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Whilst the 'Western ' world reels in shock
from the recent events in the US and the Islamic world intensely
debates its religious approaches to these phenomena, the 'western'
and financial world rush to try and come to some sort of economic
solution that may help stave off global recession. The last
30 years or so have seen an almost blind faith in unfettered
capitalism, in unrestricted markets that give the forces of
supply and demand free reign. 'Globalization' has been the
catch phrase on many economists' lips. All this may now be
forced to change or be modified, and economic regulations
may now be 'back to the future with a vengeance'. Such vast
sums of money are out 'on loan' to the 'Developing World'
through the activities of such multilateral institutions as
the World Bank and IMF and economic mobility (and hence less
control and stability) so greatly increased by agreements
such as NAFTA and WTO, that a global financial crisis could
possibly collapse the whole system. The whole World Bank and
IMF edifice has been built with loans to the 'Third World'
whose interest payments on these loans (or at least the promise
of repayment) has theoretically kept the whole system potentially
viable. If it comes to a situation where almost the entire
Developing World finds itself unable to keep up the loan interest
repayments - or even the pretence of theoretically repaying
the debts - because of a potential world economic crisis,
then 'Western' bankers and governments may be caught in an
untenable 'the Emperor has no clothes ' situation. Therefore
analysis of the work and potential plans of some of the institutions
in this last article of the series based upon water may only
be relevant up until Tuesday of last week. Economic events
and restrictions may force significant changes in these organizations
in the very near future.
How is this relevant for Eivissa/Ibiza and
water? An example springs to mind. The actual water supply
networks of several areas of the island are owned by one of
two companies, Aguas Formenteras and Sogesur. Last week the
Ajuntamiento (Town Council) of Sant Josep (San José)
made plans to take over the water supply network of the area
(at the moment owned by Aguas Formenteras) and lease it to
Sogesur to maintain and develop over the next 35 years. Theoretically
this should enable the Ajuntamiento to control the water supply
and fix its price. The fact that Sogesur now owns Aguas Formenteras
anyway does introduce a slightly puzzling element. Aguas Formenteras
actually owns the water supply/ well sources in the area -
which means that now Sogesur does. All well and good for the
present - but in 35 years time? What if Sogesur becomes the
subsidiary of a major Spanish water supply company that is
eventually bought out by a larger European company that in
turn is (or eventually becomes) a subsidiary of a massive
multinational company (e.g. Monsanto or the Bechtel corporation,
both interested in water)? Signatory countries to the WTO
cannot prevent such take-overs. If local control is lost over
essential supplies such as water then international events
can possibly adversely affect people here on Eivissa (and
in many other areas of the world). This has happened before
here. In 1996 a number of local insurance companies drastically
increased their insurance rates for vehicle, house, etc, insurance.
Very few people bothered to ask why. I did and it took a long
time to get a proper answer. It seems that the increase had
nothing to do with local nor even Spanish mainland conditions
whatsoever, but was due to a devastating 1995 hurricane season
in Florida which incurred major losses for certain large insurance
companies holding policies in that area. As it happens, these
larger insurance companies owned smaller insurance companies,
which in turn owned smaller insurance companies and so on
down the line to us here in Eivissa. We all had to pay for
events somewhere else in the world, one of the hidden 'downsides'
of globalization.
Since their founding in the 1940s (see last
weeks article) both the World Bank and the IMF (International
Monetary Fund) have pursued economic and development policies
of a nature that have effectively pulled many areas of the
world into such an interconnected situation - sometimes for
good, sometimes not so. For those interested in following
up a detailed account of nearly 50 years of the World Bank's
work, I would direct you Catherine Caufield's excellent study,
"Masters of Illusion: The World Bank and the Poverty
of Nations" (published 1996), which covers the World
Bank's activities from its founding until circa 1995. For
those who have never been to the 'Developing World' and seen
the difficulties caused by certain World Bank projects nor
been in an impoverished 'Third World Capital' when a delegation
from the World Bank arrives (suits and ties, the best hotels
and restaurants, and closeted meetings only with the 'elite'-
be it government or bankers or whoever), the book comes as
a shock. It is not a sensationalist book, however, and the
World Bank could not disagree with its detailed accounting,
however much they tried to ignore it. This is not to say that
the World Bank has not also done good work, it is just that
for much of the poorer population of the world on the receiving
end of many projects the hoped- for benefits 'have not yet
arrived' (I am trying to put it as mildly as possible).
