* This archive page part of  CitizensontheWeb.ca news
* articles by Michel Chossudovsky.

THE QUEBEC WALL
(What lies behind the Free Trade Area of the Americas (FTAA)?)
by Michel Chossudovsky
Professor of Economics, University of Ottawa [18 April 2001]

The Summit of the Americas will be held inside a four kilometer "bunker" made of concrete and galvanized steel fencing. The 10 feet high "Quebec Wall" encircles part of the historic city center including the parliamentary compound of the National Assembly, hotels and shopping areas. Cars will enter through closely guarded checkpoints; laissez-passers have been issued to official delegations, to the CEOs of major banks and corporations, as well as approved media and "selected invitees." (Click to see map of the "Security Perimeter" at http://www.securitesommet.ca/pages/p_citoyen/p_cito_pe_f.html).

Outside the bunker, more than 6,000 police and security forces are on hand, equipped not only with "pepper spray" but also with "multi-shot" Arwen 37 guns shooting hard-coated plastic bullets. The latter --according to a RCMP spokesperson-- are

"... 'meant to crack a rib and put them in a lot of pain', ... Tactical squads are usually required to test such less-lethal weapons --such as Tasers, which deliver electric shocks-- on themselves. But Toronto Police Constable Leighton said it would be 'too dangerous' to do so with the Arwen." 1

With Canadian Armed Forces personnel dispatched to Quebec's capital from military bases in Nova Scotia, the security apparatus in Quebec promises to be "better organized" than at the Seattle WTO Millenium Summit in 1999. In Seattle, the city's riot police was integrated with Gang Squads and SWAT teams of the Tactical Operations Divisions constituting the "more militarized components" of the police force.

By any standard this is the largest police operation in North America directed against ordinary citizens. Rather than "cordoning off" the conference center which is standard practice in international summits-- the Canadian authorities have chosen to "fence in" a large part of the downtown area --not only denying the rights of citizens to protest but also preventing residents from moving around within their own city.

And those who defy the Quebec Wall will be taken to Orsainville penitentiary which has been emptied of its entire prison population (including several members of the Hells Angels) to make room for these more dangerous "troublemakers."

THE QUEBEC WALL IS UNCONSTITUTIONAL

Barely a week before the Summit, the Canadian and provincial governments, the City of Quebec and Quebec City's Police force were taken to court by a Montreal lawyer and the Vancouver based Canadian Liberty Committee (CLC). In a signed affidavit, the Canadian government representative stated that democracy was not under threat, to ensure:

''freedom of expression ... the Ministry of Foreign Affairs and International Trade has [sent] invitations to the Summit to approximately 60 representatives of interest groups and lobby groups." 2

Moreover, "alternative protest sites" ("sites alternatifs de manifestation") have been designated --on the other side of the Wall-- so that the rank and file of these same civil society organisations can do their own thing.

The "People's Summit", organized by NGOs and major trade unions-- will receive "financial contributions for the holding of seminars, colloquia and public meetings."3 The federal government has allocated Can$287,000-- a comfortable amount of money, but "peanuts" in comparison to the 46 million dollar budget allocated by Ottawa for the police operation and the erection of the Wall.

WHO'S IN, WHO'S OUT

The official list of civil society invitees has not been made public but we have a good idea who the "partner" civil society organizations are. The invitees include leaders of major trade union federations as well as several CEOs of mainstream NGOs. 4

The ritual is broadly similar to that of the 1999 Seattle World Trade Organization (WTO) Millenium Summit. Several months ahead of time, the WTO and Western governments had called for a "dialogue" with the leaders of selected civil society organisations. A carefully worded AFL-CIO petition had been drafted urging the WTO Summit to adopt "trade and investment rules [which] protect workers' rights and the environment". In Seattle, Labor's buzzword was to "make the global economy work for working families". 5
 

Similarly, last January at the global business Summit in Davos --regrouping the World's top corporate execs, heads of State and VIPs, the leaders of some 59 "civil society" organisations --including the CEOs of Greenpeace, Oxfam UK, Amnesty International and Save the Children Alliance-- were also in attendance.

The ploy is to selectively handpick civil society leaders "whom we can trust" and integrate them into a "dialogue", cut them off from their rank and file, make them feel that they are "global citizens" acting on behalf of their fellow workers but make them act in a way which serves the interests of the corporate establishment:

The participation of NGOs in the Annual Meeting in Davos is evidence of the fact that [we] purposely seek to integrate a broad spectrum of the major stakeholders in society in ... defining and advancing the global agenda ... We believe the [Davos] World Economic Forum provides the business community with the ideal framework for engaging in collaborative efforts with the other principal stakeholders [NGOs] of the global economy to "improve the state of the world," which is the Forum's mission. 6

AFL-CIO's John Sweeney and Canadian Labor Congress (CLC) Ken Georgetti --together with Bill Jordan of the International Confederation of Free trade Unions (ICTFU)-- were also in Davos, mingling in a friendly environment with financier George Soros, Microsoft's Bill Gates and World Bank President James Wolfensohn. Meanwhile the rank and file protesters of these "civil society" organisations were being beaten with clubs and assaulted with water cannons by the Swiss riot police "outside" the Conference venue at the "counter-Davos."

RITUAL OF DISSENT

In the New World Order, the ritual of inviting "civil society" leaders into the inner circles of power --while simultaneously repressing the rank and file-- serves several important functions. First, it says to the World that the critics of globalization "must make concessions" to earn the right to mingle. Second, it conveys the illusion that while the global elites should --under what is euphemistically called democracy-- be subject to criticism, they nonetheless rule legitimately. And third, it says "there is no alternative" to globalization: fundamental change is not possible and the most we can hope is to engage with these rulers in an ineffective "give and take".

While the "Globalizers" may adopt a few progressive phrases to demonstrate they have good intentions, their fundamental goals are not challenged. And what this "civil society mingling" does is to reinforce the clutch of the corporate establishment while weakening and dividing the protest movement.

An understanding of this process of co-optation is important, because tens of thousands of the most principled young people in Seattle, Prague and Quebec City are involved in the anti-globalization protests because they reject the notion that money is everything, because they reject the impoverishment of millions and the destruction of fragile Earth so that a few may get richer. This rank and file and some of their leaders as well, are to be applauded. But we need to go further. We need to challenge the right of the "Globalizers" to rule. This requires that we rethink the strategy of protest. Can we move to a higher plane, by launching mass movements in our respective countries, movements that bring the message of what globalization is doing, to ordinary people? For they are the force that must be mobilized to challenge those who would plunder the Globe.

THE FTAA: PRIVATIZATION OF A HEMISPHERE, UNDER U.S. CONTROL

The FTAA is a good deal more than a trade agreement. Throughout the Americas, it would radically transform the social existence of sovereign nations.

Fundamental economic, social and institutional relations would be enshrined into a set of legally binding conditions. All public services that are at least in part subsidized by the State, would be opened up to international tender under the terms of the proposed clauses on "national treatment." If a government finances health or education, this service must be opened to international bidding. And who would bid? The large corporations would take control, all community based facilities would be transformed into profit-making undertakings ---schools, sports clubs, day-care centers, everything.

Moreover, the FTAA clauses would literally allow for the privatization of municipalities. Water, sewer systems, roads and municipal services would be owned and operated by private companies (rather than by citizens) much in the same way as the "gated communities" in the US. More generally, the FTAA would destroy local economies, depress wages and impoverish millions of people. The agreement --entrenched in international law-- would annul or invalidate national laws.

The FTAA would also allow for the privatization of water, inter-city highways as well as entire urban areas. The FTAA would also lead to the demise of national, regional and municipal governments.

IMF MEDICINE BECOMES PERMANENT

Moreover, under FTAA rules, the enforcement of the IMF's deadly "economic medicine" --which has served to destroy national economies and impoverish developing countries --would no longer hinge upon cumbersome loan agreements, which for the governments had the advantage that they were not "legally binding" documents.

But under FTAA rules, Latin American governments would have no political leverage whatsoever; they would loose their "right" to even negotiate with their creditors: the "economic medicine" would become permanently entrenched in international law. Countries would not longer be "bonded" by external debt; they would be permanently "enslaved" by their creditors.

