Conditionalities
This is also a technical term that has a specific meaning: A conditionality is a condition attached to a loan or a debt relief granted by the IMF or the World Bank. Conditionalities are typically non-financial in nature, such as requiring a country to privatize or deregulate key public services. Conditionalities are most significant within so-called Structural Adjustment Programs (SAP) created by the IMF. Nations are required to implement or promise to implement the attached conditionalities prior to approval of the loan. The fallout of conditionalities is notable. The globalist think-tank Foreign Policy in Focus published IMF Bailouts and Global Financial Flows by Dr. David Felix in 1998.
The report’s introduction makes these key points:
- The IMF has been transformed into an instrument for prying open third world markets to foreign capital and for collecting foreign debts.
- This transformation violates the IMF charter in spirit and substance, and has increased the costs to countries requesting IMF financial aid.
- The IMF’s operational crisis stems from growing debtor resistance to its policy demands, soaring fiscal costs, and accumulating evidence of IMF policy failure.12
The general public has not seen such “internal criticism” of the IMF. If an outsider were to make the very same criticism, he would be ostracized for being part of the radical fringe.
So, conditionalities are instruments of forcing open markets in third-world countries, and of collecting defaulted debts owed by public and private organizations. The accumulating result of conditionalities is increasing resistance to such demands, bordering on hatred in many countries. The countries who can least afford it are saddled with soaring costs, additional debt and reduced national sovereignty.
Perhaps the most authoritative report on this topic was produced in 2002 by Axel Dreher of the Hamburg Institute of International Economics entitled The Development and Implementation of IMF and World Bank Conditionality. Dreher notes that there was no consideration of conditionalities at the founding of the IMF, but rather they were gradually added in increasing numbers as the years passed and mostly by U.S. banking interests.13
Conditionalities are arbitrary, unregulated, and imposed in varying degrees on different countries according to the whims of the negotiators. The recipient countries have little, if any, bargaining power. The August Review has observed several times that 1973, with the creation of the Trilateral Commission, was a pivotal year in the stampede to globalization. It is no surprise then that conditionalities became a standard business practice in 1974 with the introduction of the Extended Fund Facility (EFF).14 EFF created lines of credit, or “credit tranches”, that could be drawn on as needed by a troubled country, thus creating additional moral hazards as well.
Dreher also points out the tight coordination with the World Bank:
The reforms under IMF programs have mainly been designed by World Bank economists. Fund conditionality often was supportive of measures contained in Bank supported public enterprise reform operations. The selection of public enterprises to be reformed as well as the modalities and time table was developed by the Bank as well.15
So, we see that the IMF does not act alone in the application of conditionalities and in some cases, it is pointedly driven by the World Bank. Dreher’s meticulous research uncovered another interesting statistic: The most frequent condition included is bank privatization – included in 35 percent of the programs analyzed!16
International bankers have always had disdain for banking operations run by governments instead of by private or corporate ownership. Thus, they have used the IMF and World Bank to force privatization of what remains in government hands in the third-world. If all of this was not disturbing enough, Dreher informs us that there are direct connections between conditionalities imposed and various private banks who work in concert with the IMF and World Bank:
Since private creditors were willing to lend further only if IMF programs were in effect, the Fund’s leverage was enhanced… since for crisis resolution sometimes more money is needed than can be provided by the IFIs, IMF and World Bank depend on these private creditors who should therefore be able to press for conditions which lie in their interest.17
With the IMF, World Bank and other international banks forcing governments to run their countries in ways not of their choosing, and with the United States viewed as the primary driver of these organizations, it is no wonder that the third-world musters such intense hatred for the U.S. and for the self-interested globalization it exports wherever possible.
The globalization process is most often anti-democratic and completely ineffective at accomplishing it’s lofty stated goal of poverty reduction. It should be plainly evident by now that the “can opener” for globalization to take place is the power of money. Borrowed money enslaves the borrower, and puts him at the mercy of the lender. When President Bill Clinton finally acknowledged the error of his ways during his affair with Monica Lewinski, he stated that it was for the absolutely worst of reasons: “Because I could.” Why do these global financial organizations take such advantage of those whom they systematically put in jeopardy? Because they can!
IMF Bailout of Brazil
The 1998 the Brazil currency crisis was caused by that country’s inability to pay inordinate accumulated interest on loans made over a protracted period of time. These loans were extended by banks like Citigroup, J.P. Morgan Chase and FleetBoston, and they stood to lose a huge amount of money.
