Model for Failure
excerpted from the book
The Bush Agenda
Invading the World, One Economy
at a Time
by Antonia Juhasz
HarperCollins, 2006, paper
Carlos Andres Perez, the former president of Venezuela
[the International Monetary Fund (IMF) practices] "an economic
totalitarianism which kills not with bullets but with famine."
While born from genuine interest in creating a sustainable world
economy after World War II, the formation of the World Bank and
the IMF was dominated by a solid U.S. government and corporate
agenda, an agenda that the institutions have increasingly come
to serve. Developing countries sought alternatives from the outset
at the United Nations but were ultimately unsuccessful. The twin
1970s oil crises led successive U.S. governments to use the World
Bank and the IMF to secure new sources of oil abroad and to expand
U.S. corporate access to that oil. As developing countries sank
into debt, the policies demanded of them in exchange for World
Bank and IMF loans became increasingly stringent-opening the door
for the North American Free Trade Agreement (NAFTA) and the World
Trade Organization (WTO). Indeed, anyone looking for the roots
of the Bush administration's approach to reshaping countries from
Iraq to the United States need only review the actions and impacts
of the same economic policies as imposed by the World Bank, IMF,
NAFTA, and WTO on nations such as Zambia, Russia, Argentina, Mexico,
China, and South Africa-case studies that offer a clear template
for the Bush Agenda.
Harry Dexter White, 1946
"The IMF and World Bank resemble "much too closely the
operation of power politics rather than of international cooperation,
except that the power employed is financial instead of military
The most authoritative White biography is K. Bruce Craig's Treasonable
Doubt: The Harry Dexter White Spy Case. According to Craig, White
believed that the salvation of American capitalism and the avoidance
of a postwar recession or even depression lay in the ability of
the United States to exploit new international markets. In so
doing, the entire global economic system would be sustained. White
saw two viable methods to ensure the continued health of the American
economy after World War II: continue federal government spending
at near wartime levels or stimulate the expansion of international
trade to create new markets for American goods.
In July 1944, President Franklin Roosevelt brought together representatives
from forty-four governments to Bretton Woods, New Hampshire, for
he UN Monetary and Financial Conference to come up with Solutions.
... What ultimately emerged were institutions
that followed White's Plan and met the interests of first the
U.S. government and then its British allies. They would be known
as the Bretton Woods Institutions: the International Monetary
Fund (IMF) and the International Bank for Reconstruction and Development
(IBRD)-now called the World Bank Group. Although not established
at Bretton Woods, the World Trade Organization (WTO) is commonly
considered a "Bretton Woods Institution" because its
roots began at the meeting with the creation of its predecessor,
the short-lived International Trade Organization (ITO).
... The IMF was created with the highly
laudable goal of ensuring that] economic trouble in one country
does not become a global economic crisis. In order to achieve
this goal, the IMF would manage a system of fixed exchange rates
in which the value of the world's currencies was based on gold
and the U.S. dollar. The IMF would also be on the lookout for
countries facing economic turmoil. When an economy was in trouble,
the IMF would loan it enough money to stave off a collapse Laud
contain any potential damage to other national economies. The
World Bank was originally envisioned as the source of reconstruction
shifted focus to developing economies elsewhere in the world.
Both the IMF and the World Bank are lending
institutions. They make loans at more favorable rates than commercial
banks. Each institution was created with a central focus on expanding
international trade. The IMF would ensure that economies had stable
exchange rates with which to trade; the World Bank would ensure
that countries had the necessary infrastructure to facilitate
trade; and the International Trade Organization would control
the rules of trade.
U.S. multinational corporations were at
the heart of the system. As White's theory dictated, countries
the world over would have more dollars, stable economies, and
reduced trade barriers, all of which would increase their capacity
to purchase U.S. goods. U.S. corporations, in turn, would gain
access to foreign countries to build infrastructure and spur production.
A rising tide of wealth would then lift all boats and all would
be better off. White also presupposed that domestic governments
would be able to guide and regulate the investment and operations
of foreign companies and use labor, consumer, production, and
other areas of government law to distribute the benefits equitably
throughout society. By the 1980s, the very opposite would occur.
The World Bank and IMF would be used specifically to restrict
governments from implementing such controls on corporate behavior.
