Brown Web of Debt The Shocking Truth about our Money System (3rd ed)

Chapter 28 - Recovering the Jewel of the British Empire

Gandhi’s economic ideal was a simple India of self-sufficient villages; but Pandhit Nehru, the country’s first prime minister, wanted to industrialize and combine British parliamentary democracy with Soviet-style central planning. In the prototype that resulted, all areas of heavy industry – steel, coal, machine tools, capital goods – were government-owned; but India added a democratically-elected government with a Parliament and a prime minister. The country became the model of economic development for newly independent nations everywhere, the leader for the Third World in planning, government ownership, and control.1

Helping to shape the economics of Nehru and his successor Indira Gandhi in the 1960s was celebrated American economist John Kenneth Galbraith, who was appointed ambassador to India by President John F. Kennedy. Galbraith believed that the government had an active role to play in stimulating the economy through public spending. He wrote and advised on public sector institutions and recommended the nationalization of banks, airlines and other industries. India’s banks were nationalized in 1969.

Disillusionment with the promise of Indian independence set in, however, as the private interests that had controlled colonial India continued to pull the strings of the new Indian State. In 1973, the country had a positive trade balance; but that was before OPEC entered into an agreement to sell oil only in U.S. dollars. In 1974, the price of oil suddenly quadrupled. India had total foreign exchange reserves of only $629 million to pay an annual oil import bill of $1,241 million, almost double its available reserves. It therefore had to get U.S. dollars, and to do that it had to incur foreign debt and divert farming and other industry to products that would sell on foreign markets. In 1977, Indira Gandhi was forced into elections, in which key issues were the IMF and the domestic “austerity” measures the IMF invariably imposed in return for international loans. Indira was pushed out and was replaced with a regime friendlier to the globalist agenda. Engdahl writes, “the heavy hand of Henry Kissinger was present . . . in close coordination with the British.”2

India’s recent economic history was detailed in a 2005 article by a non-partisan research group in Mumbai, India, called the Research Unit for Political Economy (R.U.P.E.). It states that India’s development was supposed to have been carried out free of powerful foreign and domestic private interests; but the economy wound up tailored to those very interests, which the authors describe darkly as “large domestic

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and foreign capitalists; landlords and other feudal sections; big traders and other parasitic forces.” The government embarked on a policy of engaging in investment by expanding external and internal debt. Loan money was accepted from the IMF even when there was no immediate compulsion to do it. Annual economic growth increased, but it was largely growth in the “unproductive” industries of finance and defense. External debt ballooned from $19 billion in 1980, to $37 billion in 1985, to $84 billion in 1990, culminating in a balance of payments crisis in 1990-91 and a crippling IMF “structural adjustment” loan. After 1995, the policies advocated by the World Bank were reinforced by the stringent requirements of the newly-formed World Trade Organization. According to the R.U.P.E. group:

For the people at large the development of events has been devastating. The relative stability of certain sections – middle peasants, organised sector workers, educated employees and teachers – evaporated; and those whose existence was already precarious plummeted. It took time for people to arrive at the perception that what was happening was not merely a series of individual tragedies, but a broader social calamity linked to official policy. As they did so, they expressed their anger in whatever way they could, generally by throwing out whichever party was in power . . . .

Yet the [new government] follows, indeed must follow, broadly the same policies as its predecessor. Any attempt to slow the pace is met with rebukes and pressure from imperialist countries and the domestic corporate sector. Indeed, there is no longer any need for them to intervene explicitly. With the last 14 years of financial liberalisation, the country is now enormously vulnerable to volatile capital flows. This fact alone would rule out any serious populist exercise: for the resources required would have to be gathered either from increased taxation or from fiscal deficits, either of which would alienate foreign speculators and could precipitate a sudden outflow of capital.3

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Miracles for Investors, Poverty for Workers

Like other Third World countries, India has been caught in the trap of accepting foreign loans and investment, making it vulnerable to sudden capital flows, subjecting it to the whims and wishes of foreign financial powers. Countries that have been lured into this trap have wound up seeking financial assistance from the IMF, which has then imposed “austerity policies” as a condition of debt relief. These austerities include the elimination of food program subsidies, reduction of wages, increases in corporate profits, and privatization of public industry. All sorts of public assets go on the block – power companies, ports, airlines, railways, even social-welfare services. Canadian critic Wayne Ellwood writes of this “privatization trap”:

Dozens of countries and scores of public enterprises around the world have been caught up in this frenzy, many with little choice.

