When a nation is, ‘down and out,’ the IMF squeezes the last drop out of it

Hunt for Successor 42: Money is the root of all evil

“Money is the root of all evil,” the email read. “It is the reason you Africans are a failure; a dependent of the West. It is the reason you languish at the bottom of the totem pole. Don’t blame us. You have put yourselves there. It is your self-interest, pettiness, and meanness that have put you at the brink of economic Armageddon. It is the greediness of your political leaders that makes you an endangered people.”

The lengthy email was from Walter, the Caucasian and former IMF official I had sat next to on my flight from Los Angeles to Boston on New Year’s Eve of 2011. I had not heard from him in months. I read on:

“It is this unbridled greed that is killing you at an alarming rate. It has turned you into beggars at the hands of the IMF-World Bank and condemned you to debt. The indebtedness, superior to colonialism, is the reason for the wanton deaths of African folk and the fast reduction of the African population. It’s a great shame for a people who have enough natural resources to feed, clothe and shelter every single soul on the continent.

Like children your so-called economists and your ill-informed politicians get excited when IMF-World Bank announces that your economic growth has ‘surged’ to 8%, 4%, 2%… What they fail to understand is such are insignificant percentages of low development. IMF-World Bank is simply putting cheese on its traps and like mice you all are getting caught. Where are the African economists to fight this scourge?”

Walter’s last remarks on African intellectuals steered a debate across Africa that has lasted up to today. From the email it was clear that he was still following closely the activities in Africa.

“I see your president has become a victim of IMF-World Bank placebos. He has removed subsidies on maize and fuel. I will address that later. Let me first inform your readers that I love Africa. I’ve left the New York “Vulture Fund” company I worked for when you and I met on JetBlue. It was too much for me. In 1999, I moved from the loan shark IMF to a broking company that was ripping off countries like yours by buying up the debt at cheap prices and demanding much higher than the original price.

“In 2007, we sued Zambia for $40 million, after buying off some of the debt for $4 million. Chiluba paid us $15 million, and we rewarded him with $2 million. We went to the Democratic Republic of Congo and did the same thing. Overtime, I became disillusioned. I was often haunted by the view from the bedroom window of my Kabulonga home back in the 1980s.”

For those familiar with Walter, you’ll remember his words: “I was part of the IMF group that came to rip you guys off. Your government put me in a million dollar mansion overlooking a shanty called Kalingalinga. From my patio I saw it all—the rich and the poor, the ailing, the dead, and the healthy.”

Walter reminisced: “The daily sight of funeral processions from Kalingalinga to Leopard’s Hill Cemetery have stuck to the walls of my brain—the sound of wailing, and solemn hymns. I have quit. I am no longer a vulture. I have now become a fighter for Africa’s economic empowerment.

“I’m a staunch supporter of Joseph Stiglitz whom I have always admired. I totally agree with him when he says that the IMF must be dismantled. Joe was at the World Bank when I was in Africa. The man has a big heart for Africa. How I wish some of your rational economists like Caleb Fundanga, who is familiar with the IMF, would take a leaf from Stiglitz and persuade your president to find a way of avoiding the IMF-World Bank high restrictive conditions and abominable interest rates that have brought misery to your people.”

For those who do not know Joseph Stiglitz, he is the Nobel Prize laureate in Economics who served as Chief Economist and Senior Vice President of the World Bank in the 1990s. In 2011, TIME magazine named him one of the 100 most influential people in the world. He is a guru at asset risk management, corporate governance, and international trade. The man was inside the World Bank and saw it all.

In a 2002 radio interview with Doug Henwood of WBAI, New York, Stiglitz was asked what struck him when he first got to the World Bank. The reply is quoted in full because it is the reason African states are stuck with IMF-World Bank for good.

[pullquote]It bothered Stiglitz greatly to discover that both the IMF and the World Bank were exploiting Africa. At the same time it bothered IMF-World Bank that Stiglitz had discovered their horrors and gone public. He was fired.[/pullquote]

Stiglitz: “One of the most traumatic experiences I had there was just a month after I started. I went to Ethiopia, one of the poorest countries in the world. It had a balanced budget, no inflation, and had had rapid growth for five years, had cut back on defense expenditures from 6% to 2%, even though it had come to power through military means. This is a really unusual government – no charges of corruption. And yet the IMF had suspended its program.

“I asked, ‘Why?’ The answer was that the budget wasn’t balanced. But it was. They said, ‘But you shouldn’t include foreign aid.’ I said, ‘Why else are governments giving money if it’s not for them to build schools and hospitals?’ They said, ‘You can’t rely on it.’ The government had a very good answer. They said, ‘As long as we get the money, we’ll build the schools, and when we don’t get the money, we’ll stop building the schools.’ And when we came back to Washington we discovered that tax revenues were more unstable than foreign aid.”