Over the years, the three Bretton Woods Institutions-the IMF,
World Bank, and WTO-have attained an aura of inevitability. Those
who challenge them are frequently painted as Luddites fighting
the natural course of progress. But in light of their true history,
it is clear that there was nothing inevitable about these organizations.
They were created by individuals who chose specific policies in
order to meet the interests of certain governments and financial
players such as U.S. banks and multinational corporations
Congressman John Parnell Thomas of New Jersey served in the infantry
in World War I. Every day of his HUAC chairmanship from 1947 to
1948, he behaved as though he was doing battle against the evils
of Communism. He opened the proceedings into the alleged Communist
activity in Hollywood. His astute media know-how-not McCarthy's
(who was not involved until 1951)-brought the likes of Gary Cooper,
Ronald Reagan, Robert Montgomery, and Robert Taylor to serve as
friendly witnesses before the committee. The interrogation of
"hostile witnesses' those who refused to answer questions
or declared their right to produce their art as they saw fit under
the First Amendment, brought even more stars, including those
who came to protest the hearings, such as Humphrey Bogart, Lauren
Bacall, and I Gene Kelly. America's attention was rapt.
At the HUAC hearings- Harry Dexter White
"I believe in freedom of religion, freedom of speech, freedom
of thought, freedom of the press, freedom of criticism, and freedom
of movement. I believe in the goal of equality of opportunity,
and the right of each individual to follow the calling of his
or her own choice .... This is my creed."
Carter Defense Secretary Harold Brown testified before Congress
"There is no more serious threat to the long-term security
of the United States and to its allies than that which stems from
the growing deficiency of secure and assured energy resources."
President Carter's 1980 State of the Union Address. In what would
be dubbed "the Carter Doctrine' the president explained that
U.S. strategic interest in the Persian Gulf is based on "the
overwhelming dependence of the Western democracies on oil supplies
from the Middle East .... Any attempt by an outside force to gain
control of the Persian Gulf will be regarded as an assault on
the vital interests of the United States of America and... will
be repelled by any means necessary including the use of force."
Reagan used the World Bank to force countries to change their
laws so that U.S. corporations would gain direct access to their
Dallas ran from 1978 to 1991 and Dynasty from 1981 to 1989. Both
shows depicted the extravagant wealth and luxurious lifestyles
of families who made and increased their fortunes as the heads
of U.S. oil companies in the 1980s Texas oil boom.
The policies that led to this boom are
known as "Reaganomics' even though British Prime Minister
Margaret Thatcher shared a great deal of the credit (and blame)
for the model. It boils down to a shift of economic resources
from the "have-nots" to the "haves." It is,
in fact, the same economic theory underpinning corporate globalization:
The wealth passed to the rich would generate more wealth, which
would in turn trickle down to the rest of society, making everyone
better off in the end. Of course, the results were nothing of
the sort, neither in the United States nor in the world.
In the thirteen years preceding Reaganomics,
income inequality in the United States was shrinking. Social welfare
programs, unions, labor laws, anti-discrimination laws, and the
like were raising the wealth of the lower income population, and
progressive tax structures were redistributing wealth from the
upper income brackets down. According to the U.S. Census Bureau,
from 1967 to 1980 the poorest u.s. households increased their
share of the total income pie by 6.5 percent, while the wealthiest
decreased their share by nearly 10 percent. Reagan aggressively
reversed this trend. He gutted social welfare programs, shifted
the tax burden from the wealthy to middle and lower income groups
poured enormous sums of money into the military-industrial complex,
and reduced labor protections. Thus, Census Bureau data revealed
a massive redistribution of income from the poor to the wealthy
between 1980 and 1990. The poorest Americans lost more than 10
percent of the income pie, while the wealthiest gained almost
It turned out that the "haves"
seemed more interested in holding onto the wealth that they accumulated
than in passing it along to the wayward masses. Reaganomics ensured
that they would not be required to do so. Reagan and Thatcher's
ideas were carried to the World Bank and IMF, paving the way for
the 1995 creation of the WTO and igniting a global trend of increasing
inequality both within and between nations that continues to this
U.S. private commercial banks were awash in cash from OPEC countries
and willingly lent large sums of money to developing nations.
