He conceded to me, however, the globalizers could point to one big success: Argentina. Then, five months after we spoke, I received the sad news that Argentina had died.
Who Shot Argentina?
The Fingerprints on the Smoking Gun Read “IMF”
It was a warm night in August 2001 when I got the call: Argentina’s economy was found dead.
This was an easy case to crack. Next to the still-warm corpse, the killer left a smoking gun with 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 confidential attachments and a companion letter from the Argentine Economics Ministry to the IMF, sent from… well, let’s just say the envelope had no return address.
The Understanding required Argentina to cut the government budget deficit from $5.3 billion in 2000 to $4.1 billion in 2001. Think about that. That September, when the Understanding was drafted, Argentina was already on the cliff edge of a deep recession. One in five workers was unemployed. Even the half-baked economists at the IMF should have known that holding back government spending in a contracting economy would be like turning off the engines of an airplane in stall. Cut the deficit at a time like this? As my four-year-old daughter would say, “Stooopid.”
Later, as the economy’s wings were falling off, the IMF brain trust ordered the elimination of the deficit, causing the economy to implode.
Officially, unemployment hit a grim 16 percent—unofficially another quarter of the workforce was either unpaid, locked out or getting too little to survive. Industrial production—already down 25 percent halfway through the year—fell into a coma induced by interest rates which, by one measure, have jumped to over 90 percent on dollar-denominated borrowings.
The IMF is never wrong without being cruel as well. And so we read, under the boldface heading “Improving the Conditions of the Poor,” an agreement to drop salaries under the government’s emergency employment program by 20 percent—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” for 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 percent under both public and private plans. Cut, cut, cut in the midst of a recession. Stooopid.
Salted in the IMPs mean-spirited plans for pensioners and the poor were economic forecasts bordering on the delusional. In the Understanding, the globalization geniuses projected that once Argentina carried out the IMF plan to snuff consumer spending, somehow the nation’s economic production would leap by 3.7 percent and unemployment would fall. In fact, by the end of March 2001, the nation’s GDP had already dropped 2.1 percent below the previous year’s mark, and has nose-dived since.
Then, another envelope walked onto my desk. It contained the World Bank’s “Country Assistance Plan” for the four years through 2005. Dated June 5, 2001, it was signed by World Bank president Wolfensohn. On the cover: a warning that recipients may use it “only in the performance of their official duties.”
My official duty as a reporter is to tell you what’s in it: a breathtaking mix of cruelty and Titanic-sized self-deception. “Despite the setbacks,” Wolfensohn wrote, “the goals set out in the last [year's] report remain valid and the strategy appropriate.” The IMF plan, cooked up with the World Bank, would “greatly improve the outlook for the remainder of 2001 and for 2002, with growth expected to recover in the later half of 2001.”
Argentina swallowed the World Bank’s fiscal medicine. But the nation did not appreciate the “greatly improved outlook.” In December, the middle class, unused to hunting the streets for garbage to eat, began to bum down Buenos Aires.
In this strange, official-eyes-only document, the World Bank president expressed particular pride that Argentina’s government had made “a $3 billion cut in primary expenditures accommodating the increase in interest obligations.” In other words, the government gouged spending on domestic needs to pay interest to creditors, mostly foreign banks.
Crisis has its bright side, Wolfensohn crowed to his elite readership. “A major advance was made to eliminate outdated labor contracts,” he wrote. Wages (“labor costs,” as he calls them) had fallen, due to “labor market flexibility induced by the de facto liberalization of the market via increased informality.” Translation: Workers lost unionized industrial jobs and turned to selling trinkets in the street.
What on Earth would lure Argentina into embracing this goofy program? The bait was a $20 billion emergency loan package and “stand-by” credit from the IMF, the World Bank and their commercial bank partners. But there is less to this generosity than meets the eye. The Understanding assumed Argentina would continue its “Convertibility Plan,” instituted in 1991, which pegged the peso, the nation’s currency, to the Yankee dollar at an exchange rate of one to one. The currency peg hadn’t come cheap. Foreign banks working with the IMF had demanded that Argentina pay a whopping 16 percent risk premium above U.S. Treasury lending rates for the dollars needed to back the scheme.