CHARTER OF RIGHTS FOR CORPORATIONS

The FTAA would grant a "charter of rights" to corporations, which would not only override national laws but would also enable private companies to sue national governments, demand the annulment of national laws and receive compensation for potential lost profits which result from government regulations.

While some of these broad issues will be debated at the People's Summit, they have not been included in the demands of trade union leaders from the US, Canada and Latin America. Regrouped under the umbrella of the ICFTU, The trade unions have called upon the FTAA Summit to include the usual core labor standards, environmental and human rights clauses in the agreement.

THE AMERICAN EMPIRE

This is not a trade deal; it is the American Empire. Behind the FTAA are the powers of Wall Street and the military-industrial complex. Ironically, while local economies including public services would be deregulated, under the FTAA the production of weapons of mass destruction by America's major defense contractors would remain heavily subsidized...

Although not officially on the FTAA agenda, the militarization of South America under "Plan Colombia", the signing of a "parallel" military cooperation protocol by 27 countries of the Americas (the so-called Declaration of Manaus) is an integral part of the process of hemispheric integration. US strategic interests are at stake.

The imposition of "free" trade by Washington is an instrument of economic conquest which serves US corporate interests as well as those of the military-intelligence-apparatus. Trade Negotiator Richard Zoellnick --who is slated to play a key role in Quebec City-- is part of the Bush National Security Team working closely with National Security Adviser Condoleezza Rice and Secretary of State Colin Powell.

DOLLARISATION

The deregulation of national banking institutions is part and parcel of the Summit agenda. Supported by the Bush administration, Wall Street wants to extend its control throughout the hemisphere, eventually displacing or taking over existing national financial institutions.

With the help of the IMF, Washington is also bullying Latin American countries into accepting the US dollar as their national currency. The greenback has already been imposed on five Latin American countries including Ecuador, Argentina, Panama, El Salvador and Guatemala.

The economic and social consequences of "dollarisation" have been devastating. In these countries, Wall Street and the US Federal Reserve system directly control monetary policy. The entire structure of public expenditure is controlled by US creditors. Real wages have collapsed, social programs have been destroyed, large sectors of the population have been driven into abysmal poverty.

While not officially part of the FTAA Summit agenda, the adoption of the US dollar as the common currency for the Western Hemisphere is being discussed behind closed doors.

Militarisation and "dollarisation" are the essential building blocks of the American Empire.

DISARMING THE NEW WORLD ORDER

With mounting dissent from all sectors of society against the FTAA, the official Summit desperately needs the token participation of "civil society" leaders "on the inside", to give the appearance of being "democratic." The Summit is seeking the endorsement of these organizations in exchange for token modifications of the Agreement, which do not put into doubt the overall legitimacy of the FTAA nor modify substantially the workings of the proposed free trade area.

The hidden agenda is to weaken and divide the protest movement and orient the anti-globalization movement into areas that do not directly threaten the interests of the business establishment and --more importantly-- which do not raise the broader issue of Washington's political hegemony in the Western Hemisphere.

Meanwhile, George W. Bush's trade negotiator Robert Zoellnick is preparing fast-track legislation packaged under the "presidential trade promotion authority", with a view to rushing the FTAA (without amendments) through the US Congress. In other words, instating the American Empire will not be subjected to the uncertainties of parliamentary consent.

In turn, in consultation with the AFL-CIO, the powerful Business Roundtable (BR) and The Emergency Committee for American Trade (ECAT) --integrated by the representatives of America's largest corporations-- are pushing the line of the trade union bosses, they are demanding the Bush administration "to make labor and environmental standards part of future trade talks."6

While most of the protesters who have converged on Quebec City (including Quebec's vibrant student movement) reject the trade deal outright, the leaders of some of the mainstream "civil society" groups want to get their human rights, democracy, labor and environmental clauses embedded into the official texts and then "cry victory," we've done it! 7 However, by doing this they would not only go against their rank and file, they would also provide --without fully realizing the implications-- legitimacy to an all encompassing process which destroys institutions and impoverishes millions of people.

The American Empire cannot be amended; it must be rejected, fought and defeated. The FTAA must be closed down!

ENDNOTES

1. Toronto Star, 22 March 2001.

2. Canada, Province de Quebec, District de Quebec, Cours supérieure, No. 200-05-014848-019, Affidavit de Denis Ricard, Section II, paragragh 16).

3. According to the signed affidavit, Canada, Province de Québec, op cit.

4. CLC K. Georgetti and AFL-CIO J. Sweeney are also on the guest list of the official FTAA Summit in Quebec City. While the Council of Canadians (COC) has stated that it will decline Ottawa's invitation, Matthew Coon Come, National Chief of the Assembly of First Nations has accepted. Among union leaders, the President of the Quebec's FTQ Henry Massé has accepted, while making clear that he will also be participating (outside the bunker) in the People's Summit in solidarity with his rank and file.

5. See AFL-CIO, "Make the Global Economy Work for Working Families", http://www.wslc.org/wto/index.htm. , October 1999)

6. See World Economic Forum, Press Release, http://www.weforum.org/whatwedo.nsf/documents/what+we+do?Open 5 January 2001.

7. In these Times, 16 April 2001

Further reading:

'Seattle and Beyond: Disarming the New World Order,' by Michel Chossudovsky at http://emperors-clothes.com/articles/chuss/seattle.htm

'Collateral Damage in Seattle' by Jim Desyllas at http://emperors-clothes.com/analysis/collater.htm

'Global Poverty in the Late 20th Century,' by Michel Chossudovsky, 'Journal of International Affairs,' Fall 1999 at http://www.mtholyoke.edu/acad/intrel/chossu.htm .

CBC "Commentary", on the FTAA and the likely fate of the Canadian Dollar, CBC, 9 April 2001.

C Copyright by Michel Chossudovsky, Ottawa, April 2001. All rights reserved. Permission is granted to post this text on non-commercial community internet sites, provided the essay remains intact and the copyright note is displayed. The text can also be photocopied for non-commercial distribution. To publish this text in printed and/or other forms contact the author at chossudovsky@videotron.ca, fax: 1-514-4256224.

==============

Environmental warfare, Chossudovsky, 2000
The Americans and the Russians have developed capabilities to manipulate the World's climate.
Dr. Rosalie Bertell confirms that "US military scientists are working on weather systems as a potential weapon.

Date: Sun, 26 Nov 2000
From: Michel Chossudovsky <chossudovsky@videotron.ca>
Climate Change: Washington's New World Order Weapons

IT'S NOT ONLY GREENHOUSE GAS EMISSIONS:
WASHINGTON'S NEW WORLD ORDER WEAPONS HAVE THE ABILITY TO TRIGGER CLIMATE CHANGE
by Michel Chossudovsky
Professor of Economics, University of Ottawa, author of The Globalization of Poverty, second edition, Common Courage Press, 2000.

The important debate on global warming under UN auspices provides but a partial picture of climate change; in addition to the devastating impacts of greenhouse gas emissions on the ozone layer, the World's climate can now be modified as part of a new generation of sophisticated "non-lethal weapons." Both the Americans and the Russians have developed capabilities to manipulate the World's climate.

In the US, the technology is being perfected under the High-frequency Active Aural Research Program (HAARP) as part of the ("Star Wars") Strategic Defence Initiative (SDI). Recent scientific evidence suggests that HAARP is fully operational and has the ability of potentially triggering floods, droughts, hurricanes and earthquakes. >From a military standpoint, HAARP is a weapon of mass destruction. Potentially, it constitutes an instrument of conquest capable of selectively destabilising agricultural and ecological systems of entire regions.

While there is no evidence that this deadly technology has been used, surely the United Nations should be addressing the issue of "environmental warfare" alongside the debate on the climatic impacts of greenhouse gases…

* * * * * * * * * * *

Despite a vast body of scientific knowledge, the issue of deliberate climatic manipulations for military use has never been explicitly part of the UN agenda on climate change. Neither the official delegations nor the environmental action groups participating in the Hague Conference on Climate Change (CO6) (November 2000) have raised the broad issue of "weather warfare" or "environmental modification techniques (ENMOD)" as relevant to an understanding of climate change.