The IMF, along with the World Bank and the U.S., bailed out Brazil with a $41.5 billion package that saved Brazil, its currency and, not incidentally, certain private banks. Congressman Bernard Sanders (I-VT), ranking member of the International Monetary Policy and Trade Subcommittee, blew the whistle on this money laundering operation. Sander’s entire congressional press release is worth reading:
IMF Bailout for Brazil is Windfall to Banks, Disaster for US Taxpayers Says Sanders
BURLINGTON, VERMONT – August 15 – Congressman Bernard Sanders (I-VT), the Ranking Member of the International Monetary Policy and Trade Subcommittee, today called for an immediate Congressional investigation of the recent $30 billion International Monetary Fund (IMF) bailout of Brazil.
Sanders, who is strongly opposed to the bailout and considers it corporate welfare, wants Congress to find out why U.S. taxpayers are being asked to provide billions of dollars to Brazil and how much of this money will be funneled to U.S. banks such as Citigroup, FleetBoston and J.P. Morgan Chase. These banks have about $25.6 billion in outstanding loans to Brazilian borrowers. U.S. taxpayers currently fund the IMF through a $37 billion line of credit.
Sanders said,
“At a time when we have a $6 trillion national debt, a growing federal deficit, and an increasing number of unmet social needs for our veterans, seniors, and children, it is unacceptable that billions of U.S. taxpayer dollars are being sent to the IMF to bailout Brazil.”
“This money is not going to significantly help the poor people of that country. The real winners in this situation are the large, profitable U.S. banks such as Citigroup that have made billions of dollars in risky investments in Brazil and now want to make sure their investments are repaid. This bailout represents an egregious form of corporate welfare that must be put to an end. Interestingly, these banks have made substantial campaign contributions to both political parties,” the Congressman added.
Sanders noted that the neo-liberal policies of the IMF developed in the 1980’s pushing countries towards unfettered free trade, privatization, and slashing social safety nets has been a disaster for Latin America and has contributed to increased global poverty throughout the world.
At the same time that Latin America countries such as Brazil and Argentina followed these neo-liberal dictates imposed by the IMF, from 1980-2000, per capita income in Latin America grew at only one-tenth the rate of the previous two decades.
Sanders continued,
“The policies of the IMF over the past 20 years advocating unfettered free trade, privatizing industry, deregulation and slashing government investments in health, education, and pensions has been a complete failure for low income and middle class families in the developing world and in the United States.
Clearly, these policies have only helped corporations in their constant search for the cheapest labor and weakest environmental regulations. Congress must work on a new global policy that protects workers, increases living standards and improves the environment.”
IMF Bailout of Asia
The Asian currency crisis came to a head in 1998, and the IMF was on the spot for a massive bailout. Vocal critics of the IMF at that time included George P. Schultz (member of the Trilateral Commission), William E. Simon (Secretary of the Treasury under Nixon and Ford) and Walter B. Wriston (former chairman of Citigroup/Citibank and member of the Council on Foreign Relations). They jointly wrote Abolish the IMF? for the Hoover Institution, where Shultz is also a distinguished fellow.
The article states:
The $118 billion Asian bailout, which may rise to as much as $160 billion, is by far the largest ever undertaken by the IMF. A distant second was the 1995 Mexican bailout, which involved some $30 billion in loans, mostly from the IMF and the U.S. Treasury. The IMF’s defenders often tout the Mexican bailout as a success because the Mexican government repaid the loans on schedule.
But the Mexican people suffered a massive decline in their standard of living as a result of that crisis. As is typical when the IMF intervenes, the governments and the lenders were rescued but not the people.18
Their scathing attack continues throughout the article, and concludes with,
The IMF is ineffective, unnecessary, and obsolete. We do not need another IMF, as Mr. (George) Soros recommends. Once the Asian crisis is over, we should abolish the one we have.18
It’s interesting that these core members of the global elite are throwing stones at their own institution. What is outrageous is that they are completely side-stepping their own personal culpability for having used it to drive globalization with all of its ill side-effects. The fact that they succinctly describe the damage done by the IMF clearly dispenses their typical claim of “ignorance.” Are they setting the stage to disband the IMF in favor of another, more powerful monetary authority? Time will tell.
Argentina – A Case Study of Privatization
In 2001, the IMF handed a bailout package to Argentina, valued at $8 billion. The major beneficiaries were the European megabanks, which held about 75 percent of the country’s foreign debt.
