World Bank "Conditionalities"
by Greg Palast
The Observer, London
October 10, 2001

"It has condemned people to death," the former apparatchik told me.
This was like a scene out of Le Carre. 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.

And here before me was a far bigger catch 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

I "debriefed" Stigltiz over several days, at Cambridge University, in
a London hotel and finally in Washington in April 2001 during the big
confab of the World Bank and the International Monetary Fund. But
instead of chairing the meetings of ministers and central bankers,
Stiglitz was kept exiled safely 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
'anti-globalization' protesters. The ultimate insider was now on the

In 1999 the World Bank fired Stiglitz. He was not allowed quiet
retirement; US Treasury Secretary Larry Summers, I'm told, demanded a
public excommunication for Stiglitz' having expressed his first mild
dissent from globalization World Bank style.

Here in Washington we completed the last of several hours of
exclusive interviews for The Observer and BBC TV's Newsnight about
the real, often hidden, workings of the IMF, World Bank, and the
bank's 51% owner, the US Treasury.

And here, from sources unnamable (not Stiglitz), we obtained a cache
of documents marked, "confidential," "restricted," and "not otherwise
(to be) disclosed without World Bank authorization."

Stiglitz helped translate one from bureaucratise, a "Country
Assistance Strategy." There's an Assistance Strategy for every
poorer nation, designed, says the World Bank, after careful
in-country investigation. But according to insider Stiglitz, the
Bank's staff 'investigation' consists of close inspection of a
nation's 5-star hotels. It concludes with the Bank staff meeting
some begging, busted finance minister who is handed a 'restructuring
agreement' pre-drafted for his 'voluntary' signature (I have a
selection of these).

Each nation's economy is individually analyzed, then, says Stiglitz,
the Bank hands every minister the same exact four-step program.

Step One is Privatization - which Stiglitz said could more accurately
be called, 'Briberization.' Rather than object to the sell-offs of
state industries, he said national leaders - using the World Bank's
demands to silence local critics - happily flogged their electricity
and water companies. "You could see their eyes widen" at the
prospect of 10% commissions paid to Swiss bank accounts for simply
shaving a few billion off the sale price of national assets.

And the US government knew it, charges Stiglitz, at least in the case
of the biggest 'briberization' of all, the 1995 Russian sell-off.
"The US Treasury view was this was great as we wanted Yeltsin
re-elected. We don't care if it's a corrupt election. We want the
money to go to Yeltzin" via kick-backs for his campaign.

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 advisors.

Most ill-making for Stiglitz is that the US-backed oligarchs stripped
Russia's industrial assets, with the effect that the corruption
scheme cut national output nearly in half causing depression and

After briberization, Step Two of the IMF/World Bank one-size-fits-all
rescue-your-economy plan is 'Capital Market Liberalization.' In
theory, capital market deregulation allows investment capital to flow
in and out. Unfortunately, as in 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%, 50% and 80%.

"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

At this point, the IMF drags the gasping nation to Step Three:
Market-Based Pricing, a fancy term for raising prices on food, water
and cooking gas. This leads, predictably, to Step-Three-and-a-Half:
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. Indonesia exploded into riots, but there
are other examples - the Bolivian riots over water prices last year
and this February, the riots in Ecuador over the rise in cooking gas
prices imposed by the World Bank. You'd almost get the impression
that the riot is written into the plan.

And it is. What Stiglitz did not know is that, while in the States,
BBC and The Observer obtained several documents from inside the World
Bank, stamped over with those pesky warnings, "confidential,"
"restricted," "not to be disclosed." Let's get back to one: the
"Interim Country Assistance Strategy" for Ecuador, in it the Bank
several times states - with cold accuracy - that they expected their
plans to spark, "social unrest," to use their bureaucratic term for a
nation in flames.

That's not surprising. The secret report notes that the plan to make
the US dollar Ecuador's currency has pushed 51% of the population
below the poverty line. The World Bank "Assistance" plan simply
calls for facing down civil strife and suffering with, "political
resolve" - and still higher prices.

The IMF riots (and by riots I mean peaceful demonstrations dispersed
by bullets, tanks and teargas) cause new panicked flights of capital
and government bankruptcies. This economic arson has it's bright
side - for foreign corporations, who can then pick off remaining
assets, such as the odd mining concession or port, at fire sale

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 Indonesia's financiers and, by
extension, the US and European banks from which they had borrowed.

A pattern emerges. There are lots of losers in this system but one
clear winner: the Western banks and US Treasury, making the big bucks
off this crazy new international capital churn. Stiglitz told me
about his unhappy meeting, early in his World Bank tenure, with
Ethopia's new president in the nation's first democratic election.
The World Bank and IMF had ordered Ethiopia to divert aid money to
its reserve account at the US Treasury, which pays a pitiful 4%
return, while the nation borrowed US dollars at 12% 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 US Treasury's vault in Washington.

Now we arrive at Step Four 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 19th century,
Europeans and Americans today are kicking down the barriers to sales
in Asia, Latin American and Africa, while barricading our own markets
against Third World agriculture.

In the Opium Wars, the West used military blockades to force open
markets for their unbalanced trade. Today, the World Bank can order
a financial blockade 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, more on that in
the next chapters). 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 loans 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 are
unpleasantly called, "triggers." Taking a World Bank loan for a
school 'triggers' a requirement to accept every 'conditionality' -
they average 111 per nation - laid down by both the World Bank and
IMF. In fact, said Stiglitz the IMF requires nations to accept trade
policies more punitive than the official WTO rules.

Stiglitz 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 "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. OK, Mr Smart-Guy Professor, how would
you help developing nations? Stiglitz proposed radical land reform,
an attack at the heart of "landlordism," on the usurious rents
charged by the propertied oligarchies worldwide, typically 50% of a
tenant's crops. So 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 their agenda." Apparently

Ultimately, what drove him to put his job on the line was the failure
of the banks and US 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 simply 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.


A version of this was first published as "The IMF's Four Steps to
Damnation" in The Observer (London) in April and another version in
The Big Issue - that's the magazine that the homeless flog on
platforms in the London Underground. 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."

Of course it was difficult for the Deputy Chief to respond. The
information (and documents) came from the unhappy lot inside his
agency and the World Bank.

At you can read more about globalization -
and view Palast's reports for BBC Television's Newsnight, including
his broadcast interview with Joe Stiglitz (Meirion Jones, Producer).