Venezuela Watch

Amigo - you have me at a disadvantage in that I haven't read perkin's book, though I have the impression I understand his basic argument.

Potential creditors are always looking to make loans to sufficiently reliable customers. Most of us get at least one or two uninvited solicitations a week for new credit cards or lines of credit. it is true that a foolish borrower, individual, corporate, or a sovereign nation, can all-to-easily get himself in a serious debt situation. That, however, is a well-recognized responsibility of individuals, companies and governments.

In principle the best use of borrowed IMF funds is for the financing of new infrastructure that promise to enhance the economic development of the borrowing country. The worst use is to sustain imports of foreign consumer goods. It is natural for the large infrastructure construction firms (mostly in developed nations) to seek such opportunities, and no doubt some have pursued projects of marginal utility. (I have considerable experience in the business.) However the object of IMF and other loans is to give developing countries access to the services of these and other like companies for needed projects they would otherwise be unable to undertake.

The potential for corruption here is great, particularly if the government of the borrowing country is itself corrupt. In some cases the construction firms themselves engage in corrupt deals - my experience is that the French are particularly expert at that. At the same time failed projects, even those funded by the IMF usually cost the construction company a great deal as well. Several major U.S. and one large German design-construction firm have gone into bankrupcy or been broken up as a result of such losses during the last 10 years. The bottom line thoiugh is that the indispensable element of coirruption in such deals is corruption in the borrowing government itself.

Thomas,

You apparently don't like to be called either a conservative or a neo-liberal. What labels then do you like?

Confessions of an Economic Hit Man: How the U.S. Uses Globalization to Cheat Poor Countries Out of Trillions

(Here is an excerpt from an interview from Pacifica Radio. -Amigo)


We speak with John Perkins, a former respected member of the international banking community. In his book Confessions of an Economic Hit Man he describes how as a highly paid professional, he helped the U.S. cheat poor countries around the globe out of trillions of dollars by lending them more money than they could possibly repay and then take over their economies. [includes rush transcript]

JOHN PERKINS: Well, the company I worked for was a company named Chas. T. Main in Boston, Massachusetts. We were about 2,000 employees, and I became its chief economist. I ended up having fifty people working for me. But my real job was deal-making. It was giving loans to other countries, huge loans, much bigger than they could possibly repay. One of the conditions of the loan-let's say a $1 billion to a country like Indonesia or Ecuador-and this country would then have to give ninety percent of that loan back to a U.S. company, or U.S. companies, to build the infrastructure-a Halliburton or a Bechtel. These were big ones. Those companies would then go in and build an electrical system or ports or highways, and these would basically serve just a few of the very wealthiest families in those countries. The poor people in those countries would be stuck ultimately with this amazing debt that they couldn't possibly repay. A country today like Ecuador owes over fifty percent of its national budget just to pay down its debt. And it really can't do it. So, we literally have them over a barrel. So, when we want more oil, we go to Ecuador and say, "Look, you're not able to repay your debts, therefore give our oil companies your Amazon rain forest, which are filled with oil." And today we're going in and destroying Amazonian rain forests, forcing Ecuador to give them to us because they've accumulated all this debt. So we make this big loan, most of it comes back to the United States, the country is left with the debt plus lots of interest, and they basically become our servants, our slaves. It's an empire. There's no two ways about it. It's a huge empire. It's been extremely successful.

http://www.democracynow.org/article.pl?sid=04/11/09/1526251

I believe this is a very selective and self-serving report of the facts by Perkins who, among other things, is peddling his book. The poertplant projects with which he associated Stone & Webster, a very well-established and faierly old engineering construction firm, then headquartered in Boston, also bankrupted that company -- it no longer exists, and the remnants were bought by Shaw Group Inc. about four years ago.. It was simply not the case that Stone & Webster benefitted from the project. The Schultz/Bechtel stuff is old news, grist for the paranoid mill over fifteen years ago and rather thoproughly debunked long ago. The fact is the U.S. Government (and many others) very openly helps finance infrastructure development projects in what were once called Third World nations and, by law, requires the use of U.S. construction firms in such projects. There is nothing secret about it at all.

George, you either want to know the truth or you don't. Its all there if you want it.

This discussion reminds me of a discussion two of my professors had in graduate school.
Basically the argument was whether huge international financial movements are made according to a plan or they are made because capitalism is chaotic by nature.
I baptised their theories, the "Maquiavellian" and the "Naïve", and think the reality is in-between.