Relatively little regarding these World
Bank projects reaches the world's media; they take too long
to 'complete' to really be amenable to a splash in the press.
Suffice it to say that since the late 1940s unbelievable sums
of money - into the hundreds of billions of $s - has been
loaned to 'Developing Countries' for projects such as dams,
irrigation systems, roads and railways, agriculture and certain
manufacturing processes. The World Bank is staffed by highly
qualified economists, who may be highly respected in their
particular fields, but a constant complaint is that very few
of these seem to have much practical 'in-the field grass-roots'
experience of the ways of life of peoples who are not part
of the financial/banking/economist/government circles that
they circulate amongst. Although lip-service is paid to the
alleviation of poverty and environmental concerns, etc, in
practice consideration seems to be thrown to the wayside in
an obsession with lending funds whether the projects are viable
or not. Everything is viewed in terms of economics, and a
certain 'Western capitalist' version of economics at that.
Although periodically anthropologists are hired as consultants
to advise on aspects of a particular project, their advice
is almost never listened to. The organization's in-house environmental
section is side-lined and often ignored in the blind competition
between departments to rush to assist development of project
requests from around the world that money can be loaned for.
The Bank seems obsessed with evaluating projects by their
economic rates of return in order to assess the extent its
loans contribute to the borrowing nation's GNP.
We have all heard the term GNP (gross national
product) and we tend to assume that it is an internationally-accepted
and understood safe term that actually means something, e.g.
if the GNP of a nation goes up, that is good, if it goes down
that is bad. It is a bit of a surprise to most people to find
out that it really means very little except to an economist
or a banker out of touch with the realities of life and what
is does mean has come up for a lot of criticism from others.
The term or concept GNP was developed in the 1930s as government
planners and economists searched for a uniform measurement
of national production. The concept GNP includes all paid
services and manufactured goods, but does not distinguish
between productive and destructive services. Thus a war is
good for GNP as this produces, for example, an increase in
arms manufacturing jobs. Thus the recent events in New York
can be seen as an example of an increase in GNP for the area
as emergency funds from Washington are funnelled in to increase
the number of clean-up, hospital and emergency services, etc.
Any financial transaction adds to GNP, as does a nation's
consumption of its natural resources (e.g. cutting and selling
its forests). If sa pagèsia Eivissenc (Ibicenco peasantry)
in the early 1950s could possibly be classed as an independent
state (an idea not necessarily foreign to pagès at
the time, as most of the island had for so long been isolated
from outside influences, even from the Spanish mainland) then
its GNP would have been practically zero, in spite of the
fact that almost all pagès had their own houses and
lands and were almost completely self-sufficient. GNP is basically
a deficient measure of national income that is unfortunately
used also by World Bank and other economists as an index of
social welfare, for which it is blatantly unsuitable. And
yet we, the public, do not question it and economists continue
to measure it. The most profound criticism of it (and therefore
of much of 'western economists' approaches to the world economy)
came from none other than Robert Kennedy, who spoke about
it on the first day of his campaign for the US presidency
in 1968:
"Gross national product counts air
pollution and cigarette advertising and ambulances to clear
our highways of carnage. It counts special locks on our doors
and the jails for the people who break them. It counts the
destruction of the redwoods and the loss of our natural wonders.
It counts napalm and it counts nuclear warheads and armoured
cars for the police to fight the riots in our cities...Yet
the gross national product does not allow for the health of
our children, the quality of their education, or the joy of
their play. It does not include the beauty of our poetry,
or the strength of our marriages, the intelligence of our
public debates, or the integrity of our public officials.