But in December 1978, the second oil shock hit. An Iranian oil
embargo reduced world oil supplies by almost 5 percent and increased
prices by 150 percent.'° In the United States, inflation skyrocketed
with interest rates following suit. U.S. banks raised interest
rates on their loans and developing countries the world over faced
significantly larger payments on their debts. In order to avoid
defaulting to the banks, the developing nations turned to the
IMF and World Bank for loans, thereby becoming doubly indebted,
first to the private commercial banks and then to the international
lending institutions. The result was a downward spiral of economic
debt known as "the 1980s debt crisis."
Reagan continued to expand World Bank
investments in oil and gas exploration, but he also used the institutions
to force nations to change their laws so that foreign companies
could gain increased access to their resources.
More than anything else, both the commercial banks and the treasury
departments of wealthy nations wanted the money they had lent
during the oil shocks back-with interest. The U.S. government,
its corporations, and its banks, among other players, wanted access
to these resources, and World Bank and IMF Structural Adjustment
Programs became some of the most useful tools available to them.
Before the 1980s, IMF and World Bank funds
had been lent for projects with relatively few strings attached.
No more. The 1980s brought a new phase for these institutions:
the age of the Structural Adjustment Program (SAP). Developing
countries were in debt to both foreign commercial banks and the
lending institutions. The banks wanted their money back, foreign
companies wanted access, and the developing countries were not
in a position to say no. In order to receive loans, countries
now had to adhere to a series of strict conditions that would
reduce domestic spending while increasing capital available to
pay back loans. The conditions were always the same, regardless
of the country in question. They all followed the same corporate
globalization model: privatize government industries, eliminate
restrictions on foreign ownership and investment, eliminate barriers
to trade, eliminate government restrictions on foreign corporations,
cut government spending, devalue the nation's currency, and focus
development on exporting key resources such as oil, minerals,
trees, agriculture products, luxury goods such as coffee and flowers,
and the like.
Reagan focused on SAPs particularly as
a tool that could force countries to open their oil sectors to
From the 1980s forward, the policies of the World Bank and IMF
have had serious, often tragic effects on the nations of the developing
world - effects that have often led to popular resistance and
protest. This was certainly the case in nations like Zambia, Russia,
Argentina, and South Africa. Because the institutions have such
a profound impact on the most basic areas of peoples' lives, from
the cost of bread to the availability of electricity and water,
people in loan-recipient nations become World Bank and IMF experts
from an early age. They learn that to bring change, they must
challenge not only their governments but also the international
financial institutions behind them as well.
Zambia Forced Backward
The World Bank, 1999
"Globalization appears to increase poverty and inequality
... The costs of adjusting to greater openness are borne exclusively
by the poor, regardless of how long the adjustment takes."
[In 1984] the Zambian people brought more than half a century
of British colonization to an end and gained their independence.
They were not about to let the IMF and World Bank take over where
the British had been stopped. After independence, Zambia became
the second wealthiest nation in sub-Saharan Africa. It had a highly
urbanized population, a strong manufacturing sector, thriving
copper exports, and a government that played a large role in guiding
the economy. But the 1973 oil shock brought with it a triple financial
burden. First, it increased the cost of imported oil. Second,
it increased the cost of all imported goods, as countries around
the world responded to the increasing cost of oil. Finally, it
led to a lower demand for Zambia's key export, copper. As a result,
Zambia was forced to borrow from foreign donors. Its external
debt rose from US $814 million in 1970 to US $3.2 billion in 1980.
To help pay off these debts, Zambia turned to the IMF and World
The World Bank provided $6.6 million in
loans for a Petroleum Exploration Promotion Project in Zambia
in 1982. For better or for worse, no oil was found. Between 1983
and 1987, the World Bank and IMF applied a Structural Adjustment
Program to Zambia's loans. The impacts of these and subsequent
World Bank and IMF conditions are brilliantly described in a 2004
report by Lishala Situmbeko, the former finance minister of Zambia
and current economist at the Bank of Zambia, and Jack Jones Zulu,
an economist at the University of Zambia. 16
The SAPs required several changes in the
Zambian economy, all of which were designed to force the government
to free as much of its money as possible from domestic spending
in order to pay back its loans. The Zambian government was required
to eliminate price supports for goods such as corn and fertilizer
(which had been used to keep the cost of such items affordable
and reliable); devalue the currency in order to make exports more
attractive on the global market; eliminate its barriers to imports,
such as tariffs (which had been used to protect the domestic industries
from foreign competition); reduce government spending by freezing
wages for public sector workers; and loosen government control
over interest rates so that investors would b, more apt to put
money into the economy.
