Issue VII: Globalization

2 Aug

For all you new readers
All my past e-mails have been archived at Enjoy!

But first, some news

  • George Bush is going to veto the expansion and re-authorization of the State-Children’s Health Insurance Program, a program that has insured millions of children across the country. I would highly, highly encourage you to sign onto this petition by the American Medical Students Association to support S-CHIP and for Congress to override his veto if he actually does it. Moron.
  • The former Japanese-Peruvian dictator of Peru (now in house arrest) ran for the Japanese senate. Alberto Fujimori called himself “the last samurai” and said he would bring tradition Japanese values back to Japan…. you know, like corruption and alleged war crimes. He was aiming for senatorial immunity, but he lost. This is the first time a president of one country has tried to run for Parliament of another country. And they told me Peruvian politics was weird.
  • Vanity Fair polled presidential candidates about what they would do for aid to Africa and HIV/AIDS.
  • The Economist, a British pro-free-market newsmagazine, has called John Edwards “the man of the left” in the Democratic primaries. Talk like that practically endorses him for me. And they, of course, complained that Democratic candidates have gone too far left. I wish.
  • America isn’t the only country sending money and guns to very-bad-nations, junior imperialist Great Britain does it too! Money quote is, “It is anybody’s guess where this equipment is destined.” I guess that could mean Osama too, huh?

Prostitution and HIV/AIDS
If hypocrisy and greed wasn’t the Bush Administration’s stock and trade, I might have been surprised that the head of the USAID (the State Department agency in charge of foreign aid) has resigned due to allegations that he used to frequent a certain D.C. Madam who is under investigation for prostitution. She apparently is a female pimp who procured prostitutes for much of Washington’s high-fliers.

The hypocrisy? Randall Tobias, a former pharmaceutical CEO, made a big push to stick anti-prostitution/generic medication conditions to HIV/AIDS money given to developing countries. That is, a country needed to ban prostitution and not work with brothels to keep HIV infection rates down and only spend the money on brand-name drugs and not cheaper generics. Thailand did wonders when it started involving red light districts stop the
spread of AIDS. Programs like that could not be funded with American taxpayer money. The conditions were so outrageous that the Brazilian government rejected the AIDS money. That money could have been used for saving lives. And don’t get me started on the ridiculously prudish anti-condom/pro-abstinence conditions that keep us from using our aid money effectively (see the president’s disgusting PEPFAR conditions for AIDS in Africa in Rolling Stone).

The Christian Right’s pernicious influence on foreign policy met the needs of the drug peddlers. How fitting for the born-again oilman. Is it too much for me to ask that we who are involved in science and public health fight against the anti-science and anti-health actions of the federal
government whether it be HIV/AIDS or the environment? I hope not.

And if you haven’t heard about the Thai government’s fight against the pharmaceutical company Abbot for cheap AIDS drugs, you should read this. I’m thinking about getting a speaker for the UTMB AMSA chapter on the topic. So you should all come for that if it happens.

A little piece of globalization, explained

I was asked by Katie to write about globalization. I think she meant more about outsourcing and free trade, but I wanted to write about something else. I am going to take four pieces of news and put them all together, and in the process, hopefully explaining something about globalization and the cracks in the armor of a formerly dominant financial arrangement.

  • In April, Venezuelan president Hugo Chavez paid back all his debts to the International Monetary Fund and withdrew from the organization. He then hosted all the presidents from South America to pitch the idea of a United States of South America and an international “Bank of the South” that would be run by developing countries for the benefit of developing countries. Money could come from China and Venezuela’s huge amount of oil money. An alternative to the Free Trade Area of the Americas (a NAFTA for the whole hemisphere) that Chavez has started is called ALBA. So far it includes Ecuador, Bolivia, Venezuela, Nicaragua, and Cuba.
  • Japan and China have proposed a “Asian Monetary Fund” that could be used for financial stabilization. China has one TRILLION dollars in foreign exchange, and other East and Southeast Asian countries have been hoarding American treasuries, currencies, and dollars to ward of speculation. The proposal would be to undermine the International Monetary Fund from interfering with Asian economies.
  • China is investing heavily in Africa for natural resources. There was a piece in Vanity Fair’s Africa issue about how China is investing in some of the worst places in the world to get natural resources for their booming economy, including oil. This money is going to places like Sudan and Zimbabwe where human rights abuses are rampant. Last year, China hosted the entire continent of Africa in Beijing to sell relations with China. China can invest money into infrastructure like roads and railroads while Africa can sell its natural resources. And free of Western scrutiny, transparency, corruption-monitoring, and….. IMF/World Bank structural adjustment conditions.
  • And in the Supreme Court 5-4 ruling, ruled against the kid for making a sign that said ” Bong hits for Jesus” and that his suspension from the school didn’t violate his First Amendment Rights.