The clash between official negotiators, environmentalists and American business lobbies has centered on Washington's outright refusal to abide by commitments on carbon dioxide reduction targets under the 1997 Kyoto protocol.1 The impacts of military technologies on the World's climate are not an object of discussion or concern. Narrowly confined to greenhouse gases, the ongoing debate on climate change serves Washington's strategic and defense objectives.

"WEATHER WARFARE"

World renowned scientist Dr. Rosalie Bertell confirms that "US military scientists … are working on weather systems as a potential weapon. The methods include the enhancing of storms and the diverting of vapor rivers in the Earth's atmosphere to produce targeted droughts or floods."2 Already in the 1970s, former National Security advisor Zbigniew Brzezinski had foreseen in his book "Between Two Ages" that:

"Technology will make available, to the leaders of major nations, techniques for conducting secret warfare, of which only a bare minimum of the security forces need be appraised... [T]echniques of weather modification could be employed to produce prolonged periods of drought or storm."

Marc Filterman, a former French military officer, outlines several types of "unconventional weapons" using radio frequencies. He refers to "weather war," indicating that the U.S. and the Soviet Union had already "mastered the know-how needed to unleash sudden climate changes (hurricanes, drought) in the early 1980s."3 These technologies make it "possible to trigger atmospheric disturbances by using Extremely Low Frequency (ELF) radar [waves]." 4

A simulation study of future defense "scenarios" commissioned for the US Air Force calls for:

"US aerospace forces to 'own the weather' by capitalizing on emerging technologies and focusing development of those technologies to war-fighting applications… From enhancing friendly operations or disrupting those of the enemy via small-scale tailoring of natural weather patterns to complete dominance of global communications and counterspace control, weather-modification offers the war fighter a wide-range of possible options to defeat or coerce an adversary... In the United States, weather-modification will likely become a part of national security policy with both domestic and international applications. Our government will pursue such a policy, depending on its interests, at various levels. 5

THE HIGH-FREQUENCY ACTIVE AURAL RESEARCH PROGRAM (HAARP)

The High-Frequency Active Aural Research Program (HAARP) based in Gokoma Alaska --jointly managed by the US Air Force and the US Navy-- is part of a new generation of sophisticated weaponry under the US Strategic Defense Initiative (SDI). Operated by the Air Force Research Laboratory's Space Vehicles Directorate, HAARP constitutes a system of powerful antennas capable of creating "controlled local modifications of the ionosphere". Scientist Dr. Nicholas Begich --actively involved in the public campaign against HAARP-- describes HAARP as:

"A super-powerful radiowave-beaming technology that lifts areas of the ionosphere [upper layer of the atmosphere] by focusing a beam and heating those areas. Electromagnetic waves then bounce back onto earth and penetrate everything -- living and dead." 6

Dr. Rosalie Bertell depicts HAARP as "a gigantic heater that can cause major disruption in the ionosphere, creating not just holes, but long incisions in the protective layer that keeps deadly radiation from bombarding the planet." 7

MISLEADING PUBLIC OPINION

HAARP has been presented to public opinion as a program of scientific and academic research. US military documents seem to suggest, however, that HAARP's main objective is to "exploit the ionosphere for Department of Defense purposes." 8 Without explicitly referring to the HAARP program, a US Air Force study points to the use of "induced ionospheric modifications" as a means of altering weather patterns as well as disrupting enemy communications and radar.9

According to Dr. Rosalie Bertell, HAARP is part of an integrated weapons' system, which has potentially devastating environmental consequences:

"It is related to fifty years of intensive and increasingly destructive programs to understand and control the upper atmosphere. It would be rash not to associate HAARP with the space laboratory construction which is separately being planned by the United States. HAARP is an integral part of a long history of space research and development of a deliberate military nature. The military implications of combining these projects is alarming. … The ability of the HAARP / Spacelab/ rocket combination to deliver very large amount of energy, comparable to a nuclear bomb, anywhere on earth via laser and particle beams, are frightening. The project is likely to be "sold" to the public as a space shield against incoming weapons, or, for the more gullible, a device for repairing the ozone layer. 10

In addition to weather manipulation, HAARP has a number of related uses:

"HAARP could contribute to climate change by intensively bombarding the atmosphere with high-frequency rays... Returning low-frequency waves at high intensity could also affect people's brains, and effects on tectonic movements cannot be ruled out. 11.

More generally, HAARP has the ability of modifying the World's electro-magnetic field. It is part of an arsenal of "electronic weapons" which US military researchers consider a "gentler and kinder warfare". 12

WEAPONS OF THE NEW WORLD ORDER

HAARP is part of the weapons arsenal of the New World Order under the Strategic Defense Initiative (SDI). From military command points in the US, entire national economies could potentially be destabilized through climatic manipulations. More importantly, the latter can be implemented without the knowledge of the enemy, at minimal cost and without engaging military personnel and equipment as in a conventional war.

The use of HAARP -- if it were to be applied-- could have potentially devastating impacts on the World's climate. Responding to US economic and strategic interests, it could be used to selectively modify climate in different parts of the World resulting in the destabilization of agricultural and ecological systems.

It is also worth noting that the US Department of Defense has allocated substantial resources to the development of intelligence and monitoring systems on weather changes. NASA and the Department of Defense's National Imagery and Mapping Agency (NIMA) are working on "imagery for studies of flooding, erosion, land-slide hazards, earthquakes, ecological zones, weather forecasts, and climate change" with data relayed from satellites. 13
 

POLICY INERTIA OF THE UNITED NATIONS

According to the Framework Convention on Climate Change (UNFCCC) signed at the 1992 Earth Summit in Rio de Janeiro: "States have… in accordance with the Charter of the United Nations and the principles of international law, the (…) responsibility to ensure that activities within their jurisdiction or control do not cause damage to the environment of other States or of areas beyond the limits of national jurisdiction." 14

It is also worth recalling that an international Convention ratified by the UN General Assembly in 1997 bans "military or other hostile use of environmental modification techniques having widespread, long-lasting or severe effects."15 Both the US and the Soviet Union were signatories to the Convention. The Convention defines "'environmental modification techniques' as referring to any technique for changing--through the deliberate manipulation of natural processes--the dynamics, composition or structure of the earth, including its biota, lithosphere, hydrosphere and atmosphere or of outer space." 16

Why then did the UN --disregarding the 1977 ENMOD Convention, as well as its own charter, decide to exclude from its agenda climatic changes resulting from military programs?

EUROPEAN PARLIAMENT ACKNOWLEDGES IMPACTS OF HAARP

In February 1998, responding to a report of Mrs. Maj Britt Theorin --Swedish MEP and longtime peace advocate--, the European Parliament's Committee on Foreign Affairs, Security and Defense Policy held public hearings in Brussels on the HAARP program.17 The Committee's "Motion for Resolution" submitted to the European Parliament:

"Considers HAARP… by virtue of its far-reaching impact on the environment to be a global concern and calls for its legal, ecological and ethical implications to be examined by an international independent body...; [the Committee] regrets the repeated refusal of the United States Administration... to give evidence to the public hearing …into the environmental and public risks [of] the HAARP program." 18.

The Committee's request to draw up a "Green Paper" on "the environmental impacts of military activities", however, was casually dismissed on the grounds that the European Commission lacks the required jurisdiction to delve into "the links between environment and defense". 19 Brussels was anxious to avoid a showdown with Washington.

FULLY OPERATIONAL

While there is no concrete evidence of HAARP having been used, scientific findings suggest that it is at present fully operational. What this means is that HAARP could potentially be applied by the US military to selectively modify the climate of an "unfriendly nation" or "rogue state" with a view to destabilizing its national economy.

Agricultural systems in both developed and developing countries are already in crisis as a result of New World Order policies including market deregulation, commodity dumping, etc. Amply documented, IMF and World Bank "economic medicine" imposed on the Third World and the countries of the former Soviet block has largely contributed to the destabilization of domestic agriculture. In turn, the provisions of the World Trade Organization (WTO) have supported the interests of a handful of Western agri-biotech conglomerates in their quest to impose genetically modified (GMO) seeds on farmers throughout the World.