The results were grim. The Zambian economy
(as measured by the gross domestic product) did not grow at all
from 1983 to 1986. The main reason was that local production came
to a near standstill because it could not compete with the newly
introduced foreign competition. Reduced price controls sent prices
skyrocketing and then took inflation (newly loosened from government
control) with it. Simultaneous increased prices and wage freezes
meant that people could no longer afford food, which brought the
now globally infamous "IMF food riots" to Zambia. The
need for more money to meet basic necessities led to a nine-fold
increase in the number of twelve- to fourteen-year-old children
working to support their families between 1980 and 1986. Finally,
the federal budget deficit and the trade deficit both increased.
Under intense public pressure, the Zambian
government told the IMF and the World Bank that it would not accept
this punishment and abandoned the SAPs in 1987. But this liberation
experiment lasted just one year before the donors rebelled. Not
only were IMF and World Bank funds suspended-so, too, were funds
from Zambia's other international lenders, who withdrew their
money until Zambia followed, at a minimum, its IMF conditions.
Zambia could not face the elimination of all of its foreign loans
and was subsequently forced back into line. When people ask: Why
do countries accept these conditions?-this is the answer.
Perhaps as retribution for Zambia's indiscretion,
the IMF and World Bank saddled the country with new and significantly
more imposing conditions in 1991. This was also, coincidentally,
the same year that one-party rule officially ended and a new multiparty
democratic government came to power. But the new government's
hands were tied by the SAPs. The three key conditions placed on
Zambia by the SAPs were identical to those imposed by the Bush
administration on Iraq fifteen years later: privatization, trade
liberalization, and agricultural liberalization.
Under its SAP, Zambia privatized 257 former government enterprises
in just five years and was hailed by the World Bank for its efforts.
Unfortunately, while privatization did benefit a few enterprises,
far more state-run companies and the services they provided were
simply eliminated when the private sector proved incapable of
or simply uninterested in taking them over. At the same time,
increased "trade liberalization" meant that Zambia had
to reduce tariffs-in this case taxes applied to goods as they
entered Zambia-which forced Zambian companies to face global competition
suddenly for the first time. The combined impact of privatization
and tariff reductions led some companies simply to pack up, move
to neighboring countries, and sell their products back to Zambia
as imports-depriving Zambia of employment and revenue.
The Zambian textile industry was decimated
by the tariff reductions. It simply was not prepared to compete
with the flood of cheap imports, mainly from Northern developed
nations. Zambia had 140 textile manufacturing firms in 1991. After
the tariff reductions, only eight firms remained in 2002. Overall,
manufacturing employment fell by 43 percent from 1991 to 1998.
This is called "deindustrialization' the all-too-common impact
of corporate globalization policies the world over.
The World Bank has increasingly turned to the imposition of "user
fees" on public services-requiring people who want access
to health care, water, electricity, education, or the like, to
pay a fee first. In wealthy nations where more people have expendable
income, user fees for those who can afford them make sense. However,
such fees are thoroughly incompatible with the poverty experienced
by 73 percent of the people in Zambia. With incomes falling and
unemployment rising, fees were simply beyond the reach of most
families. In 1994, the World Bank itself was forced to admit that,
following the introduction of user fees, outpatient attendance
fell by almost 60 percent and delivery services by over 20 percent
in urban Lusaka, and that "vulnerable groups" were simply
denied access to health services. Despite this finding, in 2004,
the World Bank told the Zambian Ministry of Health to "pursue
improvement in cost recovery through user fees. After attending
a United Nations AIDS conference in Lusaka, one British doctor
commented, "It is no coincidence that the HIV crisis has
gone hand-in-hand with the debt crisis" in Zambia.
... In 1970, when IMF and World Bank loans
first began, life expectancy in Zambia was 49.7 years. In 2001,
life expectancy was 33.4 years-the lowest of any country in the
... From 1985 to 1992, poor nations in
the Southern hemisphere paid some $280 billion more in debt service
to creditors in wealthy Northern countries (such as the World
Bank and IMF) than they received in new loans or aid. As a result,
gross national product (GNP) rose an average 1 percent in Southern
nations in the 1980s. It fell in sub-Saharan Africa by 1.2 percent
while it rose by 2.3 percent in Northern nations.