Okay, the fourth has nothing to do with this issue. But it’s still funny. And a damn shame.

So what is this IMF and why is it so important? Why are Africa, Asia, and Latin America trying to break free of its hold? Is there some sort of big picture going on here?

The Postwar Order
After World War II, the world needed a new international order to keep the world from destroying itself again economically and militarily. You have heard about the United Nations, but you may not have heard about the Bretton Woods Institutions: the International Monetary Fund and the World Bank. Both are based in Washington, D.C. and are technically part of the United Nations but in reality, are totally independent of UN control.

Since the gold standard was abandoned by the Great Depression, the world needed a new international currency system. The system was called the Bretton Woods system after the conference in Bretton Woods, New Hampshire where the ideas were fleshed out by British economist John Maynard Keynes and others. Keynes is viewed by most as the greatest economist of the 20th century and his ideas are known as “Keynesianism” and involve a strong national government guaranteeing full employment by using fiscal policy (i.e. the budget) and monetary policy to keep the economy stable.

The Bretton Woods international currency trading system was a “peg” system (not floating like the stock market) where all currencies were set relative to the American dollar. Currencies were re-evaluated periodically and moved up or down in value in a stable manner and not all the time. Keynes said this stability would prevent a country’s currency to be speculated on and keep investors from having veto power over a nation’s politics (i.e. if international bankers don’t like your country’s politics, they will sell your national currency and ruin your economy. Only by doing what investors want will they keep your currency at a good price). To quote Keynes, “[N]othing less than the democratic experiment in self-government was endangered by the threat of global financial market forces.” Or to quote currency speculator George Soros on financial nervousness of the possible election of a leftwing Brazilian president in 2002, “In modern global capitalism, only the Americans vote, not the Brazilians.” The Brazilian real fell through the floor.

The price of the American dollar was fixed to gold and could be traded in for gold. National capital controls also controlled short-term international speculation by limiting how much and how fast money could be moved into and out of a country.

The International Monetary Fund was created to help countries out with short-term liquidity crises. The World Bank (actually, the International Reconstruction and Development Bank) was to finance long-term the re-building of Europe after WWII. The mission of it since then has changed to financing development in the Third World. Both institutions, unlike the United Nations which has a one country-one vote system, the IMF/World Bank are “one dollar-one vote” systems, meaning that they are controlled by the United States and other First World countries.

In 1971, Richard Nixon and Treasury Secretary John Connally unexpectedly and without warning ended the Bretton Woods system by un-plugging the dollar from gold and floating it on international markets. This made the American dollar a floating currency and all other countries fixed to the dollar also were floating. Since then, the American dollar is only worth what people think a dollar is worth and is really no different than a stock. Dollars and Deutsche marks would go up and down based on what investors thought the dollar was worth. Because the dollar was, you know, the DOLLAR it was okay and the American currency was always stable. Nowadays with our idiotic financial situation of trade and budget deficits and the euro as competition, the American dollar has been sinking for a few years now.

International Monetary Fund/World Bank and the Asian Financial Crisis
Now with so many floating currencies, where does this leave globalization? Before the peg system left breathing room for countries to do things that international investors didn’t want them to do. But now countries with floating currencies could see economic ruin within a day if they do what big business and bankers want.

“Yeah right,” you say, “International speculation can ruin a country within a day based on some bankers and hedge fund managers in London and New York? BS!” Actually, that is exactly what happened in 1997 with the Asian financial panic when the entire economies of East and Southeast Asia collapsed when the Thai baht fell in value and led investors pull out all their money from Taiwan, Thailand, Indonesia, Singapore, Malaysia, South Korea, and the Phillippines leading to a continent-wide depression. And with this short-term cash crunch, what did the International Monetary Fund tell them to do?