It is important to understand the linkage between the economic, strategic and military processes of the New World Order. In the above context, climatic manipulations under the HAARP program (whether accidental or deliberate) would inevitably exacerbate these changes by weakening national economies, destroying infrastructure and potentially triggering the bankruptcy of farmers over vast areas. Surely national governments and the United Nations should address the possible consequences of HAARP and other "non-lethal weapons" on climate change.

NOTES

1. The latter calls for nations to reduce greenhouse gas emissions by an average of 5.2 percent to become effective between 2008 and 2012. See Background of Kyoto Protocol at http://www.globalwarming.net/gw11.html
2. The Times, London, 23 November 2000.
3. Intelligence Newsletter, December 16, 1999.
4. Ibid.
5. Air University of the US Air Force, AF 2025 Final Report, http://www.au.af.mil/au/2025/ (emphasis added).
6. Nicholas Begich and Jeane Manning, The Military's Pandora's Box, Earthpulse Press, http://www.xyz.net/~nohaarp/earthlight.html See also the HAARP home page at http://www.haarp.alaska.edu/
7. See Briarpatch, January, 2000. (emphasis added).
8. Quoted in Begich and Manning, op cit.
9. Air University, op cit.
10. Rosalie Bertell, Background of the HAARP Program, 5 November, 1996, http://www.globalpolicy.org/socecon/envronmt/weapons.htm
11. Begich and Manning, op cit.
12. Don Herskovitz, Killing Them Softly, Journal of Electronic Defense, August 1993. (emphasis added). According to Herskovitz, "electronic warfare" is defined by the US Department of Defense as "military action involving the use of electromagnetic energy..." The Journal of Electronic Defense at http://www.jedefense.com/ has published a range of articles on the application of electronic and electromagnetic military technologies.
13. Military Space, 6 December, 1999.
14. UN Framework Convention on Climate Change, New York, 1992. See complete text at http://www.unfccc.de/resource/conv/conv_002.html (emphasis added).
15. See Associated Press, 18 May 1977.
16. Environmental Modification Ban Faithfully Observed, States Parties Declare, UN Chronicle, July, 1984, Vol. 21, p. 27.
17. European Report, 7 February 1998.
18. European Parliament, Committee on Foreign Affairs, Security and Defense Policy, Brussels, doc. no. A4-0005/99, 14 January 1999.
19. EU Lacks Jurisdiction to Trace Links Between Environment and Defense, European Report, 3 February 1999.
........ ......... ......... .........

C Copyright by Michel Chossudovsky, Ottawa, November, 2000.
All rights reserved. Permission is granted to post this text on non-commercial community internet sites, provided the essay remains intact and the copyright note is displayed. To publish this text in printed and/or other forms contact the author at chossudovsky@videotron.ca, fax: 1-514-4256224.

Michel Chossudovsky
Department of Economics,
University of Ottawa, Ottawa, K1N6N5
<voice box: 1-613-562-5800, ext. 1415,
Fax: 1-514-425-6224
E-Mail: chossudovsky@videotron.ca;
(Altern. E-mail: chossudovsky@sprint.ca)
--------

* Through the imposition of deadly macroeconomic medicine, the IMF and the World Bank are responsible for destroying national economies and impoverishing millions of people.

Since the early 1980s, the "macro-economic stabilisation" and "structural adjustment" programs imposed by the IMF and the World Bank on developing countries (as a condition for the renegotiation of their external debt) have led to the impoverishment of hundreds of millions of people. Contrary to the spirit of the Bretton Woods agreement which was predicated on "economic reconstruction" and stability of major exchange rates, the structural adjustment program has largely contributed to destabilising national currencies and ruining the economies of developing countries. Internal purchasing power has collapsed, famines have erupted, health clinics and schools have been closed down, hundreds of millions of children have been denied the right to primary education.

In several regions of the developing World, the IMF-imposed reforms have been conducive to a resurgence of infectious diseases including tuberculosis, malaria and cholera. While the World Bank's mandate consists in "combating poverty" and protecting the environment, its support to large scale hydroelectric and agro-industrial projects has also speeded up the process of deforestation and the destruction of the natural environment, leading to the forced displacement and eviction of several million people.

Global Geopolitics

In the aftermath of the Cold War, macro-economic restructuring also supports global geopolitical interests. Structural adjustment is used to undermine the economy of the former Soviet block and dismantle its system of State enterprises. Since the late 1980s, the IMF-World Bank "economic medicine" has been imposed on Eastern Europe, Yugoslavia and the former Soviet Union with devastating economic and social consequences. While the social and institutional framework is fundamentally distinct, a form of structural adjustment has also been applied in the developed countries. Whereas the macro-economic therapies under the jurisdiction of national governments, tend to be less brutal than those imposed on the South and the East, the theoretical and ideological underpinnings are broadly similar. The same global financial interests are served. Monetarism is applied on a World scale, the process of global economic restructuring strikes at the very heart of the rich countries. The consequences are unemployment, low wages and the marginalisation of large sectors of the population. Social expenditures are curtailed and many of the achievements of the Welfare State are repealed. State policies have also encouraged the destruction of small and medium sized enterprises. Low levels of food consumption and malnutrition are also hitting the urban poor in the rich countries. According to a recent study, 30 million people in the United States are classified as "hungry"...

Since the mid-1980s, the impact of structural adjustment including the derogation of the social rights of women and the detrimental environmental consequences of economic reform have been amply documented. While the Bretton Woods institutions have acknowledged "the social impact of adjustment", no shift in policy direction is in sight. In fact since the late 1980s coinciding with the collapse of the Eastern block, the IMF-World Bank policy prescriptions (now imposed in the name of "poverty alleviation") have become increasingly harsh and unyielding. Social Polarization and the Concentration of Wealth In the South, the East and the North, a privileged social minority has accumulated vast amounts of wealth at the expense of the large majority of the population. This new international financial order feeds on human poverty and the destruction of the natural environment. It generates social apartheid, encourages racism and ethnic strife, undermines the rights of women and often precipitates countries into destructive confrontations between nationalities. Moreover, these reforms --when applied simultaneously in more than one hundred countries-- are conducive to a "globalization of poverty", a process which undermines human livelihood and destroys civil society in the South, the East and the North.

The Role of Global Institutions

Global institutions play an important role in the process of restructuring national economies. The ratification of the GATT agreement and the formation of the World Trade Organization (WTO) marks a landmark in the development of the global economic system. The WTO's mandate consists in regulating World trade to the benefit of the international banks and transnational corporations as well as "supervising" the enforcement of national trade policies. The GATT agreement violates fundamental peoples' rights, particularly in the areas of foreign investment, bio-diversity and intellectual property rights.

In other words, a new "triangular division of authority" has unfolded based on the close collaboration of the IMF, the World Bank and the World Trade Organization (WTO) in the "surveillance" of developing countries' economic policies. Under the new trade order (which emerges from the completion of the Uruguay Round at Marrakesh), the relationship of the Washington based institutions to national governments is to be redefined. Enforcement of IMF-World Bank policy prescriptions no longer hinges solely upon ad hoc country-level loan agreements (which are not "legally binding" documents). Many of the clauses of the structural adjustment program (e.g. trade liberalization and the foreign investment regime) will become permanently entrenched in the articles of agreement of the new World Trade Organization (WTO). These articles will set the foundations for "policing" countries (and enforcing "conditionalities") according to international law.

The IMF Menu

The same "menu" of budgetary austerity, devaluation, trade liberalization and privatization is applied simultaneously in more than 100 indebted countries. Debtor nations forego economic sovereignty and control over fiscal and monetary policy, the Central Bank and the Ministry of Finance are reorganized (often with the complicity of the local bureaucracies), State institutions are undone and an "economic tutelage" is installed. A "parallel government" which bypasses civil society is established by the international financial institutions (IFIs). Countries which do not conform to the IMF's "performance targets" are black-listed. While adopted in the name of "democracy" and so-called "good governance", the structural adjustment program requires the strengthening of the internal security apparatus: political repression --with the collusion of the Third World elites-- supports a parallel process of "economic repression".