Truly, and specially during the 80s, there was an excess of financial capital looking for places to be invested. Not that several Third World governments were force-fed those credits, who cost them dearly afterwards, but certainly the banks weren't looking for "reliable costumers" to make business with, and the measures the IMF put as a condition to return some highly indebted countries to solvency were perhaps necessary, but certainly unfair to the majority of the population living in those countries.

fbaezer, Capitalism is psychotic in nature. The reality of which was seen in El Salvador in the 80's

I believe I have fairly reliable insights in this area as I managed a major part of the international infrastructure business for a major U.S. firm for about eight years and am currently a Director in another. I stand by what I have written here.

fbaezer,

I believe your analysis is largely correct. It is also true that some of the projects that supposedly cost the people of the "victim" country "dearly" were provided at well below the real economic cost. The "dearly" part being merely the fact that they had to pay for it. Venality on the part of the government of the supposed "victim" countries is far more often the cause of repayment issues than it is the utility, benefit, and cost of the projects themselves. In countries where the police are for sale, is should be no surprise to find that other things are for sale as well, or that government graft drains any loan or investment in the country. In South America Chile is the sole exception to the rule, though beneath the chaos Brazil has some things going for it too.

What would you call the capitalistic reality today in the United States?

I believe fbaezer is correct - capitalism is rational on an individual basis, but chaotic in the large. Moreover, like mathematical chaotic systems, it is deterministic, but unpredictable in the small, but self-organizing and grossly predictable in the large. Socialism and planned economies are rational, predictable and inexorably lead to poverty and failure.

George, Can you afford to think any other way? Of coarse you will stand by capitalism, right or wrong even if it requires an outright mental block or the denial of facts. To acknowledge the truth in this matter would require you to take a second look at everything youve come to beleive and you would feel you were bitting the hand that feeds you. I always look at the questions people don't answer. Only capitalism isn't bad. People doing bad things with capitalism is bad.

By the way if 3% of the population controls 85% of the wealth and the same people own the media and the military is that Capitalism or communism?

I didn't say that capitalism was without defects or impervious to the manipulations of greedy people. Instead, I said that it is better than the alternatives of Socialism and planned economies, and has fewer bad side effects. The 20th century has provided us with more than ample proof of this proposition -- from the Soviet Empire, to China, to Africa and every other place in which these flawed ideas were applied, Even India is rapidly growing economically now that the bureaucrats have loosened their "benevolent" control of their economy.

Well in the former Soviet Union about 1% of the population controlled all of the wealth and political power in the country -- and the police, courts, and media as well. It was a socialist tyranny.

Capitalism doesn't require that such a concentration of power occurs, though it alone contains nothing that would preclude it. However if there is also a high degree of democratic political control in the country in question than the forces of capitalism can easily be turned to the breakup of such concentrations through capitalistic competition.

When some governments refused to deal with John Perkins (IMF, World Bank) the CIA would come in and assassinate them. I this part of the free market? Or should we just call it an offer you can' refuse?

After 9/11 John Perkins wrote "Confessions of an Economist hitman". Do you think he made more as a economist for the world bank and the IMF or writing this book which you claim hes lying in to hawk? I don't think money is his motive of writing this book.

Why would he leave such a position to write a book?

Did he really leave a lucrative position to write a book? or did the lucrative position leave him? The sections you quoted and those in the link contained rather masterful innuendo and, association, and non-specific implications -- all unverifiable - to make his points. All this make him look very suspect as a source of truth to me. Moreover some of his stuff is pure fantasy - previously debunked by serious investigators.

Fine george, None of this exist. It's all propaganda, it's another conspiracy theory.

I would agree with that/

Then were done.

I'm actually comfortable with "neoliberal". Just one minor quibble: the school of liberalism I believe in hasn't changed much over the last 100 years, so I find the `neo' part somewhat wasteful and misleading. What I do resent, though, is the connotation that neoliberals are heartless vampires who suck the lifeblood of innocent nations.

Yes it is, but your evidence fails to convince me that the IMF is guilty of loan sharking. It is certainly not guilty of it under the German definition of usury. Here is my best effort at translating §138 of our civil code (BGB)

Source (in German)

If the IMF ever gained a pecuniary gain that was conspicuously out of proportion to a service it provided, nobody has shown this case to me yet.

Thomas, I don't have any delusions of convincing anybody of anything. I don't think you do either. After all you've been on A2K since May 2003. You know what i'm talking about. Denial is far more popular then the willingness to admit that we are wrong. People in the defence of there religion, ideologies, countries and political parties will go into Denial far sooner then they will admit fault. For myself I feel at the very least I can stay informed and aknowlegde the injustice done to others and share that information with others. I am no match to the individuals will to ignorance but I can end my own.




