Germany influential

Debt is an efficient tool. It ensures access to other peoples’ raw materials and infrastructure on the cheapest possible terms. Dozens of countries must compete for shrinking export markets and can export only a limited range of products because of Northern protectionism and their lack of cash to invest in diversification. Market saturation ensues, reducing exporters’ income to a bare minimum while the North enjoys huge savings. The IMF cannot seem to understand that investing in … [a] healthy, well-fed, literate population … is the most intelligent economic choice a country can make. Many developing nations are in debt and poverty partly due to the policies of international institutions such as the International Monetary Fund (IMF) and the World Bank. • Poor countries must export more in order to raise enough money to pay off their debts in a timely manner. • Because there are so many nations being asked or forced into the global market place—before they are economically and socially stable and ready—and told to concentrate on similar cash crops and commodities as others, the situation resembles a large-scale price war. • Then, the resources from the poorer regions become even cheaper, which favors consumers in the West. • Governments then need to increase exports just to keep their currencies stable (which may not be sustainable, either) and earn foreign exchange with which to help pay off debts. One of the many things that the powerful nations (through the IMF, World Bank, etc.) prescribe is that the developing nation should open up to allow more imports in and export more of their commodities. However, this is precisely what contributes to poverty and dependency. of a society spends one hundred dollars to manufacture a product within its borders, the money that is used to pay for materials, labor and, other costs moves through the economy as each recipient spends it. Due to this multiplier effect, a hundred dollars worth of primary production can add several hundred dollars to the Gross National Product (GNP) of that country. If money is spent in another country, circulation of that money is within the exporting country. This is the reason an industrialized product-exporting/commodity-importing country is wealthy and an undeveloped product-importing/commodity-exporting country is poor. [Emphasis Added] …Developed countries grow rich by selling capital-intensive (thus cheap) products for a high price and buying labor-intensive (thus expensive) products for a low price. This imbalance of trade expands the gap between rich and poor. The wealthy sell products to be consumed, not tools to produce. This maintains the monopolization of the tools of production, and assures a continued market for the product. [Such control of tools of production is a strategy of a mercantilist process. That control often requires military might.] As seen above as well, one of the effects of structural adjustment is that developing countries must increase their exports. Usually commodities and raw materials are exported. But as Smith noted above, poor countries lose out when they • export commodities (which are cheaper than finished products) • are denied or effectively blocked from industrial capital and real technology transfer, and • import finished products (which are more expensive due to the added labor to make the product from those commodities and other resources) More than 50 developing countries depend on three or fewer commodities for over half of their export earnings. Twenty countries are dependent on commodities for over 90 percent of their total foreign exchange earnings, says the World Bank. Falling [commodity] prices have meant that large increases in export volume by commodity producers have not translated into greater export revenues, leading to severely declining terms of trade for many commodity producing countries. When the purchasing power of a country’s exports declines, a country is unable to purchase imported goods and services necessary for its sustenance, as well as generating income for the implementation of sustainable development programs. A vast majority of developing countries depend on commodities as a main source of revenue. Primary commodities account for about half of the export revenues of developing countries and many developing countries continue to rely heavily on one or two primary commodities for the bulk of their export earnings. cheaply, and thereby prevent a greater and more valuable importation of the manufactured commodities. (Emphasis Added) Reading the above, we can say that structural adjustment policies are also mercantilist. We are constantly told that we live in a world of global capitalism, and yet we see that while free markets are preached (in Adam Smith’s name), mercantilism is still practiced! Of course, today it is a bit more complicated too. We do have, for example, products being exported from the poorer countries (albeit some facing high barriers in the rich nations). But exporting rather than first creating and developing local industry and economy, means the “developing” country loses out in the long run, (hardly “developing”) because there is little multiplier effect of money circulating within the country, as mentioned above. Furthermore, with labor being paid less than their fair wages in the poorer nations, wealth is still accumulated by—and concentrated in—the richer nations. Stiglitz then tells Palast that after each nation’s economy is analyzed, the World Bank “hands every minister the same four-step program” (emphasis added), described in the article as follows: 1. Privatization. Stiglitz tells Palast that some politicians were corrupt enough to go ahead with some state sell-offs: “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.” According to Palast, Stiglitz asserts that the US government knew about, at least in one case: 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.’” (Emphasis added) 2. Capital market liberalization. According to Palast, Stiglitz describes the disastrous capital flows that can ruin economies as being “predictable,” and says that “when [the outflow of capital] 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%.” 3. Market-based pricing. Palast writes that it is at this point that the IMF “drags the gasping nation” to this third points, described as “a fancy term for raising prices on food, water and cooking gas” which, Palast continues, “leads, predictably, to Step-Three-and-a-Half: what Stiglitz calls, ‘The IMF riot.’” These riots, which the article clarifies are “peaceful demonstrations dispersed by bullets, tanks and teargas[sic],” cause further capital outflows, a situation which, as Palast points out, is not without a “bright” side: “foreign corporations … can then pick off remaining assets, such as the odd mining concession or port, at fire sale prices.” 4. Free trade. But a version dominated by “rules of the World Trade Organization and the World Bank,” which according to Palast, Stiglitz likens to the Opium Wars: “That too was about ‘opening markets’,” he said. Palast writes that “As in the nineteenth century, Europeans and Americans today are kicking down barriers to sales in Asia, Latin American and Africa while barricading our own markets against the Third World’s agriculture.” (Note that while even President Bush will claim that we want rules based global mechanisms, the mainstream media often does not ask what the rules themselves are, and whether they are most appropriate.) Palast highlights Stiglitz’s problems with the IMF/World Bank plans, plans that the article describes as “devised in secrecy and driven by an absolutist ideology”: first, they are not open to discourse and dissent, and second, that they don’t work. Palast writes that “Under the guiding hand of IMF structural ‘assistance’ Africa's income dropped by 23%.” . This model of development, whereby the North (or the developed Nations) impose their conditions on the South (the developing Nations) has come under criticism by many NGOs and other groups/individuals. Perhaps the model needs to be revised and approached from different angles, as this Oxfam paper suggests. True, in some cases corrupt governments have borrowed money from these institutions and/or directly from various donor nations and ended up using that money to pursue conflicts, for arms deals, or to divert resources away from their people. However, in most cases that has been done knowingly, with the support of various rich nations due to their own “national interests”, especially during the Cold War. As the global financial crisis which started in the West around 2008 has taken hold, many rich nations themselves are facing economic problems. Perhaps surprisingly many have prescribed to themselves structural adjustment and austerity programs. Some have been pressured onto them by others. For example, in Europe, Germany is influential in requiring austerity measures if countries want bailouts from Germany or the European Union. For more about the austerity measures being put in, and how some of it seems ideologically based in fact of evidence that it is not working — or even making the economy worse — see this site’s section on the global financial crisis.