THE CLAIRE FOSS JOURNAL
EVERYTHING YOU KNOW IS WRONG
BURN THE OLIVE TREE, SELL THE LEXUS
by Greg Palast and Oliver Shykles
This article is a bit dated but nonetheless spells out
the ungodly ramifications of unfettered free market capitalists attempting
to deregulate and privatize the entire globe. A special thanks to
D'Arcy Milligan for bringing this important book review to our attention.
August - 2004
Globalization is really neat. Just ask Thomas Friedman. He has a column
in the New York Times and he wrote a big, fat best-selling book, "The
Lexus and the Olive Tree" which explains it all to us - the marvels of
the New Globalization Order.
Now right there in my Lexus book it says that in this brave new world we
will all have internet-enabled cell phones which will allow us to trade
Amazon.com stock and, at the very same time, we can talk to Eskimos. The
really exciting part is we will all be able to do this from our bedrooms
in our pajamas.
When he's not in his pajamas Friedman is in fact one of gaggle of
happy-go-lucky globalizers running around chirruping the virtues of
globalization in its current form. He lays out, on a level of detail
never seen before, the ability of globalization to democratize three key
areas: technology, finance, and information. He argues that everyone in this
global New World Order will have access to the all the technology,
finance and information they need to live healthy and happy lives.
And so when I finished reading his book I thought to myself, "Wow! This
is a future I want to be a part of." Just imagine, every village from
the Andes to Shaker Heights will be connected, empowered and enabled and
that's one heck of a future. I want this and I want it now. But hold on
a minute ... I just picked up the paper and it said that 100,000 people
massed in Genoa to protest against the G8: that is the eight largest
industrial nations driving forward globalization. And 10 months before
20,000 people had gathered in Prague to demonstrate against the World
Bank and the International Monetary Fund: two of the key international
agencies driving free trade expansion, a guiding force behind
So what the heck is wrong with these protestors, don't they understand?
Haven't they heard about the Eskimos? Don't they understand economics?
As the Prime Minister of Britain, Tony Blair, explains, "The protests
and people who indulge in the protests are completely misguided. World
Trade is good for peoples' jobs and peoples' living standards", "These
protests are a complete outrage." But, you have to forgive youth it's
lack of sophistication. They obviously haven't read the Gospel of
Globalization according to Thomas, nor their daily scripture, the New
The answers were first became widely known as "Thatcherism" in Britain
and "Reaganomics" in the US and then later as "The Washington
Consensus". As Friedman puts it, "The Golden Straightjacket first began
to be stitched together [...] by British Prime Minister Margaret
Thatcher. That Thatcherite coat was soon reinforced by Ronald Reagan."
In fact, it's a very lucky thing that global capitalism happens to be
such a good system because as far as Friedman is concerned it's now the
only one left. Socialism, communism and fascism have all gone kaput,
"The Cold War had the Mao suit, the Nehru jackets, the Russian fur.
Globalization has only the Golden Straightjacket." And so all that's
left in our closet is Friedman's golden straightjacket but it's okay
because, as Friedman puts it, "the tighter you wear it the more gold it
produces." So strap yourselves in! Everyone still breathing okay? Then
So there are no dissenters now, we all agree, we're all wearing the same
straightjacket. As Friedman explains on page 106 of his book, it was all
democratic, we all got to take part in the debate. And I thought about
this and I remembered that we did have a choice, Friedman was right. We
had our choice of George W. Thatcher, Reagan Clinton Bush or Al Thatcher
Reagan Gore. You see, there's no room in the golden straightjacket for
anyone who doesn't agree. And as Friedman himself admits, "it is
increasingly difficult these days to find any real difference between
ruling and opposition parties in those countries that have put on the
Golden Straightjacket ... be they led by Democrats or Republicans,
Conservatives or Labourites, Christian Democrats or Social Democrats."
So just when I was getting sized up for my own straightjacket, and boy
was I excited, I read that there were riots in Ecuador. And I remember
thinking to myself, "Oh my, why are they in the streets?" There are
people in the streets and there are tanks too. And I thought to myself,
"Perhaps the Internet is down, perhaps they're trying to unload their
Amazon.com stock which is dropping like crazy. They can't log on. It's
all jammed up. I mean, the future's on hold here. Will someone please
But it turned out that these people were on the streets, facing down the
tanks because the price of cooking gas had just been raised by 60%. This
is odd because at the time the world was in a glut of fuel and oil
prices were way down. Ecuador was a member of OPEC, it has more gas than
it knows what to do with. It's drowning in oil. That's one of the
reasons why Ecuador was in financial trouble. So who would be bonkers
enough as to raise the price of cooking gas and create all that needless
suffering? The people on the streets claimed that this was a requirement
placed upon Ecuador by the World Bank. Now I didn't believe this for a
second; Reagan and Thatcher gave us the answers 20 years ago and there
was nothing about cooking gas. But then I showed up at my office and
while I was quietly sipping my coffee and leafing through the paper a
pile of documents flew in through the window.