"Good Governance" and the holding of multi-party elections are added conditions imposed by the donors and creditors, yet the very nature of the economic reforms, precludes a genuine democratization, --i.e. their implementation invariably requires (contrary to the "spirit of Anglo-Saxon liberalism") the backing of the Military and of the authoritarian State. Structural adjustment promotes bogus institutions and a fake parliamentary democracy which in turn supports the process of economic restructuring. Throughout the Third World, the situation is one of social desperation and hopelessness of a population impoverished by the interplay of market forces, anti-SAP riots and popular uprisings are brutally repressed: Caracas, 1989, President Carlos Andres Perez after having rhetorically denounced the IMF of practicing "an economic totalitarianism which kills not with bullets but with famine", declares a state of emergency and sends regular units of the infantry and the marines into the slum areas (barrios de ranchos) on the hills overlooking the capital. The Caracas anti-IMF riots had been sparked off as a result of a 200 percent increase in the price of bread. Men, women and children were fired upon indiscriminately: "The Caracas morgue was reported to have up to 200 bodies of people killed in the first three days ... and warned that it was running out of coffins". Unofficially more than a thousand people were killed. Tunis, January 1984: the bread riots largely instigated by unemployed youth protesting the rise of food prices; Nigeria: 1989, the anti-SAP student riots lead to the closing of six of the country's universities by the Armed Forces Ruling Council; Morocco: 1990, a General Strike and a popular uprising against the government's IMF sponsored reforms; Mexico 1993: the insurrection of the Zapatista Liberation Army in the Chiapas region of Southern Mexico, protest movements in the Russian Federation and the storming of the Russian parliament, and so on, the list is long...

Economic Genocide

Structural adjustment is conducive to a form of "economic genocide" which is carried out through the conscious and deliberate manipulation of market forces. When compared to genocide at various periods of colonial history (e.g. forced labor and slavery), its social impact is devastating. Structural adjustment programs directly affect the livelihood of more than four billion people. The application of the structural adjustment program in a large number of individual debtor countries favors the "internationalization" of macro-economic policy under the direct control of the IMF and the World Bank acting on behalf of powerful financial and political interests (e.g. the Paris and London Clubs, the G 7). This new form of economic and political domination --a form of "market colonialism"-- subordinates people and governments through the seemingly neutral interplay of market forces. The Washington based international bureaucracy has been entrusted by the international creditors and multinational corporations with the execution of a global economic design which affects the livelihood of more than 80 percent of the world's population. At no time in history, has the "free" market --operating at a World through the instruments of macro-economics-- played such an important role in shaping the destiny of "sovereign" nations.

Destroying the National Economy

The restructuring of the World economy under the guidance of the Washington based financial institutions increasingly denies individual developing countries the possibility of building a national economy: the internationalization of macro-economic policy transforms countries into open economic territories and national economies into "reserves" of cheap labor and natural resources. The application of the IMF "economic medicine" tends to further depress World commodity prices because it forces individual countries to simultaneously gear their national economies towards a shrinking World market.

At the heart of global economic system, lies an unequal structure of trade, production and credit which defines the role and position of developing countries in the global economy. What is nature of this unfolding world economic system, on what structure of global poverty and income inequality is it based? By the turn of the century, the World population will be six billion of which five billion will be living in poor countries. While the rich countries with some 15 percent of the World population control close to 80 percent of total World income, some 58 percent of the World population representing the group of "low income countries" (including India and China) with a population of over three billion people, received in 1991 approximately 5 percent of total World income, less than the GDP of France and its overseas territories. With a population of more than 500 million people, the gross product of the entire Sub-Saharan African region is approximately half that of the State of Texas. Together the lower and middle income countries (including the former "socialist" countries and the former Soviet Union) representing some 84.3 percent of World population receive less than 20 percent of total World income.

In many indebted Third World countries, real salaried earnings in the modern sector have declined by more than sixty percent since the beginning of the 1980s. The situation of the informal sector and the unemployed is even more critical. In Nigeria under the military government of General Ibrahim Babangida, for instance, the minimum wage declined by 85 percent in the course of the 1980s. Wages in Vietnam were below $10 a month while the domestic price of rice had risen to the World level as a result of the IMF program carried out by the Hanoi government: a Hanoi secondary school teacher, for instance, with a University degree received a monthly salary of less than 15 dollars A similar pattern exists in the former Soviet Union: domestic prices are "dollarised" whereas the monthly minimum wage is below 10 dollars a month. In Peru, in the aftermath of the IMF-World Bank sponsored Fujishock implemented by President Alberto Fujimori in August 1990, fuel prices increased by 31 times overnight whereas the price of bread increased by 12 times. The real minimum wage had declined by more than ninety percent (in relation to its level of the mid-seventies). Whereas an agricultural worker in Peru's Northern provinces was (in August 1990) receiving $7.50 a month, the domestic prices of many consumer goods in Lima were higher than in New York.

The Dollarisation of Prices

While there are sizeable variations in the cost of living between developing and developed countries, devaluation combined with trade liberalization and the deregulation of domestic commodity markets (under the structural adjustment program) is conducive to the dollarisation of domestic prices. Increasingly, the domestic prices of basic food staples are brought up to their world market levels. This new World economic order, while based on the internationalization of commodity prices and a fully integrated World commodity market, increasingly functions in terms of a watertight separation between two distinct "labor markets". In other words, this global market system is characterized by a duality in the structure of wages and labor costs between rich and poor countries. Whereas prices are unified and brought up to World levels, wages (and labor costs) in the Third World and Eastern Europe are as much as seventy times lower than in the OECD countries.

Income disparities between nations are superimposed on extremely wide income disparities between social-income groups within nations. In many Third World countries, at least 60 percent of national income is concentrated in the upper 20 percent of the population. In many low and middle income developing countries, 70 percent of rural households have a per capita income which is between 10 and 20 percent of the national average. These vast disparities in income within and between countries are the consequence of the structure of commodity trade and the unequal international division of labor which imparts to the Third World and more recently to the countries of the former Soviet block a subordinate status in the global economic system. These disparities have widened in the course of the 1980s and 1990s as a result of the "remolding" of indebted Third World economies under the structural adjustment program. The issue is consequently much broader and complex than that pertaining to the deterioration of the terms of trade and the downward movement of real commodity prices.

The "Thirdworldization" of the Former Eastern Block

The end of the Cold War has had a profound impact on the global distribution of income. Until recently, Eastern Europe and the Soviet Union were considered as part of the developed "North", --i.e. with levels of material consumption, education, health, scientific development, etc. broadly comparable to those prevailing in the OECD countries. Whereas average incomes were on the whole lower, Western scholars nonetheless acknowledged the achievements of the Eastern block countries particularly in the areas of health and education.

Impoverished as a result of the IMF sponsored reforms, the countries of the former socialist block, are now categorized by the World Bank as "developing economies", alongside the "low" and "middle income countries" of the Third World. The Central Asian republics appear next to Syria, Jordan and Tunisia in the "lower middle-income" category, whereas the Russian Federation is next to Brazil with a per capita income of the order of $3000. This shift in categories reflects the outcome of the Cold War and the underlying process of "thirdworldisation" of Eastern Europe and the former Soviet Union.

Economic Ideology Distorts Causes of Global Poverty

In parallel with the "remolding" of the global economy, the dominant economic discourse has, since the early 1980s, reinforced its clutch in academic and research institutions throughout the World: critical analysis is strongly discouraged, social and economic reality is to be seen through a single set of fictitious economic relations which serve the useful purpose of concealing the workings of the global economic system. Mainstream economic scholarship produces theory without facts ("pure theory") and facts without theory ("applied economics"): the dominant economic dogma admits neither dissent nor discussion of it main theoretical paradigm: the universities' main function is to produce a generation of loyal and dependable economists who are incapable of unveiling the social foundations of the global market economy. Similarly, Third World intellectuals are increasingly enlisted in support of the neo-liberal paradigm, the internationalization of economic "science" unreservedly supports the process of global economic restructuring.