It bothered Stiglitz greatly to discover that both the IMF and the World Bank were exploiting Africa. At the same time it bothered IMF-World Bank that Stiglitz had discovered their horrors and gone public. He was fired.

Walter writes: “I was in Washington D.C. when Joe was fired. Some African presidents and Finance Ministers celebrated. It was Joe who opposed the privatization of national assets. He was against high interest rates, and trade liberalization. But he was alone. Your president and your Minister of Finance disliked him. He was standing in the way of their commissions. They were making tons of money by associating themselves with the IMF and the World Bank. It was in the Washington IMF and World Bank offices that money became the root of evil. It was here that the “carrot and stick” game was played like Russian roulette. Ministers of Finance were staking their country’s assets for a commission and we kept winning, even when they shot themselves in the head.

“Now you know why the Ministry of Finance is the most sought in African countries. African Finance Ministers are the richest of the cabinet and are confidants of the president because they are the carriers of the begging bowl. Their best telephone call is the one from Washington D.C.

By the way, I was appalled, but not surprised when one of your junior ministers was quoted as saying “we will continue borrowing; we are in a hurry to develop.” Watch him. He’s drunk with power.

It is this chronic borrowing that has worsened your county’s debt and increased poverty. A debt results in cutbacks in spending on health care, and is the reason people in your country continue to die from HIV/AIDS and poverty-related diseases. I have seen his picture; he looks chubby and is always smiling. I am sure he has a relative or two who are not as fortunate as he. If I had it my way, I would arrest him, lock him up, and throw away the key for mortgaging a country in which the majority are poor. He’s a half-hearted economist; an impetuous and selfish fellow.

“This is the type of foolish behavior I saw at IMF. The so-called African economists sent to Washington didn’t care how much they borrowed, at what interest rate. They didn’t bother to read the fine print. They did care if they flogged their electricity and water companies. They simply didn’t care about the poor back in their countries. It was what was in it for them and their president—period. And we didn’t care how much we dished out as long as we kept a country such as yours below the poverty line, and within the Heavily Indebted Poor Countries (HIPC).

“I began to lose respect for African economists, dressed, as they were, in their tailor-made suits, with golden cufflinks and draped bowties. Not one of these African Iscariots I met during my stay at IMF said anything negative about IMF; not one could see the drastic impact IMF and World Bank was having on their people. Not one could see that IMF and the World Bank were merely credit risk agencies.

“Field, how do you like the tag HIPC on your country? That’s what Zambia is and will always be—a Heavily Indebted Poor Country, that’s right. IMF and the World Bank love it. It’s a way of separating lepers from society. Your president, Chiluba, sold everything for a nickel and your country slipped to 164 of the 187 countries on the United Nation’s Development Index of poverty. You are still lepers, all I know. You are a country without an airline, meaningful mining and manufacturing industries, and now no subsidies—nothing. You are a country without health, education and development. Look at your dilapidated hospitals, schools, roads—just look at them. It’s shameful.

“When I read that your president had removed subsidies on maize and fuel, two reasons came to mind. The first is obvious; your president has no choice. He needs to maintain the IMF and the World Bank (your new colonial masters) seal of approval. Your country will not get help from Western donor countries without the IMF and the World Bank endorsement. That’s a smart way of keeping your country colonized, poor and dependent. If your president refuses to remove subsidies he risks having the extension of your country’s loans denied. This is what I call ‘loss of state sovereignty.’ Like you and other writers have hinted, when a country removes subsidies, it allows the market to determine demand and supply for food. This reduces support for farmers, and leads to the poor failing to afford essentials.

“The second reason is often ignored, but true. It is what Stiglitz calls the IMF riots. Stiglitz observes that when a nation is, ‘down and out,’ the IMF squeezes the last drop out of it. I dare add that the IMF-World Bank can be political at times. Don’t forget your president is not a very likable man in the West. They think he has become a puppet of China. He has been placed under the radar and is being watched. When you make the West uncomfortable, they will have you removed. The IMF and the World Bank know that when subsidies are removed, essentials will become unaffordable and people will riot. In your country maize and fuel are good dynamite with which to blast the ruling party. If they fail this time, I can assure you they will succeed next time.

“Joe is right. He’s speaking from his heart when he says IMF has failed. It is true IMF has purloined enough from poor countries, but, unfortunately, it is only Joe and a few like me who understand this. Your president and his economists don’t. We know that the West did not develop under such harsh conditions as those imposed on Africa. They kept subsidies for domestic industries. Your economists know this, and yet they can’t see that your country is being duped through monetary austerity; fiscal austerity; privatization; and financial liberalization. What a shame.”
Walter has spoken. I shall add no more.

Field Ruwe is a US-based Zambian media practitioner, historian, and author. He is a PhD candidate at George Fox University and serves as an adjunct professor (lecturer) in Boston. ©Ruwe2012