Right on the front of one of them it said "restricted distribution" and
"it may not otherwise be disclosed without World Bank authorization." It
was a "confidential", for eyes only, document. I couldn't resist the
temptation so pretend you never saw what I'm about to reveal to you -
when you've finished, rip out this chapter and eat it right up. So I
opened up the document. It was called The Ecuador Interim Country
Assistance Strategy. I read this strategy and it included a schedule for
raising the price of cooking gas. Now, they used to call these things
"Structural Assistance Plans" but oops, they got a bad name, so like all
the best PR firms, they did the right thing and changed the name. Now
they're known as "Poverty Reduction Strategies ". Nothing like a little
whitewash to keep people quiet. But the people of Ecuador weren't
keeping quiet, so I read on ...
Along with the forced hike in cooking gas prices the World Bank required
the elimination of 26,000 government jobs. Other poverty reduction
strategies included a cut in pensions and a cut in real wages
nationwide, by half no less, all this through World Bank directed
macroeconomic manipulation. Part of the plan included the handing over
of a license for a trans-Andes pipeline controlled by British Petroleum.
I wasn't sure; perhaps I had become confused. Maybe they meant that the
poverty reduction program was a poverty reduction program for British
In all, the World Bank and IMF helpfully "suggested" 167 strategies as
part of its loan package. But Ecuador was broke, that's why it had asked
for the World Bank's help in the first place. It desperately needed the
wampum, so desperately in fact that it had no choice but to accept these
strategies. I shall, therefore, refer to these "strategies" as
conditions, which is what they are, loan conditions. No ifs, no buts,
sign on the line thank-you very much.
Oddly I didn't read about Structural Assistance Plans or the 167
conditionalities for Ecuador in my Lexus nor in the Times. But just hold
on a moment, what happened to democratic finance? Thomas Friedman, our
new apostle, said that anyone can obtain finance capital now, it's all
democratic. Hey, he said, even David Bowie can issue bonds (to the tune
of $55 million no less). Maybe Ecuador's problem was that it didn't have
a rock star to co-sign with them.
But there's a bigger problem here, these conditions weren't just put
together especially for Ecuador. Any country in crisis receiving a loan
package from the World Bank gets a neat little set of conditions along
with their loans, 111 on average. Now you'd think that if they were
doing all these wonderful things to reduce poverty they would want to
shout it from the rooftops. Hey, perhaps they're just modest. In fact,
talk about modesty - did you know they even found a cure for AIDS? Yes
indeed, I kid you not.
But before I tell you how they did it you first have to understand all
the conditions, all the little nuggets that can be found in the pockets
of our golden straightjackets. So let's enumerate them just as Thomas
Friedman does on page 105 of his book. Okay, privatization is number
one. Second is deregulation: you've got to get rid of all those dull
bureaucrats and their thick rule books, you know they just get in the
way of things. Next is free trade: drop the borders between people and
all the nice things they want. Four, free up the capital markets, let
capital flow in order to generate business and jobs worldwide. Five,
support those international agencies which enforce our new international
order - the International Monetary Fund, the World Bank and let's not
forget the good ol' World Trade Organization. In other words don't dye
your hair green and go into the streets of Seattle and break the windows
in a Starbucks. And finally: you must look for a market-based solution.
Remember, that's the one that gives you the "win-win" situation.
Now, I can tell you that it's with the market based solution that they
found a cure for AIDS in Tanzania. Now in Tanzania the silly things used
to give away health care. Can you believe it? So what World Bank said
was, "You've got to stop being so scatterbrained and start charging for
medical care", "You've got a health care crisis and you've got to cure
it with our market based solution".
In a nation with 1.4 million people with HIV/AIDS that means a lot of
visits to the hospital. So when you start charging those people to visit
the hospital they stop coming. In Dar Es Salaam the number of hospital
visits dropped by 53%. That's quite a cure and I don't think anyone
could beat that.
Now, globalization has many other "success" stories. In Britain,
Margaret Thatcher took the electricity system and she privatized and
deregulated it. Electricity used to cheaper in Britain than in the US
but now consumers pay 70% more per unit than their American
counterparts. The same process was applied to the gas system and the
charges shot up to a level some 60% higher than in the US where some
type of regulation still exists. Water in the US is still mostly a
publicly owned system but the British, still not satisfied with the
privatization and deregulation of the gas and electricity industries,
went about the same process with the water industry. Now the happily
straightjacketed folks there pay 250% more than we do in the US.