The Collapse of the Russian Economy
On November 9, 1989, the Berlin Wall crumbled.
On Christmas D7 1991, the red flag was lowered from the Kremlin,
and by the end of December the Union of Soviet Socialist Republics
was no more. The United States declared victory and the Cold War
officially came to an en(It took just three months for the U.S.
House of Representatives to introduce the "Freedom for Russia
and Emerging Eurasian Democracies and Open Markets Support Act
As in Iraq almost fifteen years later,
the oil sector was the most gleaming prize on the Russian horizon.
Russia sits on approximately 5 percent of the world's known oil
reserves. However, some estimates put its potential reserves as
high as 14 percent . All of this oil was controlled by the state,
and U.S. oil companies wanted in.
On June 1, 1992, forty years after [Harry Dexter] White's death
and the same day the White House issued its press release, Russia
was admitted into both the IMF and the World Bank. Shortly thereafter,
the loans started to flow. In August, the Bank released a description
of its loan of $760 million to support reforms for the transition
to a market economy: "The reforms include privatization and
restructuring of state-owned enterprises promotion of foreign
direct investment, pro-competition and anti-monopoly policies,
reform of financial institutions and the commercial banking sector,
and establishment of a social safety net to protect those who
may be affected by the reforms.
... IMF loans to Russia began on August
5, 1992 with $719 million. This increased to over $1 billion a
year in both 1993 and 1994, then tripled to just under $3.6 billion
in 1995, followed by $2.5 billion in 1996, $1.5 billion in 1997,
and then up to $4.6 billion in 1998, the year the Russian economy
economist Mark Weisbrot
"The IMF has presided over one of the worst economic declines
in modern history." [Russia 1992-1998]
First the IMF required that the government eliminate all price
supports. This sent prices skyrocketing. Russians quickly spent
all of their savings, which in turn led to a 520 percent increase
in inflation in the first three months alone. Millions of people
saw their life savings and pensions eviscerated virtually overnight.
To curb inflation, the IMF required the government to slam on
the monetary and fiscal brakes, bringing about a massive depression.
Within four years of reform, the average income fell by 50 percent.
Next was rapid mass privatization. Among
the many problems with the forced privatization was the apparent
ignorance about how vertically integrated the Russian economy
was. Thus, when one firm was closed, ten others soon followed.
Privatization led to the elimination of government revenue from
its once profitable enterprises. It also led to mass lay-offs.
Russian production was not ready to compete with a world market.
From 1992 to 1998, Russian output declined by more than 40 percent.
All of this amounted to deindustrialization.
According to [Joseph] Stigltz, "The IMF and [U.S.] Treasury
had rejiggered Russia's economic incentives, all right-but the
wrong way . . . . While only two percent of the population had
lived in poverty even at the end of the dismal Soviet period,
'reform' saw poverty rates soar to almost fifty percent, with
more than half of Russia's children living below the poverty line.
" Male life expectancy subsequently declined from 65.5 years
before "reform" to 57 years in 1998.
There were, of course, winners. In this case, Russia's well-placed
oil and gas magnates, bankers, speculators, and real estate operatives-the
new Russian "oligarchs"-stepped in to take advantage
of the newly "reformed" economy. They made fortunes
exporting oil, speculating in securities, and lending money to
the government." With the redistributive tools of the government
eliminated by the IMF and the World Bank, wealth was generated-it
just stayed at the top.
The economic policies that the IMF, the World Bank, and the U.S.
k' government implemented in post-Soviet Russia are responsible
for Russia's 1998 financial collapse. These are the same policies
that the Bush administration forced on Iraq in the wake of the
2003 invasion. The two countries provide stark parallels. Both
were economies heavily controlled by the government. Both were
forced to transition to market-controlled economies virtually
overnight. Both have been described by American political and
economic leaders as "experiments" to demonstrate that
American economic policy can turn around whole regions. Both have
a wealth of oil lying just beneath the surface of their soil-taunting
Americans without allowing them access. Both have been forced
to change their laws in order to grant U.S. corporations increased
access to their resources.
