The International Monetary Fund (IMF) and the World Bank (WB) were created in July, 1944 at a UN-sponsored monetary conference in Bretton Woods, New Hampshire. Drafters included British economist John Maynard Keynes, and Asst. Sec. of US Treasury, Harry Dexter White (who also sat on Council of Foreign Relations)
The Bretton Woods system was supposed to help rebuild war-torn powers world after WWII and help econonic growth in the developing countries. The IMF was to be a sort of World Federal Reserve System and the World Bank was to act as the IMFs lending agency to the world. In fact, most of the money comes from the Federal Reserve.
But in fact the IMF and World Bank, like the Federal Reserve are comprised of consortiums of private lenders. And they have an agenda and a tried formula for advancing that agenda.
The International Monetary Fund (IMF)- was created in 1944 in anticipation of currency problems that nations would face after WWII. It was designed to help countries manage balance of payments difficulties. Voting power in the IMF is based on the size of a nation’s contributions to the fund. It works in conjunction with powerful private banks to manage the Third World debt crisis. It imposes conditions (Structural Adjustment Programs- SAPS) on 3rd world governments seeking loans from international or private sources.
Standard features of the SAPs: They require that 3rd world country must:
1) Restrict credit, including raising interest rates and imposing strict control over money supply. Thus, no loans to small farmers are granted.
2) Lower tarriffs and open markets. Thus, cheap imports flood the markets and put locals out of business.
3) Balance the country’s debt. Thus, governments cut spending for social services and impose big cuts in money for education, welfare, healthcare, and big increases in military spending.
4) Lower wages to 18 to 63 cents/hour.
5) Privatize state/public sector enterprises such as water systems, forests, health care systems, postal service, educational services, etc.
6) Repay the national debt, resulting in the net outflow of cash from “developing countries” to “developed countries.”
7) Devalue their currency relative to the dollar
8) Use "market forces" to set the price of goods, services and labor.
9) Promote exportation of their goods. This often means the same goods are not available to people living in those countries.
In practice the SAPs have been a dramatic success for first world elites and a disaster for 3rd world peoples. They undermine local subsistence economies and strengthen the sector dominated by foreigners. Between 1982 and 1989, the net outflow of debt service from 3rd to 1st world equaled $240 billion. And yet no country managed to reduce the ratio of debt to GNP. Former Chancellor Willie Brandt stated that the 3rd world debt is like “a blood transfusion from the sick to the healthy”.
The Ecumenical Coalition for Economic Justice describes the impact of SAPs:
The World Bank (WB) was also created in 1944 along with IMF. WB loans aimed at helping 3rd world countries develop the infrastructure base deemed necessary for "development." The bias of the lenders has been to support projects that increase international trade and economic activity rather than improving the well being of people. Throughout 80s and 90s, the WB imposed SAPs just like IMF on 3rd world countries. Some in WB are now saying that social breakdown in many poor countries (aggravated and/or caused by IMF SAPs) is making these countries ungovernable.
The World Trade Organization (WTO) was created in 1994. It emerged out of a series of international negotiations to set rules concerning international trade and investment under the auspices of GATT (General Agreement on Tariffs and Trade). It oversees and has a dispute mechanism to enforce rules of international trade. It is probably the most powerful antidemocratic organization in the world, and its dispute resolution panels (DPRs) are made up of unelected, non-accountable trade lawyers who represent corporate interests. It is located in Geneva, Switzerland. Under WTO rules, corporations can sue countries, and indeed, they have successfully won tens of millions of dollars for “unfair restraint of trade” because of laws designed to protect the environment or people. One objective of the WTO is to “harmonize” laws of different nations, i.e., bring them into alignment, to force nations to accept the most corporate friendly and least restrictive laws. Massive protests at the WTO meeting in Seattle in Nov. and Dec., 1999, brought workers, farmers, students and environmentalists together in a display of grassroots democracy, perhaps not unlike the Boston Tea Party.
The North American Free Trade Agreement (NAFTA) is a trade agreement between the US, Mexico and Canada designed to increase trade and investment. It seeks a radical reduction of tariff and non-tariff barriers and establishes comprehensive rules governing trade and investment. Labor and environmental concerns are relegated to side agreements with few enforceable provisions. It took effect on Jan. 1, 1994 (by virtue of fast-track legislation in which Congress had no time to examine or debate the bill). On this day, the Zapatista movement in Chiapas, Mexico, launced military operations to call attention ot NAFTAs disasterous consequences for indigenous people and Mexican agriculture.
Effects of NAFTA as of the late 1990's:
1) Since NAFTA went into effect, at least 500,000 Mexican farmers have been forced off their land due to a flood of government-subsidized corn from the US.