Now do the arithmetic. When Wolfensohn wrote his memo, Argentina owed $128 billion in debt. Normal interest plus the premium amounted to $27 billion a year. In other words, Argentina’s people didn’t net one penny from the $20 billion in “bailout” loans. The debt grew, but none of the money escaped New York, where it lingered to pay interest to U.S. creditors holding the bonds, big fish like Citibank and little biters like Steve Hanke.
I spoke with Hanke, president of Toronto Trust Argentina, an “emerging market” fund that loaded up 100 percent on Argentine bonds during a 1995 currency panic. Don’t cry for Steve, Argentina. His 79.25 percent profit that year put his outfit at the top of the speculators’ league.
Hanke profits by betting on the failure of the IMF policies. This junk-bond speculation—the players call it “vulture investing”—is merely his lucrative avocation. By day he is a Johns Hopkins University economics professor. Despite the fact that his advice would put him out of business, Hanke offers a simple cure for Argentina’s woes; “Abolish the IME” And, Hanke advised last year, abolish the peg.
But the importance of this one-for-one dollar exchange rate has been far overstated. When the Argentine government finally devalued the peso in January, it wiped out the value of local savings accounts. But it was not the peg itself that skewered Argentina rather IMF policies. The currency peg is best understood as the meat hook on which the IMF hung Argentina’s finances. It forced Argentina to beg and borrow a steady supply of dollars to back each peso, and this became the rationale for the IMF and World Bank to let loose in the pampas their Four Horsemen of neoliberal policy. Described by Stiglitz, they are liberalized financial markets, reduced government, mass privatization and free trade.
“Liberalizing” financial markets meant allowing capital to flow freely across a nation’s borders. And indeed, after liberalization the capital flowed with a vengeance. Argentina’s panicked rich dumped their pesos for dollars and sent the hard loot to investment havens abroad. In June 2001 alone, Argentines withdrew 6 percent of all bank deposits, a devastating loss of assets.
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 foreign operators, including Citibank of New York and Fleet Bank of Boston. Former World Bank advisor Charles Calomiris told me these bank privatizations were a “really wonderful story.” Wonderful for whom? With the foreign-owned banks unwilling to repay Argentine depositors, the government froze savings accounts, effectively seizing money from regular Argentines to payoff the foreign creditors.
To keep the foreign creditors smiling, the Understanding also required “reform of the revenue sharing system.” This is the IMF’s kinder, gentler way of stating that the U.S. banks would be paid by siphoning off tax receipts that the provinces had earmarked for education and other public services. The Understanding also found 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 described his nation’s privatization scheme to me. French multinationals picked up a big hunk of the water system and promptly raised charges in some towns by 400 percent. In his confidential memo, the World Bank’s Wolfensohn sighs, “Almost all major utilities have been privatized,” so now there’s really nothing left to sell.*
*And as in every country, the sell-off (the privatization) quickly became “briberization.”—with a little help, says a top government official, from the Bush family. See Chapter 3, “Power Pirates.”
The coup de grace, the final bullet loaded into the Understanding, was imposition of “an open trade policy.” This forced Argentina’s exporters (with their products priced via the peg in U.S. dollars) into a pathetic, losing competition against Brazilian goods priced in that nation’s devalued currency, Stooopid.
Have the World Bank and IMF learned from the Argentina horror? They learn the way a pig learns to sing: They can’t, they won’t, and, if they try, the resulting noise is unbearable. On January 9, with the capital in flames, IMF Deputy Managing Director Anne Krueger ordered Argentina’s latest in temporary presidents, Eduardo Duhalde, to cut still deeper into government expenditures. (President Bush backed the IMF budget- cutting advice—the same week he demanded that the U.S. Congress adopt a $50 billion scheme to spend the United States out of recession.)
In the midst of disaster, Wolfensohn’s memo insisted that the World Bank-IMF scheme could still work: All Argentina needed to do was “reduce the cost of production,” a step that required only a “flexible workforce.” Translation: even lower pensions and wages, or no wages at all. To the dismay of Argentina’s elite, however, the worker bees proved inflexibly obstinate in agreeing to their impoverishment.