So tickled were they with their clever programs of privatization and
deregulation they decided to spread the good news. The system spread,
via a World Bank loan condition, to Brazil. There the electricity
industry was targeted and the Rio Light Company of Rio de Janeiro was
taken out of public hands. The new British, French and American owners
came along and said, "Just look, look at this bloated and inefficient
company and its huge payroll". So they immediately set to work making it
lean and mean. And mean it was: they knocked off 40% of the workforce.
But there was a problem; the workers knew where the transformers were.
So the lights in Rio de Janeiro started flickering and Rio Light is now
know as Rio Dark. But that was not all, for a flickering light system
the people of Rio de Janeiro got to pay double what they had paid prior
to privatization. But don't panic; it's not all doom and gloom. There
was a huge increase in profits.
So after the failed attempt at privatization in Brazil they said, "well,
let's try it again, we'll do it right this time. We'll go to India". And
that failed, so they went to Pakistan: the attempt there became one of
the reasons why they had a military coup. So they went to Chile and that
didn't work there either. So they said, "Let's try, one more desperate
time. We'll go to a place that understands the future. We'll go to
California and they'll get it, they'll be able to deal with
deregulation. They'll get the wonderful effects of reductions due to the
miracles of the markets. There'll be competition and prices in
California, which are too high, will plummet." In fact when the
Californian legislature voted to de-regulate the price of electricity,
they even changed the law to the effect that prices would fall 20%. Yet,
year on year prices rose in the wholesale market in California. Actually
in one year they rose 380%. So faced with a terrible problem in
California they went to Cleveland instead.
While I was in Cleveland to debate Thomas Friedman I got a letter from
my friendly-faced hotelier. It read: "Dear Guest, due to the current
energy issue, a surcharge is being applied nightly to all guest
accounts'. Well I'll tell you it's not an "energy issue". It's a
crisis. And it's not a crisis of energy; it's a crisis of globalization.
It's a crisis of a plan that never seems to work.
I used to work as an advisor with the utility commission of Ohio,
amongst others, and we were thinking about what to do about the billions
spent on nuclear plants and other wasteful projects that went nowhere.
That was in the 1980s, in the bad old days before de-regulation, so the
answer we came up with was simple: you put a cap on the price. You just
put a cap on it. You regulate in the public's interest. But little did I
know that we should have looked for the market-based solution. I am now
reading Paul Krugman. Now he is the guy that appears in the New York
Times with Thomas Friedman. So there it was, Friedman the globalizer and
Krugman the globalizer and they agree with each other. Krugman says, "I
know the solution to bring down the prices of supplies: what we should
do is remove all caps and allow electricity prices to rise." And I said,
"Wow!" I didn't think of it; that's really deep. If you want the prices
to go down you raise them. And I thought about that. It's like a one
hand clapping thing.
I have to confess I didn't understand it at all. I said, "This is beyond
me. I had better go to one of the gurus of globalization. I mean one of
the inventors of market-based solutions. You know: the top banana." So I
went to Cambridge University with my camera crew from BBC. And I sat
down, for several hours, with the man himself; the voice of
globalization, Professor Joseph Stiglitz. Now Stiglitz was the chief
economist of the World Bank. The guy who wrote some of these plans and
conditions. The guy who came up with these market based solutions. And
so I said, "You've gotta answer this for me. I'm really losing it,
Professor Stiglitz. To cut electricity prices you raise the prices. To
cure AIDS, you raise the price of medicine. To stop the hemorrhage of
capital in Ecuador, you remove capital controls on the export of
capital. I don't get it."
And so he explained it to me sort of like this, "You see, in the Middle
Ages, they used to put leeches on people's bodies when they were ill and
they would get sicker and sicker. And you know what they would say? They
would say, "You know what? You know what's wrong? There's still blood."
So they would apply more leeches. And that's how the globalisation
program works. You just keep applying leeches and if a little
deregulation seems to be making the system sick what you need is more
deregulation to try to cure the system." And I said, "You know what? You
don't sound like you're wearing your straightjacket." And he replied,
"Well I'm not, not anymore". Despite the fact that there's supposedly no
dissent, he was dissenting; and this is the guy who conceived the system.
So I asked him "What happened here then?", and he said, "Well, you know,
economics is a science. It's a dismal science, but it's a science. And
you know what the problem with globalization and the program of
privatizations, deregulation, liberalisation of capital markets are?