In the early 1990s, Argentina followed IMF dictums to the letter.
it privatized state-owned industries, liberalized trade and financial
markets, eliminated capital controls, and cut government spending.
The government even tied its currency to the U.S. dollar.
This was a fully internationalized economy, if ever there was
one. But when the value of the U.S. dollar began to rise in the
mid-1990s, Argentine exports were no longer competitive and industry
began to decline, causing unemployment to increase. The World
Bank had led Argentina to privatize its social security program,
causing government revenues to decline as contributions once made
to social security were diverted to private pension funds. With
its revenue falling, the government turned to the IMF for help.
In return for its money, the IMF demanded deep cuts in public
spending that further reduced domestic demand and stoked social
unrest. Millions lost health coverage, as private international
insurers pressured their local providers to cut costs. Argentine
banks now owned by foreign firms cut back lending to small and
medium-size enterprises. Stripped of protections, private employers
were pressured to become lean and mean through mass layoffs.
The IMF rules succeeded in opening the
Argentine market to foreign investors, but did nothing to require
those investors to make commitments to the health and welfare
of the Argentine economy in return. Thus, freed to come and go
as they wished due to the elimination of capital controls, foreign
companies and investors simply pulled their money out when the
going got tough and moved on to the next hot developing country
market-leaving the Argentineans to clean up the mess.
In December 2001, the government of Argentina
closed its banks and froze assets in a last ditch effort to stave
off total financial collapse. Before doing so, however, armored
cars went to the banks in the dead of night, filled up with money,
and sped off to deliver what remained to foreign creditors.
As the economy and the government struggled to put back the pieces,
the people of Argentina began organizing for themselves. The model
that emerged is most often referred to as horizontalism.
The most important component of horizontalism
is probably the neighborhood assembly, where decisions such as
trash collection, repair of potholes or road signs, school boards,
and even city budgets are made. The assembly is a form of "direct
democracy" in which people participate directly in making
political and economic decisions that affect their daily lives.
For example, when the foreign owners of companies abandoned Argentina,
many workers simply took over the factories and began running
them themselves. Most are worker-run cooperatives in which decisions
are made through assemblies in which all workers have equal decision-making
authority about pay, production schedules, materials, distribution,
health benefits, and the like.
In addition, when the foreign companies
left and stopped selling their products or providing their services,
major cities in Argentina adopted extensive barter systems in
which people barter dentistry services for haircuts, aerobics
classes for massages, food for clothing.
There are barter currencies and banks
that lend these currencies without fees. The banks barter their
services just like everyone else. There are also kitchens, day-care
centers, health clinics, computer programming classes, schools,
and community centers run by professionals, those who were once
paid in pesos for such services, who now volunteer and barter
their services instead.
The Case of Wal-Mart
According to Forbes, in 2005, five Walton
family members, Christy, Jim, S. Robson, Alice, and Helen, were
among the top ten wealthiest people in America and the tenth through
the thirteenth wealthiest people on earth (a few Walton family
members are tied). Wal-Mart is the largest company in the world,
the largest employer, and the nineteenth largest economy on the
... In 2002, Wal-Mart's sales were larger
than the individual GDP's of Sweden, Austria, Norway, Poland,
Saudi Arabia, Turkey, Denmark, Indonesia, Hong Kong, Greece, Finland,
and hundreds of other nations. And Wal-Mart just keeps growing,
at a rate of more than 18 percent a year-more four times that
of the United States (3.9 percent) and the world (4 percent).
Wal-Mart has achieved its number-one status
by mastering the use of international trade agreements. This has
enabled the company to enter and dominate markets with its stores
and to use those suppliers most willing to pick up, close shop,
and scour the planet for the cheapest places to make products-successfully
pitting the poor against the poorer in its pursuit of ever-falling
... In 2003, consulting firm Retail Forward
estimated that 50 to 60 percent of the merchandise sold in Wal-Mart's
U.S. stores was made overseas." In addition, Wal-Mart now
owns more than 2,400 stores in fifteen countries outside of the
WAL-MART AND THE NORTH AMERICAN FREE TRADE
In 1994, the United States, Mexico, and
Canada signed the most far-reaching multilateral and investment
agreement of its time. NAFTA was signed under the promise that
it would create jobs and economic benefits across all three NAFTA
countries. As with all trade agreements, benefits did accrue,
but certainly not to all. As Jorge Castaneda, Mexico's former
foreign secretary, observed, NAFTA was "an accord among magnates
and potentates: an agreement for the rich and powerful ... effectively
excluding ordinary people in all three societies."