One inflexible worker, Anibal Veron, a thirty-seven-year-old father of five, lost his job as a bus driver from a company that owed him nine months’ pay. Veron joined angry unemployed Argentines, known as “piqueteros,” who block roads in protest. In a November 2000 blockade clearing, the nation’s military police killed him with a bullet to the head.
Globalization boosters portray resistance to the New World Order as a lark of pampered, naive Western youths curing their ennui by, as British prime minister Tony Blair puts it, “indulging in protest.” The U.S. and European media play to this theme, focusing on demonstrations in Seattle and Genoa, while burying news of a June 2000 general strike honored by 7 million Argentine workers.
The death in Genoa of demonstrator Carlo Giuliani was front-page news, but Veron’s death went unreported. Nor did U.S. media record the June 17 deaths of protesters Carlos Santillan, twenty-seven, and Oscar Barrios, seventeen, gunned down by police in a churchyard in Salta Province, north of Buenos Aires. Only in December, when Argentina failed to make an interest payment on foreign-held debt, did the Euro-American press suddenly report a “crisis,” feeding us the images we expect from Latin America: tear gas, burning cars and a parade of new presidentes taking oaths of office.
Who done it? Who killed Argentina’s economy? The Understandings and memoranda are evidence that the World Bank and IMF pulled the triggers, acting as hit men for foreign creditors and asset snatchers. But did they have accomplices?
I called Adolfo Perez Esquivel, leader of Buenos Aires-based Peace and Justice Service (SERPA)), a church-based human rights organization. He had investigated police torture of protesters in Salta Province, where Santillan and Barrios died. Perez Esquivel, who won the Nobel Peace Prize in 1980, told me repression and economic “liberalization” are handmaidens. SERPA has filed a formal complaint charging police with recruiting children as young as five years old as informers for paramilitary squads, an operation he compares to the Hitler Youth.
Perez Esquivel, who last year led protests against the proposed Free Trade Agreement of the Americas, doesn’t agree with my verdict against the IMF in Argentina’s death. He notes that the IMPs fatal “reforms” were embraced with enthusiasm by Finance Minister Domingo Cavallo, a World Bank favorite. Cavallo, fired in December after the mass protests, is best known by Argentines for heading the nation’s Central Bank during the nation’s 1976-1983 military dictatorship. For Perez Esquivel, Cavallo’s enthusiastic collaboration with the IMF and World Bank suggests that the untimely demise of the nation’s economy wasn’t murder, but suicide.
GATS, the Invisibles and the Free Trade Jihad
On September 11, I remember listening to our president, when he emerged from hiding, tell the nation, “America is open for business!” Not in my neighborhood, Mr. President. Mostly, we were shaken and worried sick waiting for word of missing friends.
But some people caught the spirit. Within days, some enterprising souls tried to sell little bags to victims’ families, supposedly full of the ashes of their deceased kin. George Bush’s globalization czar, Trade Representative Robert Zoellick, made the most of the mass murder too. Within days, he proclaimed that President Bush could defeat Osama bin Laden if only the wusses in Congress would grant our president extra-Constitutional powers—not to wage war, but to bargain new trade treaties. Now before you jump to the conclusion that Ambassador Zoellick is some kind of heartless crackpot jackal, consider his sound reasoning. “Terrorists hate the ideas America has championed around the world,” he told a meeting of CEOs. “It is inevitable that people will wonder if there are intellectual connections with others who have turned to violence to attack international finance, globalization and the United States.” Got it? You’re either for free trade—or for al-Qaeda.
The weapon meant to make Osama shake and quake is called “Fast-Track Trade Authority.” It’s a kind of blank check for globalization. With fast-track powers, the president can sign any agreement with the World Trade Organization and any treaty involving trade, and Congress cannot challenge a single specific provision of these pacts. The details would be left to Zoellick.