The money river flowed like this:
- IMF gives $8 billion (about $1.6 billion of which was tax money collected from hard working Americans) to Argentina
- Argentina buys U.S. Treasury bills (U.S. gets the dollars back after being “monetized”)
- Argentina delivers Treasury Bills to creditor banks who graciously agree to retire their worthless Argentinian bonds
Less than a decade earlier, the IMF and the World Bank backed Argentina in the largest water privatization project in the world. In 1993, Aquas Argentinas was formed between Argentina’s water authority and a consortium that included the Suez group from France (largest private water company in the world) and Aquas de Barcelona of Spain. The new company covered a region populated by over 10 million inhabitants. Now, after 10 years of higher water rates, decreased quality of water and sewage treatment, and neglected infrastructure improvements, the consortium is breaking its 30-year contract and pulling out. Bitterness between Aqua and government officials runs deep because of broken promises and political backlash. The aftermath of Aqua Argentina is recorded in the November 21, 2005 online edition of the Guardian:
More than 1 million residents in the rural Argentinian province of Santa Fe are facing an anxious wait to discover if their taps will still flow or their toilets flush over the next few weeks.
Since 1995, the province has had its water supply and sewage services provided by a consortium led by the French multinational Suez; now the giant utility wants out, and plans to leave within the month.
The decision, which follows the high-profile collapse of other water privatization schemes in countries including Tanzania, Puerto Rico, the Philippines and Bolivia, has again raised questions about the viability of privatizing utilities in the developing world.
Suez is also preparing an early departure from its formerly lucrative concession in the Argentine capital, Buenos Aires. The deal, struck in 1993, marked the largest water privatization project in the world.
In both cases, the French utility is terminating its 30-year contract a third of the way through. Suez cannot get the concessions to turn a profit – at least not under the terms of its current agreements.
The French utility giant snapped up both service agreements in the mid-1990s when Argentina was undergoing a massive reform of its public sector, largely at the behest of the World Bank and other lending agencies.19
Aqua Argentina milked the market as long as it could, and then simply bailed out. And, why not? The profit dried up and it’s not their country! Global statistics show that some 460 million people around the world must rely on private water corporations like Aqua Argentina, compared to only 51 million in 1990. The IMF (and World Bank) levered the extra 400 million people into privatized contracts with water mega-companies from Europe and the U.S. Now that the cream has been skimmed off the top of the milk, these same companies are excusing themselves from the party – leaving a shambles, angry customers and incapable governments still saddled with the billions of dollars of debt incurred (at their insistence) to start privatization in the first place.
[Note: In February 2003, CBC News in Canada produced an in depth report Water for Profit: how multinationals are taking control of a public resource that included features and segments that were delivered across five days of broadcasting.] 20
Luke Eastwood points out in 2014:
If you look at the history of the IMF’s intervention in countries around the world you will see a trail of disaster and looting that repeats time and time again wherever they go. The many countries that are involved are supposed to have some influence but this is proportional to their financial clout, which in truth means that the USA has most of the control of what happens and many countries have effectively no say at all. My opinion of the IMF, concurs with that of John Perkins, author of ‘Confessions of An Economic Hitman‘, his views being that of an insider in the system and mine merely as an observer.
He succinctly points out that major western nations use financial warfare to get what they want and gain influence over other countries – the IMF being one of the tools with which they do this.
- Caribbean countries such as Jamaica have been destroyed by trade agreements
- Much the same thing has happened throughout Africa, South America and Asia at various times since world war II
What the IMF does is somewhat similar to a thug loan shark. The loan shark lends money to people who can’t afford to borrow so that the borrower ends up having to not eat to make the payments or face having broken legs. In a more subtle way, the IMF behaves in a similar way. Countries are given a ‘helping hand’ as loans that they will have great difficulty paying back. In return for the loans the IMF wants interest and regular repayments and ‘restructuring’ of the country’s assets. What this actually means is the asset stripping of sovereign nations so that their economic wealth is transferred from the country’s/public’s ownership into private hands.
This has happened in Europe recently, with countries such as, Greece, Portugal, Ireland, Spain, and Italy, …faced with the prospect of having to sell off national assets in order to finance repayment of loans to either the IMF or EU. Private consortiums, owned by the banks or oligarchs buy up a nation’s forests, coal industry, water supply etc so that instead of the country receiving income from its resources the private company makes all the money off the backs of the increasingly impoverished population. At the moment the Ukrainian people might welcome the IMF but you can be sure that in a short time the country will be financially raped and the population plunged into even worse poverty as a result of IMF ‘assistance’.