2) Over 765,000 jobs have disappeared in the US. By 1996, over $28 billion in business was lost to American workers. Factoring in losses from other trade agreements as well, US workers have lost 2.6 million high paying jobs since the 1970s. And 28% of American’s jobs pay poverty-level wages.
3) Since NAFTA's passage, over 1 million more Mexicans now earn less than min. wage of $3.40/day. And 8 million Mexicans have fallen from middle class into poverty. Now 70% of Mexicans live in poverty. Nearly half make less than $3/day. In Mexico, manufacturing wages fell 21% from 1995 to 1999. Meanwhile, Mexico now has the most billionaires of any developing country.
4) Since NAFTA was created, fifteen US wood product companies have set up operations in Mexico, and logging there has dramatically increased.
The Free Trade Agreement of the Americas (FTAA). At the first Summit of the Americas meeting in Dec. 1994, 34 heads of state from nations in the Western Hemisphere pledged to create a FTAA by 2005. The FTAA would eliminate investment and trade barriers on nearly all goods and services traded by member countries. The Summit of Amercas meeting in Canada in April 2001 pushed forward this agenda but was subject of mass protests. Both NAFTA and FTAA put interests of investors above the need to protect the environment, human rights and working communities. And they jeopardize the ability of elected officials to pass laws that protect consumers, workers, and the environment.
July 27, 2003, Congress narrowly approved “fast track” trade negotiating authority by Pres. Bush (215-212).
Together, the “free trade” policies pushed by these institutions make up the so-called “neoliberal reforms” or ‘the Washington consensus”
Some other side effects of “the Washington Consensus:"
In December, 2001 Argentina erupted with massive civil unrest and demonstrations against US-imposed IMF austerity measures which devalued the peso, cut social spending, and privatized state enterprises. The President resigned. Now the peso is worth 1/4 of its previous value, banks limit withdrawals, and 60% of the population lives under the poverty line, 26% are unemployed. The Argentine people are responding innovatively with neighborhood meetings (true democracy), building community projects themselves, establishing a barter network which 7 million use instead of money), and creating alternatives to the IMF free market reforms. Recall than 30 years ago, 30,000 “leftist agitators”.
In Brazil, newly elected President Luiz Inacio Lula leader of the Worker’s Party- said the FTAA is “an annexation of Latin America by the United States”
In Oct. 31, 2002, about 10,000 farmers, union members, natives, students and activists in Ecuador protested the 7th ministerial trade meetings in Quito to show their complete rejection of FTAA. Venezula govt. also now opposes FTAA.
CORPORATE AGENDA; ENFORCE ADAM SMITH’S “VILE MAXIM”; “ALL FOR OURSELVES, NOTHING FOR ANYONE ELSE’
1) Corporate taxes as a share of total nation’s tax revenue fell from 28% in 1956 to only 11.8 % in 1996.
2) Family income taxes rose from an average of 17.3% of ave. income in 1955 to 37.6% in 1998.
3) Share of all property taxes p aid by corporations has fallen from 45% in 1957 to 16% in 1995.
4) Jim Hightower pointed out: “41of America’s largest corporations earned $25.8 billion betweeen 1996 and 1999, yet not only did they avoid paying their fair share of taxes- they got $3.2 billion in rebate checks from taxpayers. Among these tax dodgers are such brand-names as Chevron, PepsiCo, Pfizer, J.P. Morgan, Saks, Goodyear, Ryder, Enron, Colgate-Palmolive, MCI, Weyerhaeuser, GM and Northrop Grumman.”
5) By setting up almost 900 subsidiaries in tax havens such as the Cayman Islands and through tax-deductions of stock options given to senior execs, ENRON Corp payed no federal taxes in 4 of 5 years prior to its implosion in 2002. In 2000, it got a $278 million tax refund.
6) The GAO concluded, “in each year between 1989 and 1995, a majority of corporations, both foreign- and US-controlled, paid no US income tax”. In 999, Microsoft reported $12.3 billion in profits and paid no taxes. In 1997, IBM claimed profits of $3.1 billion and got a tax rebate.
7) Top income bracket’s taxes have fallen from 80% in 1935 to 33% in 2002.
8) The government spends as much as $125 billion a year on corporate welfare.
Looking up from the bottom:
1) Between 1972 and 1994, the number of Americans living below the poverty line almost doubled from 23 million to 40 million.
2) Incidence of teen and young adult suicide has nearly tripled from 1952 to 1995.
3) In 1998, nearly 6 million American adults (1 in 34 or nearly 3% of population) in jail, on parole, or on probation. In 2000, 1 in 143 Americans were incarcerated. In 2001, private prison industry is worth over $2.8 billion. And they deliver free prison labor to corporations. Prisoners have a suicide rate 20 times higher than the country as a whole. Most are in there on non-violent drug-related convictions.