It measures neither our wit nor our courage, neither our wisdom
nor our learning, neither our compassion nor our devotion
to our country. It measures everything, in short, except that
which makes life worthwhile".
And to think that for over 50 years the
world's two most important financial institutions, the World
Bank and its sister institution the IMF (International Monetary
Fund) have been pushing these (albeit hidden and possibly
not well understood) views and money down the throats of the
'Developing World'. In spite of numerous disastrous projects
supported by both institutions (including, of course, some
good ones, but these are often rather hard to find if one
assumes that such projects are to assist the needy and not
just 'the rich' or governments themselves) and numerous complaints
(usually ignored), both organizations tend to continue their
activities as if assuming that the general public does not
really know what is good for the world.
Let me give an example related to the IMF.
The World Bank will loan money for projects (plus further
loan other funds often to just enable the interest loans on
the first loans to possibly be paid, and then further loans
to assist the interest on the second loans to be repaid, etc)
to governments in the 'Developing World' if these governments
will agree to follow certain strict restructuring rules that
will bring their economies into line with certain economic
beliefs (usually 'western Euro-American capitalist') that
the World Bank deems normal and universal. The IMF works more
directly to assist the economies of these governments at a
governmental and banking level to achieve economic growth
following similar guidelines. But in many instances these
guidelines do not seem to work, seem to be flawed, and often
seem to create - or do create - almost the opposite effects
intended. The 'tiger economies' of Southeast Asia - South
Korea, Thailand and Indonesia, so lauded by western economists
in the 1980s and early 1990s, collapsed suddenly in 1997.
With strong encouragement from the IMF and the World Bank
these economies had pursued recommended strategies for attracting
foreign capital, something that economists believe is inherently
good. The dangers of 'fast-track capitalism', albeit supported
by 'experts' and advice from the IMF and World Bank, unhinged
the system and devaluation and an economic crisis brought
the Southeast Asian miracle to a juddering halt. Rumours circulated
in the US in early 1998 that a confidential internal memo
restricted to only the highest offices of the IMF in Washington
recognized that actual IMF impositions and (? miss-) guidance
were actually responsible for this collapse. Asian governments
lined up to request billions of $s of assistance from the
IMF. Despite the seeming absolute failure of IMF policies
in Southeast Asia, the IMF was, in 1998, trying to expand
its financial role in the area - and world-wide - thought
by economists to be essential but by many others with an historical
view of such events to be potentially disastrous (the Mexican
economy had collapsed in 1994 for many of the same reasons).
Although the IMF is officially set up as a multilateral agency,
it is said by some of its critics to function as an extension
of the US Treasury Department, and by others to be basically
and institution enabling US and western banks to loan vast
sums of money for 'guaranteed returns' (!). Even before the
Asian economic crisis the IMF had plans to request a capital
increase of US $90 billion that would hopefully come mainly
from the G-7 countries. As the economies of Southeast Asia
crumbled, the IMF requested from the US a proposed $14.5 billion
as replenishment, implying the funds were depleted due to
the crisis. This created uproar in the US House of Representatives
and in April 1998 the Banking Oversight Subcommittee of the
Banking and Financial Services Committee held days of tense
meetings.
