Whilst the 'Western' world reels in shock from the recent events in the US and the Islamic world intensely debates its religious approaches to these phenomena, the 'western' and financial world rush to try and come to some sort of economic solution that may help stave off global recession. The last 30 years or so have seen an almost blind faith in unfettered capitalism, in unrestricted markets that give the forces of supply and demand free reign. 'Globalization' has been the catch phrase on many economists' lips. All this may now be forced to change or be modified, and economic regulations may now be 'back to the future with a vengeance'. Such vast sums of money are out 'on loan' to the 'Developing World' through the activities of such multilateral institutions as the World Bank and IMF and economic mobility (and hence less control and stability) so greatly increased by agreements such as NAFTA and WTO, that a global financial crisis could possibly collapse the whole system. The whole World Bank and IMF edifice has been built with loans to the 'Third World' whose interest payments on these loans (or at least the promise of repayment) has theoretically kept the whole system potentially viable. If it comes to a situation where almost the entire Developing World finds itself unable to keep up the loan interest repayments - or even the pretence of theoretically repaying the debts - because of a potential world economic crisis, then 'Western' bankers and governments may be caught in an untenable 'the Emperor has no clothes ' situation. Therefore, analysis of the work and potential plans of some of the institutions in this last article of the series based upon water may only be relevant up until Tuesday of last week. Economic events and restrictions may force significant changes in these organizations in the very near future.
How is this relevant for Eivissa/Ibiza and water? An example springs to mind. The actual water supply networks of several areas of the island are owned by one of two companies, Aguas Formenteras and Sogesur. Last week the Ajuntamiento (Town Council) of Sant Josep (San José) made plans to take over the water supply network of the area (at the moment owned by Aguas Formenteras) and lease it to Sogesur to maintain and develop over the next 35 years. Theoretically this should enable the Ajuntamiento to control the water supply and fix its price. The fact that Sogesur now owns Aguas Formenteras anyway does introduce a slightly puzzling element. Aguas Formenteras owns the water supply/ well sources in the area - which means that now Sogesur does. All well and good for the present - but in 35 years time? What if Sogesur becomes the subsidiary of a major Spanish water supply company that is eventually bought out by a larger European company that in turn is (or eventually becomes) a subsidiary of a massive multinational company (e.g. Monsanto or the Bechtel corporation, both interested in water)? Signatory countries to the WTO cannot prevent such take-overs. If local control is lost over essential supplies such as water, then international events can possibly adversely affect people here on Eivissa (and in many other areas of the world). This has happened before here. In 1996 several of local insurance companies drastically increased their insurance rates for vehicle, house, etc, insurance. Very few people bothered to ask why. I did and it took a long time to get a proper answer. It seems that the increase had nothing to do with local nor even Spanish mainland conditions whatsoever but was due to a devastating 1995 hurricane season in Florida which incurred major losses for certain large insurance companies holding policies in that area. As it happens, these larger insurance companies owned smaller insurance companies, which in turn owned smaller insurance companies and so on down the line to us here in Eivissa. We all had to pay for events somewhere else in the world, one of the hidden 'downsides' of globalization.
Since their founding in the 1940s (see last weeks article) both the World Bank and the IMF (International Monetary Fund) have pursued economic and development policies of a nature that have effectively pulled many areas of the world into such an interconnected situation - sometimes for good, sometimes not so. For those interested in following up a detailed account of nearly 50 years of the World Bank's work, I would direct you Catherine Caufield's excellent study, "Masters of Illusion: The World Bank and the Poverty of Nations" (published 1996), which covers the World Bank's activities from its founding until circa 1995. For those who have never been to the 'Developing World' and seen the difficulties caused by certain World Bank projects nor been in an impoverished 'Third World Capital' when a delegation from the World Bank arrives (suits and ties, the best hotels and restaurants, and closeted meetings only with the 'elite'- be it government or bankers or whoever), the book comes as a shock. It is not a sensationalist book, however, and the World Bank could not disagree with its detailed accounting, however much they tried to ignore it. This is not to say that the World Bank has not also done good work, it is just that for much of the poorer population of the world on the receiving end of many projects the hoped- for benefits 'have not yet arrived' (I am trying to put it as mildly as possible).
Relatively little regarding these World Bank projects reaches the world's media; they take too long to 'complete' to really be amenable to a splash in the press. Suffice it to say that since the late 1940s unbelievable sums of money - into the hundreds of billions of $s - has been loaned to 'Developing Countries' for projects such as dams, irrigation systems, roads and railways, agriculture, and certain manufacturing processes. The World Bank is staffed by highly qualified economists, who may be highly respected in their particular fields, but a constant complaint is that very few of these seem to have much practical 'in-the field grassroots' experience of the ways of life of peoples who are not part of the financial/banking/economist/government circles that they circulate amongst. Although lip-service is paid to the alleviation of poverty and environmental concerns, etc, in practice consideration seems to be thrown to the wayside in an obsession with lending funds whether the projects are viable or not. Everything is viewed in terms of economics, and a certain 'Western capitalist' version of economics at that. Although periodically anthropologists are hired as consultants to advise on aspects of a particular project, their advice is almost never listened to. The organization's in-house environmental section is side-lined and often ignored in the blind competition between departments to rush to assist development of project requests from around the world that money can be loaned for. The Bank seems obsessed with evaluating projects by their economic rates of return to assess the extent its loans contribute to the borrowing nation's GNP.