This "official" neoliberal dogma also creates its own "counter-paradigm" embodying a highly moral and ethical discourse. The latter focuses on "sustainable development" and "poverty alleviation" while distorting and "stylizing" the policy issues pertaining to poverty, the protection of the environment and the social rights of women. This "counter-ideology" rarely challenges neoliberal policy prescriptions. It develops alongside and in harmony rather than in opposition to the official neoliberal dogma. Within this counter-ideology (which is generously funded by the research establishment) development scholars find a comfortable niche. Their role is to generate within this counter-discourse a semblance of critical debate without addressing the social foundations of the global market system. The World Bank plays in this regard a key role by promoting research on poverty and the so-called "social dimensions of adjustment". This ethical focus and the underlying categories (e.g. poverty alleviation, gender issues, equity, etc.) provides a "human face" to the world Bank and a semblance of commitment to social change. However, inasmuch as this analysis is functionally divorced from an understanding of the main macro-economic reforms, it rarely constitutes a threat to the dominant neoliberal economic paradigm. ***

Michel Chossudovsky, Professor of Economics, University of Ottawa, is author of The Globalization of Poverty, Impacts of IMF and World Bank Reforms,

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By Michel Chossudovsky

Professor of Economics, University of Ottawa

- Monday, 21 September 1998 -

* * *

"Practices of the unscrupulous money changers stand indicted in the court of public opinion, rejected by the hearts and minds of men". (Franklin D. Roosevelt's First Inaugural Address, 1933)

  Humanity is undergoing in the post-Cold War era an economic crisis of unprecedented scale leading to the rapid impoverishment of large sectors of the World population. The plunge of national currencies in virtually all major regions of the World has contributed to destabilising national economies while precipitating entire countries into abysmal poverty.

  The crisis is not limited to Southeast Asia or the former Soviet Union. The collapse in the standard of living is taking place abruptly and simultaneously in a large number of countries. This Worldwide crisis of the late twentieth century is more devastating than the Great Depression of the 1930s. It has far- reaching geo-political implications; economic dislocation has also been accompanied by the outbreak of regional conflicts, the fracturing of national societies and in some cases the destruction of entire countries. This is by far the most serious economic crisis in modern history.

  The existence of a "global financial crisis" is casually denied by the Western media, its social impacts are downplayed or distorted; international institutions including the United Nations deny the mounting tide of World poverty: "the progress in reducing poverty over the [late] 20th century is remarkable and unprecedented..."1. The "consensus" is that the Western economy is "healthy" and that "market corrections" on Wall Street are largely attributable to the "Asian flu" and to Russia's troubled "transition to a free market economy".

 EVOLUTION OF THE GLOBAL FINANCIAL CRISIS

  The plunge of Asia's currency markets (initiated in mid-1997) was followed in October 1997 by the dramatic meltdown of major bourses around the World. In the uncertain wake of Wall Street's temporary recovery in early 1998 -- largely spurred by panic flight out of Japanese stocks -- financial markets backslided a few months later to reach a new dramatic turning- point in August with the spectacular nose-dive of the Russian ruble. The Dow Jones plunged by 554 points on August 31st (its second largest decline in the history of the New York stock exchange) leading in the course of September to the dramatic meltdown of stock markets around the World. In a matter of a few weeks (from the Dow's 9337 peak in mid-July), 2300 billion dollars of "paper profits" had evaporated from the U.S. stock market.2

  The ruble's free-fall had spurred Moscow's largest commercial banks into bankruptcy leading to the potential take- over of Russia's financial system by a handful of Western banks and brokerage houses. In turn, the crisis has created the danger of massive debt default to Moscow's Western creditors including the Deutsche and Dresdner banks. Since the outset of Russia's macro-economic reforms, following the first injection of IMF "shock therapy" in 1992, some 500 billion dollars worth of Russian assets -- including plants of the military industrial complex, infrastructure and natural resources -- have been confiscated (through the privatisation programmes and forced bankruptcies) and transferred into the hands of Western capitalists.3 In the brutal aftermath of the Cold War, an entire economic and social system is being dismantled.

`FINANCIAL WARFARE'

  The Worldwide scramble to appropriate wealth through "financial manipulation" is the driving force behind this crisis. It is also the source of economic turmoil and social devastation. In the words of renowned currency speculator and billionaire George Soros (who made 1.6 billion dollars of speculative gains in the dramatic crash of the British pound in 1992) "extending the market mechanism to all domains has the potential of destroying society".4 This manipulation of market forces by powerful actors constitutes a form of financial and economic warfare. No need to recolonise lost territory or send in invading armies. In the late twentieth century, the outright "conquest of nations" meaning the control over productive assets, labour, natural resources and institutions can be carried out in an impersonal fashion from the corporate boardroom: commands are dispatched from a computer terminal, or a cell phone. The relevant data are instantly relayed to major financial markets -- often resulting in immediate disruptions in the functioning of national economies. "Financial warfare" also applies complex speculative instruments including the gamut of derivative trade, forward foreign exchange transactions, currency options, hedge funds, index funds, etc. Speculative instruments have been used with the ultimate purpose of capturing financial wealth and acquiring control over productive assets. In the words of Malaysia's Prime Minister Mahathir Mohamad: "This deliberate devaluation of the currency of a country by currency traders purely for profit is a serious denial of the rights of independent nations".5

  The appropriation of global wealth through this manipulation of market forces is routinely supported by the IMF's lethal macro-economic interventions which act almost concurrently in ruthlessly disrupting national economies all over the World. "Financial warfare" knows no territorial boundaries; it does not limit its actions to besieging former enemies of the Cold War era. In Korea, Indonesia and Thailand, the vaults of the central banks were pillaged by institutional speculators while the monetary authorities sought in vain to prop up their ailing currencies. In 1997, more than 100 billion dollars of Asia's hard currency reserves had been confiscated and transferred (in a matter of months) into private financial hands. In the wake of the currency devaluations, real earnings and employment plummeted virtually overnight leading to mass poverty in countries which had in the post-War period registered significant economic and social progress.

  The financial scam in the foreign exchange market had destabilised national economies, thereby creating the preconditions for the subsequent plunder of the Asian countries' productive assets by so-called "vulture foreign investors".6 In Thailand, 56 domestic banks and financial institutions were closed down on orders of the IMF, unemployment virtually doubled overnight.7 Similarly in Korea, the IMF "rescue operation" has unleashed a lethal chain of bankruptcies leading to the outright liquidation of so-called "troubled merchant banks". In the wake of the IMF's "mediation" (put in place in December 1997 after high-level consultations with the World's largest commercial and merchant banks), "an average of more than 200 companies [were] shut down per day (...) 4,000 workers every day were driven out onto streets as unemployed".8 Resulting from the credit freeze and "the instantaneous bank shut-down", some 15,000 bankruptcies are expected in 1998 including 90 percent of Korea's construction companies (with combined debts of $20 billion dollars to domestic financial institutions).9 South Korea's Parliament has been transformed into a "rubber stamp". Enabling legislation is enforced through "financial blackmail": if the legislation is not speedily enacted according to IMF's deadlines, the disbursements under the bail-out will be suspended with the danger of renewed currency speculation.

  In turn, the IMF sponsored "exit programme" (ie. forced bankruptcy) has deliberately contributed to fracturing the chaebols which are now invited to establish "strategic alliances with foreign firms" (meaning their eventual control by Western capital). With the devaluation, the cost of Korean labour had also tumbled: "It's now cheaper to buy one of these [high tech] companies than buy a factory -- and you get all the distribution, brand-name recognition and trained labour force free in the bargain"...10

THE DEMISE OF CENTRAL BANKING

  In many regards, this Worldwide crisis marks the demise of central banking meaning the derogation of national economic sovereignty and the inability of the national State to control money creation on behalf of society. In other words, privately held money reserves in the hands of "institutional speculators" far exceed the limited capabilities of the World's central banks. The latter acting individually or collectively are no longer able to fight the tide of speculative activity. Monetary policy is in the hands of private creditors who have the ability to freeze State budgets, paralyse the payments process, thwart the regular disbursement of wages to millions of workers (as in the former Soviet Union) and precipitate the collapse of production and social programmes. As the crisis deepens, speculative raids on central banks are extending into China, Latin America and the Middle East with devastating economic and social consequences.