Double-Crossed with Loans

Analyzing some particular cases is a good way to x-ray the actions of the International Monetary Fund and the impact of the payment of poor countries' foreign debt.

In 1982, Mexico owed US$ 57 billion to credit entities. Two decades later it owes US$ 152 billion, an amount that triples what it has already paid. According to official data, this country has 55 million poor people, almost half of its total population.
Colombia's Finance Minister informed the country's national budget for the next year is 35,361 million dollars, one third of which will be used to pay principal and interest on the debt. 62 percent of the Colombian children are poor or indigent, if it is necessary to make clear what kind of economy this refers to.
Brazil, one of the most unfair countries on Earth in terms of income distribution, owes 223 billion dollars.
More than half the African countries spend more budget to pay their foreign debt than in health care. As a direct consequence, Sub-Saharan Africa will have more than 18 million orphans in 2010 because of AIDS.
Military dictatorships in Latin American countries received enormous loans from the IMF as well. Do they promote democracy?
Argentina: A Leading Case

During the 90s, Argentina's government -- by coincidence, the most corrupt in its history -- decided to follow word for word each and every instruction issued by the IMF. State companies were privatized in exchange for a derisory amount; one of the main sources for public financing built by pension contributions was disrupted and sent to international banks; and in particular, for 10 years an absurd foreign exchange policy based on convertibility was strictly maintained. This was a forced system establishing that one Argentine peso was equal to one US dollar.

This situation brought about the two basic pillars of poverty: the cheap dollar prevented Argentine companies from exporting, and in turn, the internal market purchased all kinds of imported goods whose prices were lower than that of locally manufactured items. In the meantime, the foreign debt rose from 50 billion dollars to 150 billion dollars in only ten years.

The result is that in a country that in 1984 had an extremely low unemployment rate below 6 percent, one of the highest literacy rates in the world, and an industrial and cultural infrastructure with no precedents in Latin America, today, 20 years later, is a country in which more than half of the population is below the poverty line.

During the neo-liberalism's golden age, the IMF used to praise Argentina's economic policies and placed the country on a pedestal as an example of the good results its economic plans reaped. When the Argentine crisis broke out in December 2001 (the banking system blew up and the government was ousted after a bloody clash in the streets, as a result of a paralyzed economy and unprecedented problems), the IMF "punished" the nation, depriving it of funds and demanding stronger belt-tightening measures.

Apparently, during the 10 previous years, it had never noticed that unemployment and poverty advanced with giant steps, that foreign banks transferred funds abroad thereby emptying the financial system, while private investors took advantage to purchase Argentine debt bonds at a 10 percent monthly rate, which was obviously impossible to pay.

An interesting detail is that when Argentina took its first loan in the 60s, the state was able to finance itself. However, the establishment induced countries to fall into indebtedness as a gesture of "good will" towards the international community.

Nowadays, Argentinean President Néstor Kirchner's government decided to openly confront the IMF and disobeyed its recommendations. Thanks to this, the Argentine economy experienced a record growth in the last 12 months.

Crime without Punishment

The Center for Economic and Policy Research (CEPR) proposes establishing criteria to monitor the performance of senior IMF officials, in such a way that it is possible to determine when a dismissal should be applied.

"The IMF does not have the solution. They are not experts. They are representatives of specific private interests," stated Alan Freeman, the great economist who acts as an advisor to London's mayor Ken Livingtone, and who supports Argentina in its quest for a fair solution to the debt problem.


Mr. Freeman is not wrong. The IMF has such a degree of interference in internal policy that it issues opinions on the dollar exchange rate, and public utility rates. The IMF also makes suspicious economic forecasts: frequently what actually happens is exactly the opposite of what they presage. For example, when Argentina finally abandoned the currency convertibility system, the IMF presaged the dollar exchange rate would soar to 10 Argentine pesos or more, and an unstoppable 10% annual inflation would lash the nation. None of this has happened.

http://kmareka.com/usury.htm

Not bad at all, Thomas, but your translation misses a bit the juridical tone :wink:

The semi-official translation (from Forrester, Goren & Ilgen: The German Civil Code ):

You may well be correct about this. Nevertheless, there are at least two people in this thread who have seen me admit mistakes on A2K. In fact, there are two such people on this page alone, including one whose politics disagrees with mine more often than not. Hence, your failure to persuade me that the IMF is a loan shark does not necessarily mean that my ignorance and denial is greater than yours.