We have all heard the term GNP (gross national product) and we tend to assume that it is an internationally accepted and understood safe term that means something, e.g. if the GNP of a nation goes up, that is good, if it goes down that is bad. It is a bit of a surprise to most people to find out that it really means very little except to an economist or a banker out of touch with the realities of life and what is does mean has come up for a lot of criticism from others. The term or concept GNP was developed in the 1930s as government planners and economists searched for a uniform measurement of national production. The concept GNP includes all paid services and manufactured goods but does not distinguish between productive and destructive services. Thus, a war is good for GNP as this produces, for example, an increase in arms manufacturing jobs. Thus, the recent events in New York can be seen as an example of an increase in GNP for the area as emergency funds from Washington are funnelled in to increase the number of clean-up, hospital and emergency services, etc. Any financial transaction adds to GNP, as does a nation's consumption of its natural resources (e.g. cutting and selling its forests). If sa pagèsia Eivissenc (Ibicenco peasantry) in the early 1950s could possibly be classed as an independent state (an idea not necessarily foreign to pagès at the time, as most of the island had for so long been isolated from outside influences, even from the Spanish mainland) then its GNP would have been practically zero, in spite of the fact that almost all pagès had their own houses and lands and were almost completely self-sufficient. GNP is basically a deficient measure of national income that is unfortunately used also by World Bank and other economists as an index of social welfare, for which it is blatantly unsuitable. And yet we, the public, do not question it and economists continue to measure it. The most profound criticism of it (and therefore of much of 'western economists' approaches to the world economy) came from none other than Robert Kennedy, who spoke about it on the first day of his campaign for the US presidency in 1968:
"Gross national product counts air pollution and cigarette advertising and ambulances to clear our highways of carnage. It counts special locks on our doors and the jails for the people who break them. It counts the destruction of the redwoods and the loss of our natural wonders. It counts napalm and it counts nuclear warheads and armoured cars for the police to fight the riots in our cities...Yet the gross national product does not allow for the health of our children, the quality of their education, or the joy of their play. It does not include the beauty of our poetry, or the strength of our marriages, the intelligence of our public debates, or the integrity of our public officials. It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country. It measures everything, in short, except that which makes life worthwhile".
And to think that for over 50 years the world's two most important financial institutions, the World Bank and its sister institution the IMF (International Monetary Fund) have been pushing these (albeit hidden and possibly not well understood) views and money down the throats of the 'Developing World'. In spite of numerous disastrous projects supported by both institutions (including, of course, some good ones, but these are often rather hard to find if one assumes that such projects are to assist the needy and not just 'the rich' or governments themselves) and numerous complaints (usually ignored), both organizations tend to continue their activities as if assuming that the general public does not really know what is good for the world.
Let me give an example related to the IMF. The World Bank will loan money for projects (plus further loan other funds often to just enable the interest loans on the first loans to possibly be paid, and then further loans to assist the interest on the second loans to be repaid, etc) to governments in the 'Developing World' if these governments will agree to follow certain strict restructuring rules that will bring their economies into line with certain economic beliefs (usually 'western Euro-American capitalist') that the World Bank deems normal and universal. The IMF works more directly to assist the economies of these governments at a governmental and banking level to achieve economic growth following similar guidelines. But in many instances these guidelines do not seem to work, seem to be flawed, and often seem to create - or do create - almost the opposite effects intended. The 'tiger economies' of Southeast Asia - South Korea, Thailand, and Indonesia, so lauded by western economists in the 1980s and early 1990s, collapsed suddenly in 1997. With strong encouragement from the IMF and the World Bank these economies had pursued recommended strategies for attracting foreign capital, something that economists believe is inherently good. The dangers of 'fast-track capitalism', albeit supported by 'experts' and advice from the IMF and World Bank, unhinged the system and devaluation and an economic crisis brought the Southeast Asian miracle to a juddering halt. Rumours circulated in the US in early 1998 that a confidential internal memo restricted to only the highest offices of the IMF in Washington recognized that actual IMF impositions and (? miss-) guidance were responsible for this collapse. Asian governments lined up to request billions of $s of assistance from the IMF. Despite the seeming absolute failure of IMF policies in Southeast Asia, the IMF was, in 1998, trying to expand its financial role in the area - and world-wide - thought by economists to be essential but by many others with an historical view of such events to be potentially disastrous (the Mexican economy had collapsed in 1994 for many of the same reasons). Although the IMF is officially set up as a multilateral agency, it is said by some of its critics to function as an extension of the US Treasury Department, and by others to be basically and institution enabling US and western banks to loan vast sums of money for 'guaranteed returns' (!). Even before the Asian economic crisis the IMF had plans to request a capital increase of US $90 billion that would hopefully come mainly from the G-7 countries. As the economies of Southeast Asia crumbled, the IMF requested from the US a proposed $14.5 billion as replenishment, implying the funds were depleted due to the crisis. This created uproar in the US House of Representatives and in April 1998 the Banking Oversight Subcommittee of the Banking and Financial Services Committee held days of tense meetings.
