Model for Failure

excerpted from the book

The Bush Agenda

Invading the World, One Economy at a Time

by Antonia Juhasz

HarperCollins, 2006, paper

p52
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."

p52
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.

p53
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 and political."

p54
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.

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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.

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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

p60
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.

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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."

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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."

p65
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."

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Reagan used the World Bank to force countries to change their laws so that U.S. corporations would gain direct access to their oil.

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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 20 percent.

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 day.

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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.

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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 foreign companies.

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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.

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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."

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[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 Bank.

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.

p73
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.

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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 world.

... 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.

p75
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 of 1992."

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.

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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 collapsed.

p77
economist Mark Weisbrot
"The IMF has presided over one of the worst economic declines in modern history." [Russia 1992-1998]

p77
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.

p78
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.

p79
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.

p80
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.

p81
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.

p81
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.

p82
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.

p83
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 planet.

... 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 prices.

... 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 United States.

WAL-MART AND THE NORTH AMERICAN FREE TRADE AGREEMENT.

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.

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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.

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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.

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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."

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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 WTO.

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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."

p92
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 practices "

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 bills.

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By the late 1980s, more than seventy countries had been submitted to World Bank and IMF Structural Adjustment Programs.

The Bush Agenda

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