They don't work." And he told me to take a look at Latin America in the
period 1960 to 1980. In the Dark Ages in which they had all kind of
government regulations, controls, quasi-socialist economies and
government intervention, Latin America's per capita income grew by 73%.
The same went for Africa; its per-capita income grew by 34%. But it was
"inefficient" and we thought we could do better with free-market
solutions. And so it began in 1980, with the International Monetary Fund
and then the World Bank, sending out structural assistance programs with
loan conditions. They said, if we're going to give you money, you've got
to change your economy.
Then came the economic miracle. Latin America,
in the next 20 years in its straightjacket, went from 73% growth per
capita income to just about nothing: 6%. Africa, which had grown at a
pokey 34% during those 20 years, has since dropped by 23%. The
privatization program became what Professor Stiglitz called the
"briberization" program. What happened was that privatization became the
means to sell off the country to bandits who then had no reason to
operate businesses so instead they just sold off the assets. And that's
what happened in Russia and there it resulted in a depression. I said to
him, "You sound like a bitter man. Did it work for anyone, is it all
doom and gloom?" He said, "Oh no, you look at the numbers for Asia; the
World Bank always talks about how well Asia did. That's because of China
and the tremendous growth it experienced." And I asked him what China's
trick was and he replied, "They didn't listen to us!" China said, "We're
not privatising; we're not liberalizing. Worry, keep your straightjacket."
I asked him if there were any other good stories. He said, "Yeah,
Botswana." "So what did they do?" I asked. He said - no points for
guessing - Botswana, it turns out, also said "Forget it." Botswana was
the one nation in Africa that refused the International Monetary Fund
and World Bank's help.
So it had all gone bad. The protesters were going to be out in the
streets this week and there were protests going on in Ecuador. In fact,
when we talk about protests we think about Seattle and Genoa and the
claims that all these white college kids are just out there because they
don't know what to do with themselves, and because they just don't
understand economics. But what you didn't hear about was the 400
protests that took place in the Third World in 1999 alone. There they
understand exactly what's going on.
But how come we never hear about these demonstrations on our televisions
or in our newspapers? Well, it's because Thomas Friedman the globalizer,
on the political left, writing in The New York Times, agrees with Milton
Friedman the globalizer, on the political right. And the opinion in The
Times matches the opinion in the Washington Post, which matches the
Financial Times which matches ABC, NBC, BBC and CBC and any other
mainstream media outlet you care to mention. And so it would seem that
everyone agrees now. That is everyone who is doing quite well, thank you
very much, out of globalization and out of the suffering of billions of
people. They are not going to tell you about suffering on the streets in
the First World and the Third World caused by the undemocratic
international agencies and our supposedly democratically elected
governments (the idea of democracy is based on a choice - a real choice,
not a choice between globalistas and globalistas). They won't tell you
that this system is a mess because it is not in their best interests to
Currently the wealth of the world's 475 billionaires is greater than the
combined income of the poorest half of humanity. But Friedman still
wants to assure us that, "The answer is free-market capitalism. Other
systems may be able to distribute and divide income more efficiently and
equitably, but none can generate income to distribute as efficiently as
free-market capitalism." I'm sure that the poorest half of humanity
feels much better now Mr Friedman, thank you.
But there was nothing wrong with the international control of trade when
the World Bank - that is the World Bank that John Maynard Keynes devised
- came along and rebuilt the nations that had been flattened by World
War II. The International Monetary Fund also helped by correcting the
imbalance of trade that resulted from changes in commodity prices. But
things changed in 1980 when we all climbed into our golden
straightjackets with Thatcher, Reagan and Milton Friedman. The agencies
were taken over by the Free-Market Believers who had plans for
structural adjustment, globalizing and economies free of government.
"So where did we go wrong?" I asked myself. In my pile of confidential
papers I found a General Agreement on Trade and Services (GATS) from the
secretariat of the World Trade Organization. You're not supposed to see
this either, but what the heck. This document contains a discussion of
something called the "necessity test" and it tells you the real plan
behind the several "democracies" Friedman says are the gift of
The "Necessity Test' appears within GATS article 6.4. Now I know this
has nothing to do with trading stock in your pajamas, but this is what
globalisation is really about. This is the plan for the establishment of
a panel which will set national laws and regulations. What this
innocuous looking article means is that only those regulations of a
nation which are "least burdensome" to business for "legitimate policy
purposes" are allowed. Legitimate policy purposes? But I thought that's
what nations had Congresses and Parliaments for: it is for Congress and
Parliament to decide what is legitimate and what is not. A "necessity
test" already exists in the North American Free Trade Agreement (NAFTA);
this will be expanded in the FTAA and this is why there were people in
the streets in Quebec in April 2001.