It is to the credit of this Committee that they invited the respected representative of an Asian NGO, Walden Bello (also Professor of Public Administration and Sociology of the University of the Philippines) to testify before them. Professor Bello began his testimony "Allow me to state at the outset that the IMF's record in the Asian region does not inspire confidence in the institution...by promoting a policy of indiscriminate capital account liberalization among the East Asian economies (it) has been a central reason for the Asian financial crisis...the IMF has exhibited a remarkable inability to anticipate and predict the financial crisis...the Fund is imposing stabilization and recovery programs that are worsening instead of alleviating the economic crisis...the IMF is not so restoring our economies to health as bailing out the big international creditors...(and) for its own bureaucratic self-interest, is preventing the Asian countries from developing innovative responses to the Asian financial crisis...". His detailed testimony goes on in sections entitled "Blindsided by Ideology', 'A cure worse than the Disease', 'Building a Safety Net for the Global financial Elite', 'Promoting Anti-Americanism' ( does this sound familiar from the last 10 days?), 'Creating Poverty and Instability', 'Institutionalizing Stagnation' and finally 'Monopolizing Solutions and Eroding Congress's Authority'. Shocking? Not really, when one looks at the world not from the 'West' but from the security of one's rice paddy in an area due to be flooded by another World Bank dam project with no proper resettlement area envisaged. These kinds of things have been going on for decades.
From the above, it would look as if two multilateral bodies might be enough to aid and abet the 'development' of the world, any more could possibly be even more disastrous (?). Well, there is never a dull moment in the financial world. In 1995 the World Trade Organization (WTO) was set up. Many of the public are not aware what this organization is, and even more in the dark are countries in the 'Developing World'. Is it part of the UN? Is it part of the World Bank/IMF sisterhood? Although obviously interlinked, it seems to be almost completely independent of any of these institutions and any governments and in fact has gathered to itself such powers that it can override almost any national or international laws that interfere with its objective as the primary rule-making regime of the globalization process. Headquartered in Geneva with an administrative staff of over 500 it has now incorporated into itself more than 20 international agreements (including GATT) and has full executive authority over all these accords. Working in the best interests of the world at large? Well, apparently yes - if you happen to be a 'Western' multinational company, etc, so it seems. It does not necessarily seem so beneficial if you happen to be at the 'rice paddy' end of the spectrum, dispite of all the publicity on the benefits of 'globalization'. Such concerns, though, have never seemed to hinder the development of such monumental organizations.
The WTO now seems part of the 'accepted international scene' (well, at least amongst bankers, multinationals and the G-7!) but a certain amount of mist seems to shroud its actual beginnings. Michel Chossudovsky, Professor of Economics at the University of Ottawa, Canada, calls it an "illegal organization". I quote here from a resume (published in June 2001 by Sonoma State University in California) of Professor Chossudovsky's work on the WTO. "...The WTO is actually an illegal institution. The WTO was put in place following the signing in 199(5) in Morocco, of a 'technical document' negotiated behind closed doors. Following the Morocco meeting, the agreement was either rubber-stamped or never formally ratified by national governments, yet membership in the WTO requires acceptance of its precepts without question.
"The 199(5) agreement has been casually embodied in international law, bypassing the democratic process in mostly all of the member countries. It blatantly overrides national laws and constitutions while providing extensive powers to global banks and multinational corporations. This totalitarian intergovernmental body has been empowered under international law to 'police' country level economic and social policies, suppressing the rights of national governments. Also, the WTO neutralizes the authority of UN agencies, such as the International Labour Organization (ILO), designed to oversee international trade conduct. It furthermore contradicts the Universal Declaration of Human Rights".
Through the WTO large multinationals can do just about anything they want anywhere in the world - and if a small nation tries to stop them the company can take that nation to court under the terms of the WTO. So in future any multinational with an eye on making a profit out of Eivissa's/Ibiza's scarce water resources could find a way to do so, Local Government or no. In Vanuatu in the Southwest Pacific, where no outsiders can own land (the concept of foreign ownership of land does not exist in the traditional systems there), a multinational could force its way in to buy up uninhabited islets, threatening to take the government to court.
Does the world really need such institutions to `police' it? Does the 'Western world' really know or care what has been done in the name of 'development' in the 'Developing World'? Unfortunately, I think not.
Kirk W Huffman