The IMF told them to remove all capital controls and to increase interest rates to bring back the foreign money that was moved out. Removing the capital controls made the money move out even faster and raising the interest rates made the economies even worse by crushing domestic lending. The Fund then told countries to liberalize their economies and institute neoliberal policies like privatizing state-owned companies, cutting health and social services and education, balance the budget, buy U.S. Treasury bonds, and put money towards re-paying the national debts rather than re-starting the economy as a condition for short-term loans. “Structural adjustment” is the bureaucratic word that in no way conveys how bad these policies are when crammed down a developing country’s throat.

Above all, they were not to devalue their currency (this would increase exports) or re-instate capital controls. These group of ideas, called the Washington Consensus, were also applied to Russia and Latin America in the 1990s and met disastrous results as well (the case of Russia being possibly the greatest theft of national assets in world history). Asians were livid at the Fund for forcing them to follow these idiotic structural adjustment programs that were the same for every country. See this interview with Nobel Prize winning economist Joseph Stiglitz who was fired from the World Bank in 1999 for criticizing these one-size-fits-all program if you want an insider’s view.

All of these suggested actions benefit very few people, the U.S. Treasury and hedge fund managers, and hurt many, many millions of people. In Argentina, these ideas led the economy to collapse in 2001 into a depression as bad as the Great Depression. Asia was, in a word, pissed.

The only two countries in Asia that didn’t get affected? India and China, who still had a peg-system and capital control over investment.

Death of the IMF/World Bank?
This Washington Consensus of neoliberal economics has been push most forcefully in Latin America which I know about a little bit more than other areas of the world. Has this improved Latin America at all?

Actually, between 1960 and 1980 Latin countries grew twice as fast (in per capita GDP and overall GDP) than they did between 1980 and 2000. In some countries, the economies are the same or worse than when IMF dictates were applied to their countries. Examples?
Where I last traveled, Nicaragua, lives and dies by its debt obligations to “el Fondo” – the IMF. Education was privatized and parents had to either pay school fees or “volunteer” several hours of work per week to send their kids to school. The right to health care was abandoned by the government as it sold all government clinics and laid off doctors who work in the public service. Only now with the new Sandinista president has Mulukuku got a doctor at its government health clinic.

Bolivia, which I went to in 2005, had either stayed the same or gotten poorer since the 1980s when the IMF imposed structural adjustment on the country for its hyperinflation. The government oil and gas company was sold off to almost nothing and the railroads were sold by the government too. Bolivia’s historically most precious resource, its mines, were also privatized and thousands and thousands of laid off mineworkers left the mines to move into the jungle to grow coca (which can be made into cocaine). The current president of Bolivia is the former union leader of the coca growers, and that union has many connections to the radical mining unions because of the “disliquidaciones” of the 80s.

And the worst villain of all (according the idiotic American media), President Hugo Chavez first came to prominence in Venezuela after a series of economic riots in 1989 called el Caracazo (“the Caracas smash”). El Caracazo were riots after IMF structural adjustments led to recession and food shortages. The Venezuelan military was called into shoot protestors (up to 3000 people were killed). The instability continued until the 1990s, and in 1992 Col. Chavez attempted a coup because he didn’t believe the government should be shooting people fighting for food. He lost the coup and announced on national TV that the struggle was over “for now” and that he would continue peacefully in the future. After serving some jail time and getting pardoned, Chavez came out nationally famous and popular for his coup against a corrupt government and was elected president in 1998, 2000, and 2006.

All of these are consequences of IMF-imposed economic conditions. The new generation of the Latin American left is trying to undo the corrupt privatization and self-serving free market fundamentalism that the Chicago Boys cooked up in 1973 in Chile and emphasize people-centered economics that serves Latin America, not Washington and New York. And Mexico was a hair away from having a New Left president too; and if certain guerilla leaders are to be believed, we could be looking at a third Mexican revolution (1810, 1910, 2010?) coming up pretty soon. Who knew currency trading could be so fun?

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