. . . [C]ountries forced to the wall by debt have been pushed into the privatization trap by a combination of coercion and blackmail. . . . How much latitude do poor nations have to reject or shape adjustment policies? Virtually none. The right of governments . . . to make sovereign decisions on behalf of their citizens

– the bottom line of democracy – is simply jettisoned.4

In theory, these structural adjustment programs also benefit local populations by enhancing the efficiency of local production, something that supposedly happens as a result of exposure to international competition in investment and trade. But their real effect has been simply to impose enormous hardships on the people. Food and transportation subsidies, public sector layoffs, curbs on government spending, and higher interest and tax rates all hit the poor disproportionately hard.5 Helen Caldicott, M.D., co-founder of Physicians for Social Responsibility, writes:

Women tend to bear the brunt of these IMF policies, for they spend more and more of their day digging in the fields by hand to increase the production of luxury crops, with no machinery or modern equipment. It becomes their lot to help reduce the foreign debt, even though they never benefited from the loans in the first place. . . . Most of the profits from commodity sales in the Third World go to retailers, middlemen, and shareholders in the First World. . . . UNICEF estimates that half a million children die each year because of the debt crisis.6

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Countries have been declared “economic miracles” even when their poverty levels have increased. The “miracle” is achieved through a change in statistical measures. The old measure, called the gross national product or GNP, attributed profits to the country that received the money. The GNP included the gross domestic product or GDP (the total value of the output, income and expenditure produced within a country’s physical borders) plus income earned from investment or work abroad. The new statistical measure looks simply at GDP. Profits are attributed to the country where the factories, mines, or financial institutions are located, even if the profits do not benefit the country but go to wealthy owners abroad.7

In 1980, median income in the richest 10 percent of countries was 77 times greater than in the poorest 10 percent. By 1999, that gap had grown to 122 times greater. In December 2006, the United Nations released a report titled “World Distribution of Household Wealth,” which concluded that 50 percent of the world’s population now owns only 1 percent of its wealth. The richest 1 percent own 40 percent of all global assets, with the 37 million people making up that 1 percent all having a net worth of $500,000 or more. The richest 10 percent of adults own 85 percent of global wealth. Under current conditions, the debts of the poorer nations can never be repaid but will just continue to grow. Today more money is flowing back to the First World in the form of debt service than is flowing out in the form of loans. By 2001, enough money had flowed back from the Third World to First World banks to pay the principal due on the original loans six times over. But interest consumed so much of those payments that the total debt actually quadrupled during the same period.8

China and India: Ahead of the Pack

The statistics for most Third World countries are dismal, but India has done better than most. China, which is politically still Communist, is technically part of the “Second World,” but it too has had serious struggles with poverty. Advocates of the free-market approach rely largely on data from China and India to show that the approach is working to reduce poverty, but as Christian Weller and Adam Hersh wryly observed in a 2002 editorial:

[T]o use India and China as poster children for the IMF/World Bank brand of liberalization is laughable. Both nations have sheltered their currencies from global speculative pressures (a serious

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sin, according to the IMF). Both have been highly protectionist (India has been a leader of the bloc of developing nations resisting WTO pressures for laissez-faire openness). And both have relied heavily on state-led development and have opened to foreign capital only with negotiated conditions.9

The declines in poverty in China and India occurred largely before the big strides in foreign trade and investment of the 1990s. Something else has contributed to their economic resilience, and one likely contributor is that both countries have succeeded in protecting their currencies from speculators. Both were largely insulated from the Asian crisis of the 1990s by their governments’ refusal to open the national currency to foreign speculation. In India, as in in China, private banking has made some inroads; but in 2006, 80 percent of India’s banks were still owned by the government.10 Government ownership has not made these banks inefficient or uncompetitive. A 2001 study of consumer satisfaction found that the State Bank of India ranked highest in all areas scored, beating both domestic and foreign private banks and financing institutions.11

A Country of Many States and Disparities

Differing assessments of how India is faring may be explained by the fact that it is a very large country divided into many states, with economic policies that differ. In a June 2005 article in the London Observer, Greg Palast noted that in those Indian states where globalist free trade policies have been imposed, workers have been reduced to sweatshop conditions due to murderous competition between workers without union protection. But these are not the states where Microsoft and Oracle are finding their highly-skilled computer talent. In those states, says Palast, the socialist welfare model is alive and thriving:

The computer wizards of Bangalore (in Karnataka state) and Kerala are the products of fully funded state education systems where, unlike the USA, no child is left behind. A huge apparatus of state-owned or state-controlled industries, redistributionist tax systems, subsidies of necessities from electricity to food, tight government regulation and affirmative action programs for the lower castes are what has created these comfortable refuges for Oracle and Microsoft.

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. . . What made this all possible was not capitalist competitive drive (there was no corporate “entrepreneur” in sight), but the state’s investment in universal education and the village’s commitment to development of opportunity, not for a lucky few, but for the entire community. The village was 100% literate, 100% unionized, and 100% committed to sharing resources through a sophisticated credit union finance system.12

Conditions are much different in the state of Andhra Pradesh, where farming has been the target of a “poverty eradication” program of the British government. Andhra Pradesh has the highest number of farmer suicides in India. These tragedies have generally followed the amassing of unrepayable debts for expensive seeds and chemicals for export crops that did not produce the promised returns. An April 2005 article in the British journal Sustainable Economics traced the problem to a project called “Vision 2020”:

[T]he UK’s Department for International Development (DFID) and World Bank were financing a project, Vision 2020 [which] aimed to transform the state to an export led, corporate controlled, industrial agriculture model that was thought likely to displace up to 20 million people from the land by 2020. There were no ideas or planning for what such displaced millions were to do and despite these fundamental and profound upheavals in the food system, there had been little or no involvement of small farmers and rural people in shaping this policy.