It is to the credit of this Committee that
they invited the respected representative of an Asian NGO,
Walden Bello (also Professor of Public Administration and
Sociology of the University of the Philippines) to testify
before them. Professor Bello began his testimony "Allow
me to state at the outset that the IMF's record in the Asian
region does not inspire confidence in the institution...by
promoting a policy of indiscriminate capital account liberalization
among the East Asian economies (it) has been a central reason
for the Asian financial crisis...the IMF has exhibited a remarkable
inability to anticipate and predict the financial crisis...the
Fund is imposing stabilization and recovery programs that
are worsening instead of alleviating the economic crisis...the
IMF is not so restoring our economies to health as bailing
out the big international creditors...(and) for its own bureaucratic
self-interest, is preventing the Asian countries from developing
innovative responses to the Asian financial crisis...".His
detailed testimony goes on in sections entitled "Blindsided
by Ideology', 'A cure worse than the Disease', 'Building a
Safety Net for the Global financial Elite', 'Promoting Anti-Americanism'
( does this sound familiar from the last 10 days?), 'Creating
Poverty and Instability', 'Institutionalizing Stagnation'
and finally 'Monopolizing Solutions and Eroding Congress's
Authority'. Shocking? Not really, when one looks at the world
not from the 'West' but from the security of one's rice paddy
in an area due to be flooded by another World Bank dam project
with no proper resettlement area envisaged. These kinds of
things have been going on for decades.
From the above, it would look as if two
multilateral bodies might be enough to aid and abet the 'development'
of the world, any more could possibly be even more disastrous
(?). Well, there is never a dull moment in the financial world.
In 1995 the World Trade Organization (WTO) was set up. Many
of the public are not really aware what this organization
is, and even more in the dark are countries in the 'Developing
World'. Is it part of the UN? Is it part of the World Bank/IMF
sisterhood? Although obviously interlinked, it seems to be
almost completely independent of any of these institutions
and any governments and in fact has gathered to itself such
powers that it can override almost any national or international
laws that interfere with its objective as the primary rule-making
regime of the globalization process. Headquartered in Geneva
with an administrative staff of over 500 it has now incorporated
into itself more than 20 international agreements (including
GATT) and has full executive authority over all these accords.
Working in the best interests of the world at large? Well,
apparently yes - if you happen to be a 'Western' multinational
company, etc, so it seems. It does not necessarily seem so
beneficial if you happen to be at the 'rice paddy' end of
the spectrum, in spite of all the publicity on the benefits
of 'globalization'. Such concerns, though, have never seemed
to hinder the development of such monumental organizations.
The WTO now seems part of the 'accepted
international scene' (well, at least amongst bankers, multinationals
and the G-7!) but a certain amount of mist seems to shroud
its actual beginnings. Michel Chossudovsky, Professor of Economics
at the University of Ottawa, Canada, actually calls it an
"illegal organization". I quote here from a resume
(published in June 2001 by Sonoma State University in California)
of Professor Chossudovsky's work on the WTO. "...The
WTO is actually an illegal institution. The WTO was put in
place following the signing in 199(5) in Morocco, of a 'technical
document' negotiated behind closed doors. Following the Morocco
meeting, the agreement was either rubber-stamped or never
formally ratified by national governments, yet membership
in the WTO requires acceptance of its precepts without question.
"The 199(5) agreement has been casually
embodied in international law, bypassing the democratic process
in mostly all of the member countries. It blatantly overrides
national laws and constitutions while providing extensive
powers to global banks and multinational corporations. This
totalitarian intergovernmental body has been empowered under
international law to 'police' country level economic and social
policies, suppressing the rights of national governments.
Also the WTO neutralizes the authority of UN agencies, such
as the International Labour Organization (ILO), designed to
oversee international trade conduct. It furthermore contradicts
the Universal Declaration of Human Rights".
Through the WTO large multinationals can
do just about anything they want anywhere in the world - and
if a small nation tries to stop them the company can take
that nation to court under the terms of the WTO. So in future
any multinational with an eye on making a profit out of Eivissa's/Ibiza's
scarce water resources could find a way to do so, Local Government
or no. In Vanuatu in the Southwest Pacific, where no outsiders
can own land (the concept of foreign ownership of land does
not exist in the traditional systems there), a multinational
could force its way in to buy up uninhabited islets, threatening
to take the government to court.
Does the world really need such institutions
to `police' it? Does the 'Western world' really know or care
what has been done in the name of 'development' in the 'Developing
World'? Unfortunately I think not.
Kirk W Huffman
kirkwhuffman@liveibiza.com
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