... People are often surprised to discover
the extreme difficulty of determining where companies actually
make their goods. There are no federal reporting requirements
short of product labels.
NAFTA eliminated tariffs and other import controls on good"
moving between the three countries. This meant that U.S. companies
could send products to be assembled in Mexican factories, where
labor is cheap, environmental protections weak, taxes low, and
protections from further regulation and government oversight even
greater than in the United States, and then send the finished
products back home to sell at prices far cheaper than if the goods
were produced domestically. These factories are called maquiladoras.
... From 1990 to 2001, the number of maquiladora
factories across Mexico more than doubled from 1,700 to 3,600
plants, with 2,700 of these located in the export processing zones.
The result, according to the U.S. Congressional
Research Service, is that U.S. imports from Mexico increased by
229 percent between 1993 and 2001. While U.S. exports to Mexico
increased 144 percent, 60 percent of these were components being
shipped to the maquiladora factories for processing, yielding
little or no benefit to the Mexican economy or consumer.
Back in Mexico, the dramatic rise of the maquiladoras coincided
with the near collapse of the farming sector because of the NAFTA.
The elimination of agricultural tariffs and quotas on products
such as corn, which had accounted for 60 percent of all Mexican
farming, allowed cheap, heavily government-subsidized U.S. products
to flood the Mexican market. Similar provisions are found in the
WTO's Agriculture Agreement. The price paid to Mexican farmers
for corn dropped by 70 percent. In addition, in order to join
the NAFTA, Mexico was forced to eliminate one of the most important
victories of the Mexican Revolution, the Ejidos program, which
granted guaranteed land-rights to indigenous people. The combined
impact was that Mexican farmers could not compete and could not
keep their land. One and a half million farmers and their families
were forced from their land and subsequently found themselves
in search of work. The more unemployed workers there were, the
more U.S. companies could demand stiff sacrifices in return for
jobs. Maquiladoras have since become synonymous with "sweat
shop labor"-with human rights abuses rampant, unionization
unheard of, and long hours, low pay, no benefits, and unsafe working
conditions the norm. In addition, some 80 percent of maquiladora
workers are women, most of them young women who frequently face
sex and age discrimination in the workplace.
The result is that average real wages
in Mexican manufacturing are lower today than they were before
NAFTA; the minimum wage has declined by 20 percent and hovers
at around $4/day, and half of the nation now lives in poverty.
Today, Wal-Mart is the largest private employer in Mexico. It
has 683 stores and does more business than the entire tourism
industry. It sells $6 billion worth of food a year, more than
anyone else in Mexico. As Weiner wrote, "It sells more of
almost everything than almost anyone."
Until 2000, the United States supplied uniquely high tariffs on
goods imported from China in opposition to the human rights abuses
inflicted on the Chinese by their government. U.S. corporations
looked to China and saw 1.2 billion potential new customers and
workers in a country where unionization is illegal, workers are
cheap and disciplined, unemployment is rampant, and environmental
protections are nil. Human rights advocates saw a move that would
increase the powerlessness of China's workers not only at the
hands of the Chinese government but also at the hands of U.S.
corporations as well. Under what one Capital Hill publication
called a corporate "Blitz for Free Trade' an odd coalition
of CEOs, President Clinton, and the Republican House that had
voted to impeach him pulled together to "normalize trade"
with China just two months before the 2000 presidential election.
One year later, in December 2001, China became a member of the
Because NAFTA makes it illegal for the Mexican government to require
any sort of commitment on the part of foreign companies, when
things started looking good in China, U.S. producers picked up
and moved out. A full third of the eight hundred thousand manufacturing
jobs initially created under NAFTA have since disappeared. Due
to the WTO's elimination of tariffs and quotas on products entering
and leaving China, and removal of many of the restrictions on
which companies can operate there, in the last five years Wal-Mart
alone has doubled its imports from China. It even opened its global
procurement center in Shenzhen, China. In 2002, it bought approximately
$12 billion in merchandise from China, 20 percent more than in
2001, which represented nearly 10 percent of all Chinese exports
to the United States. Wal-Mart is the single largest U.S. importer
of Chinese consumer goods, surpassing the trade volume of entire
countries, such as Germany and Russia."