  This ongoing pillage of central bank reserves, however, is by no means limited to developing countries. It has also hit several Western countries including Canada and Australia where the monetary authorities have been incapable of stemming the slide of their national currencies. In Canada, billions of dollars were borrowed from private financiers to prop up central bank reserves in the wake of speculative assaults. In Japan -- where the yen has tumbled to new lows -- "the Korean scenario" is viewed (according to economist Michael Hudson), as a "dress rehearsal" for the take over of Japan's financial sector by a handful of Western investment banks. The big players are Goldman Sachs, Morgan Stanley, Deutsche Morgan Gruenfell among others who are buying up Japan's bad bank loans at less than ten percent of their face value. In recent months both US Secretary of the Treasury Robert Rubin and Secretary of State Madeleine K. Albright have exerted political pressure on Tokyo insisting "on nothing less than an immediate disposal of Japan's bad bank loans -- preferably to US and other foreign "vulture investors" at distress prices. To achieve their objectives they are even pressuring Japan to rewrite its constitution, restructure its political system and cabinet and redesign its financial system... Once foreign investors gain control of Japanese banks, these banks will move to take over Japanese industry..."11

CREDITORS AND SPECULATORS

  The World's largest banks and brokerage houses are both creditors and institutional speculators. In the present context, they contribute (through their speculative assaults) to destabilising national currencies thereby boosting the volume of dollar denominated debts. They then reappear as creditors with a view to collecting these debts. Finally, they are called in as "policy advisors" or consultants in the IMF-World Bank sponsored "bankruptcy programmes" of which they are the ultimate beneficiaries. In Indonesia, for instance, amidst street rioting and in the wake of Suharto's resignation, the privatisation of key sectors of the Indonesian economy ordered by the IMF was entrusted to eight of the World's largest merchant banks including Lehman Brothers, Credit Suisse-First Boston, Goldman Sachs and UBS/SBC Warburg Dillon Read.12 The World's largest money managers set countries on fire and are then called in as firemen (under the IMF "rescue plan") to extinguish the blaze. They ultimately decide which enterprises are to be closed down and which are to be auctioned off to foreign investors at bargain prices.

WHO FUNDS THE IMF BAILOUTS?

  Under repeated speculative assaults, Asian central banks had entered into multi-billion dollar contracts (in the forward foreign exchange market) in a vain attempt to protect their currency. With the total depletion of their hard currency reserves, the monetary authorities were forced to borrow large amounts of money under the IMF bailout agreement. Following a scheme devised during the Mexican crisis of 1994-95, the bailout money, however, is not intended "to rescue the country"; in fact the money never entered Korea, Thailand or Indonesia; it was earmarked to reimburse the "institutional speculators", to ensure that they would be able to collect their multi-billion dollar loot. In turn, the Asian tigers have been tamed by their financial masters. Transformed into lame ducks -- they have been "locked up" into servicing these massive dollar denominated debts well into the third millennium.

  But "where did the money come from" to finance these multi- billion dollar operations? Only a small portion of the money comes from IMF resources: starting with the Mexican 1995 bail-out, G7 countries including the US Treasury were called upon to make large lump-sum contributions to these IMF sponsored rescue operations leading to significant hikes in the levels of public debt.13 Yet in an ironic twist, the issuing of US public debt to finance the bail-outs is underwritten and guaranteed by the same group of Wall Street merchant banks involved in the speculative assaults.

  In other words, those who guarantee the issuing of public debt (to finance the bailout) are those who will ultimately appropriate the loot (eg. as creditors of Korea or Thailand) -- ie. they are the ultimate recipients of the bailout money (which essentially constitutes a "safety net" for the institutional speculator). The vast amounts of money granted under the rescue packages are intended to enable the Asian countries meet their debt obligations with those same financial institutions which contributed to precipitating the breakdown of their national currencies in the first place. As a result of this vicious circle, a handful of commercial banks and brokerage houses have enriched themselves beyond bounds; they have also increased their stranglehold over governments and politicians around the World.

STRONG ECONOMIC MEDICINE

  Since the 1994-95 Mexican crisis, the IMF has played a crucial role in shaping the "financial environment" in which the global banks and money managers wage their speculative raids. The global banks are craving for access to inside information. Successful speculative attacks require the concurrent implementation on their behalf of "strong economic medicine" under the IMF bail-out agreements. The "big six" Wall Street commercial banks (including Chase, Bank America, Citicorp and J. P. Morgan) and the "big five" merchant banks (Goldman Sachs, Lehman Brothers, Morgan Stanley and Salomon Smith Barney) were consulted on the clauses to be included in the bail-out agreements. In the case of Korea's short-term debt, Wall Street's largest financial institutions were called in on Christmas Eve (24 December 1997), for high level talks at the Federal Reserve Bank of New York.14

  The global banks have a direct stake in the decline of national currencies. In April 1997 barely two months before the onslaught of the Asian currency crisis, the Institute of International Finance (IIF), a Washington based think-tank representing the interests of some 290 global banks and brokerage houses had "urged authorities in emerging markets to counter upward exchange rate pressures where needed...".15 This request (communicated in a formal Letter to the IMF) hints in no uncertain terms that the IMF should advocate an environment in which national currencies are allowed to slide.16 Indonesia was ordered by the IMF to unpeg its currency barely three months before the rupiahs dramatic plunge. In the words of American billionaire and presidential candidate Steve Forbes: "Did the IMF help precipitate the crisis? This agency advocates openness and transparency for national economies, yet it rivals the CIA in cloaking its own operations. Did it, for instance, have secret conversations with Thailand, advocating the devaluation that instantly set off the catastrophic chain of events?" (...) Did IMF prescriptions exacerbate the illness? These countries' moneys were knocked down to absurdly low levels".17

DEREGULATING CAPITAL MOVEMENTS

  The international rules regulating the movements of money and capital (across international borders) contribute to shaping the "financial battlefields" on which banks and speculators wage their deadly assaults. In their Worldwide quest to appropriate economic and financial wealth, global banks and multinational corporations have actively pressured for the outright deregulation of international capital flows including the movement of "hot" and "dirty" money.18 Caving in to these demands (after hasty consultations with G7 finance ministers), a formal verdict to deregulate capital movements was taken by the IMF Interim Committee in Washington in April 1998. The official communique stated that the IMF will proceed with the Amendment of its Articles with a view to "making the liberalization of capital movements one of the purposes of the Fund and extending, as needed, the Fund's jurisdiction for this purpose".19 The IMF managing director, Mr. Michel Camdessus nonetheless conceded in a dispassionate tone that "a number of developing countries may come under speculative attacks after opening their capital account" while reiterating (ad nauseam) that this can be avoided by the adoption of "sound macroeconomic policies and strong financial systems in member countries". (ie. the IMF's standard "economic cure for disaster").20

  The IMF's resolve to deregulate capital movements was taken behind closed doors (conveniently removed from the public eye and with very little press coverage) barely two weeks before citizens' groups from around the World gathered in late April 1998 in mass demonstrations in Paris opposing the controversial Multilateral Agreement on Investment (MAI) under OECD auspices. This agreement would have granted entrenched rights to banks and multinational corporations overriding national laws on foreign investment as well derogating the fundamental rights of citizens. The MAI constitutes an act of capitulation by democratic government to banks and multinational corporations.

  The timing was right on course: while the approval of the MAI had been temporarily stalled, the proposed deregulation of foreign investment through a more expedient avenue had been officially launched: the Amendment of the Articles would for all practical purposes derogate the powers of national governments to regulate foreign investment. It would also nullify the efforts of the Worldwide citizens' campaign against the MAI: the deregulation of foreign investment would be achieved ("with a stroke of a pen") without the need for a cumbersome multilateral agreement under OECD or WTO auspices and without the legal hassle of a global investment treaty entrenched in international law.