So what happened under NAFTA with this "Necessity Test"? Well, there's
an interesting story here: it's the story of the case of Metalclad, a US
based company who wanted to build a toxic dump in Mexico. It was one of
the new breed of globalizers following the advice of Larry Summers, who
said that the Third World is under polluted from an economic point of
view. Summers is the guy who was US secretary of the Treasury and
Stiglitz's predecessor at the World Bank, so he must know what he's
talking about. He was also the guy who demanded that Stiglitz be fired
for dissent. (So now there cannot be any dissenting, because we all
agree, right? There is no dissent now, because if you dissent your head
is cut off and put on a spike on L Street, Washington. But I digress) So
Metalclad wanted to put a toxic dump into a central Mexican state, on
top of an aquifer, no less. And Mexico said, "You know, we have our
rules. You can't put a toxic dump above our water supply." And Metalclad
said, "Have you read NAFTA?" And so Metalclad took Mexico to court under
the NAFTA "Necessity Test" rules.
But the NAFTA disputes panel is not like the courts as you know them,
where things are open. The NAFTA disputes panel is secret, closed to the
public. So Metalclad made their case and it turned out that Mexico was
being "trade restrictive". So not only did Mexico get a toxic waste dump
right on top of their aquifer but they also received a bill for millions
of dollars for delaying the toxic dumping.
But it's not just Mexico that has experienced the full force of NAFTA,
California now faces a bill for $976 million as punishment for not
changing its anti-pollution laws. The trade restrictive hooligans there
wanted to stop a Canadian company from selling them their toxic gasoline
But I just couldn't get Ecuador off my mind so I went back to Stiglitz
and asked him about how those pesky folks got into financial trouble in
the first place. He told me the International Monetary Fund and World
Bank years ago forced Ecuador to liberalize its capital markets, remove
all restrictions on ownership of bonds on the movement of money across
borders. This way, capital can easily flow in and flow out. But the
capital flowed out and it flowed out. So the IMF said, my god, you gotta
get that money back, start raising interest rates! So Ecuador raised
their rates 10 ... 20 . 30 ... 40 ... 50 ... 60 ... 70 ... 80 ... 90%.
But that caused the economy to go into the tank. Then the World Bank
said "Well you can't raise interest rates anymore, so start selling
everything that isn't nailed down." And when that money was used up to
pay creditors the bank ordered a price rise on items like cooking gas.
Yet despite the World Bank's success, some people didn't want to put on
their golden straightjackets. In 2000 there was a protest in Cochabamba,
Bolivia. It was a protest against the privatization and deregulation of
the local water company and it was led by the local Archbishop and a
union leader named Oscar Olivera. The privatization and deregulation was
part of the World Bank's cure because Cochabamba had problems; only 35%
of the people there had good drinking water. So of course the World Bank
said we have an idea: let's privatize the water company. And so they
passed Cochbamba's problems to Bechtel, an American company, and
International Water of London because they will know what to do, they
will apply a market-based solution. And they did: they raised the price
of water. That's why there were people on the streets.
Hugo Banzar, who used to be Bolivia's dictator but who had now become
president, sent in the tanks. And then I got this note which told me
that two days later a 17 year-old, Hugo Daza, had been killed, shot
through the face. A friend of mine, who knows his family, told me that
he was just in town to run an errand for his mother. In the protests
that ensued four more people were shot dead. Jim Wolfensohn, president
of the World Bank, was asked about the incident a couple of days later.
He said, "The riots in Bolivia, I am pleased to say, are quieting down'.
He then went on to warn the Bolivians that they had better start paying
their water bills.
A year later the protesters won, and the price of water dropped. But
then it started creeping up again. Then I got another note telling me
that Oscar Olivera and the Archbishop, head of the human rights
committee, had led another peaceful protest. The authorities had
responded by sending in close to 1,000 heavily armed members of the
Bolivian security forces to disperse the peaceful marchers with tear
gas, beating them and confiscating their personal possessions. Oscar
Olivera went missing.
It turned out that he had been detained by the authorities, an action
which contravened Bolivian law: Article 7 of the Bolivian constitution
guarantees citizens the right to protest and the freedom to meet and
associate for legal ends. I understand now why Thomas Friedman, despite
talking at length about the democratization of technology, of finance
and of information, only once mentions the democratization of democracy
and it's right there on page 167 where Friedman proudly explains
democracy IMF-style: "It's one dollar, one vote."
I've gotta go now, I gotta get my cell phone, get in my pajamas and tell
those Eskimos what's really goin' on.