Ireland is realizing the foolishness of the IMF/EU bailouts that made life increasingly difficult for ordinary citizens while the government ponders selling off its resources. Any country with sense (like Iceland) would show the IMF the door and find a better way of clawing its way out of economic problems. Iceland is a perfect example of how a country could solve its own problems – but no-one in the media talks about this – the corporatocracy does not want anyone else getting the same idea. Surely, if every nation took the same actions the corporate take over of sovereign nations would fall flat on its face wouldn’t it?
Conclusion
This report does not pretend to be an exhaustive analysis of the IMF. There are many facets, examples and case studies that could be explored. In fact, many critical analysis books have been written about the IMF. The object of this report was to show generally how the IMF fits into globalization as a critical member in the triad of global monetary powers: The IMF, the BIS and the World Bank.
Despite even establishment calls for the dissolution of the IMF, it continues to operate unhindered and with virtually no accountability. This is reminiscent of the BIS continuing to operate even after its dissolution was officially mandated after WWII.
For the purpose of this report, it is sufficient to conclude that…
- of the two founders of the IMF, one was an outright traitor to the U.S. and the other was a British citizen totally dedicated to globalism
- the IMF, in coordination with the BIS, tightly controls currencies and foreign exchange rates in the global economy
- the IMF is a channel for taxpayer money to be used to bail out private banks who made questionable loans to countries already saddled with too much debt
- the IMF uses conditionalities is a lever to force privatization of key and basic industries, such as banking, water, sewer and utilities
- conditionalities are often structured with help from the private banks who loan alongside of the IMF
- the policies of privatization accomplish just the opposite of what was promised
- the global elite are neither ignorant nor repentant of the distress the IMF has caused so many nations in the third-world
- when the public heat gets too hot, the global elite simply join the critics (thereby shunning all blame) while quietly creating new initiatives that allow them to get on with business — that is, their business!
Footnotes
- Stiglitz, Globalization and its Discontents (Norton, 2002), p.12
- ibid, p. 3
- Ladd, FBI Office Memorandum, October 16, 1950
- Beichman, Guilty as Charged, Hoover Digest 1999 No. 2
- IMF web site, http://www.imf.org
- World Bank web site. http://www.WorldBank.org
- Baker, The Bank for International Settlements: Evolution and Evaluation, (Quorum, 2002), p. 141-142
- IMF, What is the International Monetary Fund?, 2004
- IMF, Overview of the IMF as a Financial Institution, p.11
- ibid, p. 3
- Sennholz, IMF Bailouts Make Matters Worse
- Felix, IMF Bailouts and Global Financial Flows, Vol. 3, No. 3, April 1998
- Dreher, The Development and Implementation of IMF and World Bank Conditionality, Hamburg Institute of International Economics
- ibid, p. 9
- ibid, p. 17
- ibid, p. 18
- ibid, p. 21
- Shultz, et. al, Who Needs the IMF?, Hoover Institution Public Policy Inquiry on the IMF
- The trickle-away effect, The Guardian, November 21, 2005
- CBC News, Water for Profit: how multinationals are taking control of a public resource
Chronological History of Events Related to the IMF
Ukraine’s Euromaidan Protests Begin – The Revolution of Dignity: An American led Coup d’etat
John Kerry’s New World Order Promotion at His Secretary of State Confirmation Hearing before the Senate Foreign Relations Committee
The UN’s Conference on Sustainable Development (Rio+20) took place in Rio de Janeiro, Brazil
World Bank President Robert Zoellick, “If Leaders are Serious about Creating New Global… Governance… Empower the WTO, the IMF, and the WBG to Monitor National Policies.”
The Wall Street Bailout: A Financial Coup d’etat
2007-08 Financial Collapse Begins with the Filing for Bankruptcy by New Century Financial
The Orange Revolution: The Ukraines Fight Against Election Fraud
US Sponsored Coup d’Etat in Haiti: An Armed Insurrection to Unseat President Aristide via a Carefully Staged Military-Intelligence Operation
Battle of Seattle (Nov 30-Dec 1): The 1999 WTO Protests Instigated by Police Agent Provocateurs as Documented by Alex Jones