CREATING A GLOBAL FINANCIAL WATCHDOG

  As the aggressive scramble for global wealth unfolds and the financial crisis reaches dangerous heights, international banks and speculators are anxious to play a more direct role in shaping financial structures to their advantage as well as "policing" country level economic reforms. Free market conservatives in the United States (associated with the Republican Party) have blamed the IMF for its reckless behaviour. Disregarding the IMF's intergovernmental status, they are demanding greater US control over the IMF. They have also hinted that the IMF should henceforth perform a more placid role (similar to that of the bond rate agencies such as Moody's or Standard and Poor) while consigning the financing of the multi-billion dollar bail-outs to the private banking sector.21

  Discussed behind closed doors in April 1998, a more perceptive initiative (couched in softer language) was put forth by the World's largest banks and investment houses through their Washington mouthpiece (the Institute of International Finance). The banks proposal consists in the creation of a "Financial Watchdog -- a so-called "Private Sector Advisory Council" -- with a view to routinely supervising the activities of the IMF. "The Institute [of International Finance], with its nearly universal membership of leading private financial firms, stands ready to work with the official community to advance this process."22 Responding to the global banks initiative, the IMF has called for concrete "steps to strengthen private sector involvement" in crisis management -- what might be interpreted as a "power sharing arrangement" between the IMF and the global banks.23 The international banking community has also set up it own high level "Steering Committee on Emerging Markets Finance" integrated by some of the World's most powerful financiers including William Rhodes, Vice Chairman of Citibank and Sir David Walker, Chairman of Morgan Stanley. The hidden agenda behind these various initiatives is to gradually transform the IMF -- from its present status as an inter-governmental body -- into a full fledged bureaucracy which more effectively serves the interests of the global banks. More importantly, the banks and speculators want access to the details of IMF negotiations with member governments which will enable them to carefully position their assaults in financial markets both prior and in the wake of an IMF bailout agreement. The global banks (pointing to the need for "transparency") have called upon "the IMF to provide valuable insights [on its dealings with national governments] without revealing confidential information...". But what they really want is privileged inside information.24

  The ongoing financial crisis is not only conducive to the demise of national State institutions all over the World, it also consists in the step by step dismantling (and possible privatisation) of the post War institutions established by the founding fathers at the Bretton Woods Conference in 1944. In striking contrast with the IMF's present-day destructive role, these institutions were intended by their architects to safeguard the stability of national economies. In the words of Henry Morgenthau, US Secretary of the Treasury in his closing statement to the Conference (22 July 1944): "We came here to work out methods which would do away with economic evils -- the competitive currency devaluation and destructive impediments to trade -- which preceded the present war. We have succeeded in this effort".25

1. United Nations Development Program, Human Development Report, 1997, New York, 1997, p. 2.

   2. Robert O'Harrow Jr., "Dow Dives 513 Points, or 6.4", Washington Post, 1 September 1998, page A.

   3. Bob Djurdjevic, Return looted Russian Assets, Aug. 30, Truth in Media's Global Watch, Phoenix, 30 August 98.

   4. See "Society under Threat - Soros", The Guardian, London, 31 October 1997.

   5. Statement at the Meeting of the Group of 15, Malacca, Malaysia, 3 November 1997, quoted in the South China Morning Post, Hong Kong, 3 November 1997.

   6. See Michael Hudson and Bill Totten, "Vulture speculators", Our World, No. 197, Kawasaki, 12 August 1998.

   7. Nicola Bullard, Walden Bello and Kamal Malhotra, "Taming the Tigers: the IMF and the Asian Crisis", Special Issue on the IMF, Focus on Trade No. 23, Focus on the Global South, Bangkok, March 1998.

   8. Korean Federation of Trade Unions, "Unbridled Freedom to Sack Workers Is No Solution At All", Seoul, 13 January 1998.

   9. Song Jung tae, "Insolvency of Construction Firms rises in 1998", Korea Herald, 24 December 1997. Legislation (following IMF directives) was approved which dismantles the extensive powers of the Ministry of Finance while also stripping the Ministry of its financial regulatory and supervisory functions. The financial sector had been opened up, a Financial Supervisory Council under the advice of Western merchant banks arbitrarily decides the fate of Korean banks. Selected banks (the lucky ones) are to be "made more attractive" by earmarking a significant chunk of the bail- out money to finance (subsidise) their acquisition at depressed prices by foreign buyers, -- ie. the shopping-spree by Western financiers is funded by the government on borrowed money from Western financiers.

   10. Michael Hudson, Our World, Kawasaki, December 23, 1997.

   11. Michael Hudson, "Big Bang is Culprit behind Yen's Fall", Our World, No. 187, Kawasaki, 28 July 1998. See also Secretary of State Madeleine K. Albright and Japanese Foreign Minister Keizo Obuchi, Joint Press Conference, Ikura House, Tokyo, July 4, 1998 contained in Official Press Release, US Department of State, Washington, 7 July, l998.

   12. See Nicola Bullard, Walden Bello and Kamal Malhotra, op. cit.

   13. On 15 July 1998, the Republican dominated House of Representatives slashed the Clinton Administration request of 18 billion dollar in additional US funding to the IMF to 3.5 billion. Part of the US contribution to the bail-outs would be financed under the Foreign Exchange Stabilisation Fund of the Treasury. The US Congress has estimated the increase in the US public debt and the burden on taxpayers of the US contributions to the Asian bail-outs.

   14. Financial Times, London, 27-28 December 1997, p. 3).

   15. Institute of International Finance, Report of the Multilateral Agencies Group, IIF Annual Report, Washington, 1997.

   16. Letter addressed by the Managing director of the Institute of International Finance Mr. Charles Dallara to Mr. Philip Maystadt, Chairman of the IMF Interim Committee, April 1997, quoted in Institute of International Finance, 1997 Annual Report, Washington, 1997.

   17. Steven Forbes, "Why Reward Bad Behaviour, editorial, Forbes Magazine, 4 May 1998.

   18. "Hot money" is speculative capital, "dirty money" are the proceeds of organised crime which are routinely laundered in the international financial system.

   19. International Monetary Fund, Communique of the Interim Committee of the Board of Governors of the International Monetary Fund, Press Release No. 98/14 Washington, April 16, 1998. The controversial proposal to amend its articles on "capital account liberalisation" had initially been put forth in April 1997.

   20. See Communique of the IMF Interim Committee, Hong Kong, 21 September 1997.

   21. See Steven Forbes, op cit.

   22. Institute of International Finance, "East Asian Crises Calls for New International Measures, Say Financial Leaders", Press Release, 18 April 1998.

   23. IMF, Communique of the Interim Committee of the Board of Governors, April 16, 1998.

   24. The IIF proposes that global banks and brokerage houses could for this purpose "be rotated and selected through a neutral process [to ensure confidentiality], and a regular exchange of views [which] is unlikely to reveal dramatic surprises that turn markets abruptly (...). In this era of globalization, both market participants and multilateral institutions have crucial roles to play; the more they understand each other, the greater the prospects for better functioning of markets and financial stability... ". See Letter of Charles Dallara, Managing Director of the IIF to Mr. Philip Maystadt, Chairman of IMF Interim Committee, IIF, Washington, 8 April 1998.

   25. Closing Address, Bretton Woods Conference, Bretton Woods, New Hampshire, 22 July 1944. The IMF's present role is in violation of its Articles of Agreement.

  Copyright by Michel Chossudovsky 1998. All rights reserved.

  Michel Chossudovsky is a Professor of Economics, University of Ottawa and author of "The Globalisation of Poverty, Impacts of IMF and World Bank Reforms", Third World Network, Penang and Zed Books, London, 1997. He is also the author of "Dismantling Yugoslavia, Colonizing Bosnia," Covert Action Quarterly, Washington, D.C., Spring 1996, Number 56 and "The Business of Crime and the Crimes of Business: Globalization and the Criminalization of Economic Activity," Covert Action Quarterly, Washington, D.C., Fall 1996, Number 58. A contributor to Antifa Info-Bulletin, this article appears with the author's permission. To publish or reproduce this text, contact the author at chossudovsky@sprint.ca or fax 1-514-425-6224.

  Michel Chossudovsky, Department of Economics, University of Ottawa, Ottawa, K1N6N5 Canada; Voice box: 1-613-562-5800, ext. 1415; Fax: 1-514-425-6224; E-Mail: chossudovsky@sprint.ca Alternative fax: 1-613-562-5999