Vision 2020 was backed by a loan from the World Bank and was to receive £100 million of UK aid, 60% of all DFID’s aid budget to India. . . . There were about 3000 farmer suicides in Andhra Pradesh in the 4 years prior to the May 2004 election and since the election there have been 1300 further suicides.13

Vendana Shiva, one of the article’s co-authors, later put the number of farmer suicides at 150,000 in the decade before 2006.14 Shiva and co-authors noted that India’s farmers, who make up 70 percent of the population, voted out the existing coalition government in May 2004; but the new leaders too had to take their marching orders from the World Bank, the World Trade Organization (WTO) and multinational corporations. They observed that a growing number of laws and policies are being pushed through the legislature that threaten to rob the poor of their seeds, their food, their health and their livelihoods, including:

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yA new patent ordinance that introduces product patents on seeds and medicines, putting them beyond people’s reach. Prices increase 10to 100-fold under patent monopolies. Since India is also the source of low-cost generic medicines for Africa, the introduction of patent monopolies in India is likely to increase debt and poverty globally.

yNew policies for water privatization have been introduced, including privatization of Delhi’s water supply, pushing water tariffs up by 10 to 15 times. The policies threaten to deprive the poor of their fundamental right to water, diverting scarce incomes to pay water bills that are 10 times higher than needed to cover the cost of operations and maintenance.

yThe removal of regulations on prices and volumes, allowing giant corporations to set up private markets, destroying local markets and local production. India produces thousands of crops on millions of farms, while agribusiness trades in only a handful of commodities. Their new central role in much less regulated Indian markets is likely to result in destruction of diversity and displacement of small producers and traders.

India’s poor, however, are not taking all this lying down. Following Gandhi’s example of mass non-cooperation with oppressive British laws, they have organized a nation-wide movement against the patent ordinance. Communities are creating “freedom zones” to protect themselves from corporate invasion in areas such as genetically modified seeds, pesticides, unfair contracts, and monopolistic markets. The grassroots movement has called for a rethinking of GATT (the General Agreement on Tariffs and Trade), which led to the creation of the WTO in 1995. The WTO requires the laws of every member to conform to its own and has the power to enforce compliance by imposing sanctions.15

The WTO and the NWO

The United States is also a member of the WTO. Critics warn that Americans could soon be seeing international troops in their own streets. The “New World Order” that was heralded at the end of the Cold War was supposed to be a harmonious global village without restrictions on trade and with cooperative policing of drug-trafficking,

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terrorism and arms controls. But to the wary, it is the road to a oneworld government headed by transnational corporations, oppressing the public through military means and restricting individual freedoms. Bob Djurdjevic, writing in the paleoconservative journal Chronicles in 1998, compared the NWO to the old British empire:

Parallels between the British Empire and the New World Order Empire are striking. It’s just that the British crown relied on brute force to achieve its objectives, while the NWO elite mostly use financial terrorism . . . The British Empire was built by colonizing other countries, seizing their natural resources, and shipping them to England to feed the British industrialists’ factories. In the wake of the “red coats” invasions, local cultures were often trampled and replaced by a “more progressive” British way of life.

The Wall Street-dominated NWO Empire is being built by colonizing other countries with foreign loans or investments. When the fish is firmly on the hook, the NWO financial terrorists pull the plug, leaving the unsuspecting victim high and dry. And begging to be rescued. In comes the International Monetary Fund (IMF). Its bailout recipes – privatization, trade liberalization and other austerity reforms – amount to seizing the target countries’ natural and other resources, and turning them over to the NWO elites – just as surely as the British Empire did by using cruder methods.16

Americans tend to identify with these Wall Street banks and transnational corporations because they have U.S. addresses, but Djurdjevic warns that the international cartels do not necessarily have our best interests in mind. To the contrary, Main Street America appears to be their next takeover target . . . .

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Section IV

THE DEBT SPIDER

CAPTURES AMERICA

“We are all threatened,” answered the tiger, “by a fierce enemy which has lately come into this forest. It is a most tremendous monster, like a great spider, with a body as big as an elephant and legs as long as a tree trunk. . . . [A]s the monster crawls through the forest he seizes an animal with a leg and drags it to his mouth, where he eats it as a spider does a fly. Not one of us is safe while this fierce creature is alive.”

– The Wonderful Wizard of Oz,

“The Lion Becomes the King of Beasts”