Zoellick, who arrived in Bush’s cabinet after representing Enron Corporation, spoke out while preparing for a meeting of the World Trade Organization. What did Zoellick and the WTO trade lords have in their little bag of political ashes too important for mere congressmen to scrutinize? I glimpsed part of the answer in a memorandum that came through my fax machine. It was dated March 19, 2001, and marked. “Confidential.”
The “Necessity Test” Better Than Democracy
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 General Agreement on Trade in Services, better known as GATS. And I had it in my hand: The unassuming six-page memo the WTO modestly hid away in secrecy may one day be seen as the post- democratic Magna Carta. At its heart was a bold plan to create an international agency with veto power over individual nations’ parliamentary and regulatory decisions.
The memo begins by 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. A few centuries after America set the standard, almost all nations now rely on elected congresses, parliaments, prime ministers and presidents to make the rules. It is these ungainly deliberative bodies that “balance” the interests of citizens and businesses.
Now kiss that obsolete system good-bye. Once nations sign on to the proposed GATS Article VIA, something called “the Necessity Test” will kick in. Per the secretariat’s 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 any parliament or congress, will tell us what is “necessary.”
GATS is one of the half dozen treaties that together constitute and empower the World Trade Organization. I would have dismissed the March 19 memo had it been just another wacko design for trade-rule totalitarianism by some WTO functionary. But the memo is the summary of the consensus of member nations’ trade ministers meeting behind closed doors as the Working Party on Domestic Regulation. As a practical matter, the Necessity Test they agreed on, if signed and implemented, 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, 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 gas 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 U.S. 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 March 19 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 crosshairs? The U.S. 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.
Officially, the WTO assures us that nothing threatens the right to enforce laws in the nation’s public interest. But that’s not according to their internal memo, where the WTO reports that trade ministers, in the course of secretive multilateral negotiations, 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.”
The March 19 memo suggests “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 that rulers know their democratic parliaments could not accept. This would be supremely dangerous if, one day, the United States elected a president named Bush who wanted to shred air pollution rules. How convenient for embattled chief executives: what elected congresses and parliaments dare not do, GATS would require.
For example, as president—and previously as governor of Texas—George W. Bush has fought to tear apart the one remaining effective control over corporate miscreants: the right of victims to sue corporations and executives that poison workers, kill consumers and cook their books. As Governor, Bush guided such so-called tort reform into Texas law in 1999, a favor to a business front group headed by Enron’s then-CEO Ken Lay. Because the Bush administration’s campaign against victims’ rights later belly flopped in the U.S. Congress, their game plan now is to take the debate over the right to sue away from U.S. courts and Congress and twist it into a “trade issue”—with all powers handed to an offshore GATS “disputes panel.” The sly shift has already begun, under NAFTA.
In 1996, a jury ruled that Canadian funeral parlor chain Loewen Corporation broke U.S. law when it bullied small U.S. operators so it could monopolize the market and jack up prices. Rather than appeal to a higher court, Loewen agreed to pay $150 million to its victims . . . then whipped around and demanded the U.S. government refund the entire sum and then some, $725 million, under NAFTA. The Canadian-U.S.-Mexican NAFTA panel has accepted jurisdiction in Loewen v. Mississippi Jury, and that’s a bit scary. It means that the NAFTA panel has declared itself the ultimate legal authority for America—not the U.S. Supreme Court or our Constitution.*
*Luckily, Loewen Corp. went belly up and was sold to a U.S. outfit. Now the NAFTA panel may have to give up its grandiose grab for authority on a technicality: There’s no cross-border dispute. The bullet missed, but the gun’s still loaded.
The replacement of courts and congresses by these disputes panels has given the British Medical Association the jitters. Will England’s National Health Service be sold? In its journal, Lancet, the BMA nervously questions European commissioner 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 British doctors’ concern “hysterical.”
But after reading the WTO’s March 19 internal memo, hysteria may be the right prescription. The secretariat’s memo makes no concession to sovereign interpretation of trade 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 the U.S. Congress, state legislatures and our courts are constrained by old- fashioned constitutional requirements to debate the legitimacy of any law in public, with public evidence, with hearings open to citizen comment, GATS panels are far more efficient. Hearings are closed. Mere citizens—and their unions, consumer, environmental and human rights groups—are barred from participating or even knowing what is said before the panel.