South African Structural Adjustment
In February 11, 1990, Nelson Mandela ended
twenty-seven years of imprisonment. Four years later, one of the
most powerful movements in history, embraced by people around
the world, achieved the abolition of South African apartheid.
In 1994, Mandela and his African National Congress (ANC) party
won the first free and democratic elections in South African history.
People around the world were glued to their television sets as
black South Africans willingly stood in lines several hundred
people long for their first opportunity to cast a ballot. Tragically,
the economic transformation did not share the democratic freedom
of the political process.
In 1993, the IMF lent South Africa $850
million, conditioned with a set of classic structural adjustment
provisions: tariff reduction, cuts in government spending, and
deep public sector wage reductions. Three years later, the World
Bank followed suit, expanding the Structural Adjustment Program
with money, two of its economists, and a name-"Growth, Employment,
and Redistribution" (GEAR). GEAR called for commercialization
and then privatization of all of South Africa's companies and
services, cuts to corporate taxation, more cuts to government
spending, more tariff cuts, including in newly emerging sectors
such as textiles and food products, and liberalization of capital
controls and foreign exchange rates . As described by Patrick
Bond, a leading economist at Witwatersrand University: "The
reality is that South Africa has witnessed the replacement of
racial apartheid with what is increasingly referred to as class
apartheid-systemic underdevelopment and segregation of the oppressed
majority through structured economic political, legal, and cultural
As with Argentina, the lifting of capital
controls devastated the South African economy and may be one of
the most significant obstacles to ending economic, not just racial,
apartheid. Eliminating barriers to the outflow of capital meant
that the owners of capital-white people-were permitted to remove
all of their capital from the country (much of which went to London)
while maintaining their residency in South Africa. Corporations
were also allowed to pick up shop and move headquarters and production
facilities out of the country. Individual and corporate wealth
grew, but it benefited London's economy, not South Africa's. The
result was a massive outflow of capital without any concurrent
attraction of new capital. According to Patrick Bond, the "white
capital flight' in combination with the massive job loss, led
black African household income to fall 19 percent from 1995 to
2000, while white household income rose 15 percent. The poorest
half of all South Africans earned just 9.7 percent of national
income in 2000, down from 11.4 percent in 1995. The richest 20
percent of South Africans earned 65 percent of all income."
In 2003, South Africa earned the dubious distinction of having
the greatest income inequality of any nation other than Guatemala.
In the first year of GEAR's implementation,
South Africa lost more than 100,000 jobs. Unemployment rose from
16 percent in 1995 to 30 percent in 2002. With the addition of
"frustrated job-seekers," those who had given up searching
for work, unemployment was at 43 percent. 44 Unemployment figures
in most of the country's provinces have continued to hover near
50 percent since the late 1990s.
Much of the job loss was caused by privatization
for example, more than 50,000 workers lost their jobs through
the partial privatizations of the state-owned telephone company
and the electricity sector. The most devastating impact of privatization
on South Africa, as on Zambia, was the dramatic reduction of vital
services, including phone lines, water, electricity, and health
care, to those most desperately in need. For example, of the thirteen
million people given access to a fixed telephone line for the
first time after 1994, ten million were disconnected because they
could not pay their bills-due to dramatically higher prices after
the one company was partially privatized.
Beginning in the late 1990s, the World
Bank made a total of seven loans to South Africa totaling approximately
$130 million. The loans required that South Africa adopt 100 percent
cost recovery for previously free services. Through user fees,
the state would retrieve 100 percent of its cost. At the same
time, many of the services were being privatized and the prices
increased. The combination of 100 percent cost recovery and privatization
meant that water, electricity, and health care suddenly became
priced completely out of reach for millions of South Africans.
More than ten million of the nation's
poor and primarily black population had their water cut off from
1994 to 2002-more households than the government had managed to
connect to water since the end of apartheid in 1990. The same
number had their electricity disconnected. Two million people
were evicted from their homes due their inability to pay utility
By the late 1980s, more than seventy countries had been submitted
to World Bank and IMF Structural Adjustment Programs.
The Bush Agenda