In the Fantasy Island version of free trade, the GATS disputes panels are used by our government to defend American jobs when evil foreigners lock out our products. But the biggest complaint brought by the United States under current rules was to slam Europeans over barriers to our markets in bananas. Exactly how many banana-picking jobs did our government save by this action? When Harry Belafonte sang “Day-O!” he wasn’t talking about Bayonne, New Jersey. 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?
Dare we suspect the hand of the Corporate lobby in this banana appeal? And as for the March 19 WTO memo: Where did the trade ministers get these ideas?
The LOTIS Committee
There are conspiracy cranks and paranoid anti-globalizers who imagine that the blueprints for WTO supranational control are designed in secret meetings between the planet’s corporate elite and government functionaries, with media leaders attending to adjust propaganda as ordered. They’re right.
One of these quiet groups calls itself the LOTIS Committee.
The inner group of this inner group is called the “High Level LOTIS,” which sounds like a stage of Buddhist enlightenment. It isn’t. LOTIS, standing for “Liberalization of Trade in Services,” grew out of the less wisely named “British Invisibles.” LOTIS High and Low are chaired by the Right Honorable Lord Brittan of Spennithorne, Q.C., who, as Leon Brittan, was chief of the European Union, the “Common Market.” He now attends to LOTIS as vice chairman of international banking house UBS Warburg.
The minutes—how I got them is not important—are a fun read. In the meeting of February 22, 2001, Britain’s chief negotiator on the GATS treaty references the European Commission’s paper on industry regulation privately circulated to LOTIS members for their vetting (figure 4.2). The European memo—supposedly a confidential government document—gave LOTIS the inside track on the GATS Necessity Test proposals. The dreams and wishes of LOTIS members were amply fulfilled in the consensus of the trade ministers, as recorded one month later in the March 19 WTO memo.
Fig. 4.2. A page from the minutes of a series of fourteen such meetings held between April 1999 and February 2001 in London. Invited to the private meetings: Europe’s chief negotiators on the GATS treaty, plus Alistair Clarke (Bank of England), Sir John Kemp-Welch (London Stock Exchange) and the biggest names in Continental finance, including the European chiefs of U.S. financial and services giants Sir David Walker (Morgan Stanley), Mark Hatcher (PriceWaterhouseCoopers) and Philip Randall (Arthur Andersen, RIP). Some, such as Peter Sutherland, international chairman of Goldman Sachs, could sit comfortably on either side of the table. Sutherland joined the CitiCorp investment banking arm after serving as director general of the World Trade Organization.
The movers and shakers of LOTIS got a look, see at several confidential documents; but the public—the moved and shaken—got the runaround. Barry Coates, director of the WTO watchdog organization World Development Movement, told me he was refused these documents by the British government. Coates was told the papers “did not exist.”
You’d think that the LOTIS tribe, whose banks and insurance operations controlled several hundred billion dollars in assets, would not care a jot whether Coates and his WDM researchers had the info. But in fact, WDM had LOTIS members in a panic, according to the notes under the heading “Anti-GATS Countermeasures.” It was like a herd of elephants panicked by a mouse. But the WDM is a mouse that roars. At the February LOTIS meeting, according to the minutes, much time was spent “in countering the anti-GATS arguments.” In these private sessions, they worried that WDM factual presentations had raised questions about free trade that the businessmen could not counter. One member fretted, “The pro-GATS case was vulnerable when NGOs [non-governmental organizations] asked for proof of where the economic benefits of liberalisation lay.”
LOTIS swung into action, with a plan to buy a friendly study from some professors they could enlist for about $75,000 to $100,000 apiece.
And in attendance, helpfully, was Henry Manisty of Reuters—the giant news service whose stories are carried by every major paper around the globe. Manisty volunteered his news agency for the propaganda effort. Just plant the material with him, he offered.
“His company would be most willing to give them publicity.”*
*To view the confidential WTO and LOTIS documents in full, visit http://www.gatswatch. org/LOTIS/LOTIS.html.