Bang! you are dead: Confessions of an Economic Hit Man

John Perkin's ‘Confession of an economic hit man’ is a page runner that that make for quality reading during the holiday season!

In the 10 years between 1971 and 1981, Perkins worked for an international consulting firm where he earned impressive job titles and salaries. Yet in reality Perkin’s job was to implement policies that promoted the interests of the U.S. corporatocracy while confessing to alleviate poverty.

Perkin calls himself “an economic hit man”. “Economic hit men are highly paid professionals who cheat countries around the globe out of trillions of dollars," he writes. People recruited in to this capacity facilitate lending to third world countries that are strategically important for U.S interest. A necessary conditionality of these loans is that U.S. engineering companies be given the construction contracts of these development projects. So the money once again makes it way back to the U.S economy. Yet “the recipient country is required to pay it all back, principal plus interest.” The debts are so large that eventually the debtor country has to default. The more the debt ,better the result. The debt becomes a lever forcing that country to serve U.S. and corporate interests, whether with “United Nations votes, the installation of military bases or access to precious resources such as oil.”

Citing Ecuador for example, the country Perkins served in as a Peace Corps volunteer in 1968, Perkin writes “ We loaned it billions of dollars so it could hire our engineering and construction firms to build projects that would help its richest families. As a result, in ... three decades, the official poverty level grew from 50 to 70 percent, public debt increased from $240 million to $16 billion, and the share of national resources allocated to the poorest citizens declined from 20 percent to 6 percent”.

Confessions of an Economic Hit Man landed on The New York Times Bestseller List, and in 19 other bestseller lists including the Los Angeles Times, San Francisco Chronicle, USA Today, Wall Street Journal, and Washington Post.
What better way to start the Holiday reading!!!

Post Script (2013): I wonder if the "economic hit man" strategy is in the preview of  modern Chinese policies. The billions thrown into economies in South Asia (Sri Lanka etc) and in Africa are mainly for infrastructure development. Unless these infrastructure turn into productive  income generating avenues the shadows of underdevelopment and aid dependency will remain at large.

Best practices? Whtz that?

The developing credit crisis in the United States, linked to the bursting of the housing market bubble, is beginning to reveal the accounting manipulations employed by major US financial institutions to engage in speculative activities and hide risks. The mortgage market – which loans to borrowers with a poor credit history - has been reeling under large losses for months and some of these losses have been incurred by hedge funds. In July number of hedge funds closed down and now in to the 4th quarter many large banks are reporting massive losses running into billions of dollars. Among the affected is Citigroup—an American financial conglomerate that is the world’s largest company measured by asset value and Morgan &Stanley—a forerunner among American banking dynasties. Morgan & Stanley’s reported losses for 2007 is a first in its 73 year old history.

Guess who is baling America out? For Morgan and Stanley it is good old China!(Chinese sovereign funds) While Citi had to latch on to the Moslem world to find a breather with Saudi funding.

The whole crisis coerces one to wonder why there is a duplicity when it comes to “Best Practices and Good Governance” for preachers of these have hardly practiced any to reach and to maintain the “now developed” status. One other thing, gone are the good old days of Allen Greenspan!!!!

The Greenspan Drama

Remember the great Allen Greenspan?

In 1980's Greenspan's predecessor, Paul Volcker, made the bold -- but widely unpopular -- decision to send the American economy into a major recession in order to curb the rampant inflation of the time. Many in the likes of Milton freedman believed that recessions were missteps of the federal reserves, thus Volcker was a prime example for a Fed induced recession. Unlike Volcker, Greenspan didn’t have to take dramatic steps to manage the economy. Greenspan was also accredited for steadying things during the "Black Monday" market crisis in 1987, the late 90's currency crisis and the hedge fund collapse that resulted due to Russian loan defaults. Even after 9/11 the American economic recovery was widely attributed to Greenspans voice of reasoning and strength.

Greenspan unlike many was the luckiest of the lot. He reigned during the longest period of an American economic boom, a result of a rapid technological advancement and trade. Thus inflation remained low and unemployment was less, making Greenspans job a lot easier. He was famous for his "inflation targeting", in which the Fed makes public a projected inflation rate, effecting a greater transparency in likely Fed moves to raise or lower short-term interest rates, a practice which Bernanke later replaced by providing a "targeted minimum level of inflation".

Greenspan was a keen supporter of the Bush administration. Economist Paul Krugman, a frequent Greenspan critic, wrote in the New York Times that Greenspan was a "three-card maestro" with a "lack of sincerity" who, "by repeatedly shilling for whatever the Bush administration wants, has betrayed the trust placed in the Fed chairman'". Yet Allen Greenspan wrote in his 2007 book, "I am saddened that it is politically inconvenient to acknowledge what everyone knows: the Iraq war is largely about oil". One wonders whether his close relationship with the famous American philosopher Ayn Rand (who advocated objectivism against positivism) might have influenced him to develop this objectivistic insight into American politics.

Shel Silverstein

I recently fell in love with Shel Silverstein's work. Shel is an American children’s writer. His poetry is what took me by surprise. In almost all his work he tries to put forth an "alternative view". His famous poems including Danny O'Dare, Its dark inside here, rain, young boy and the old man, are just to name a few examples where this "alternative" perspective gets a sizable amount of attention. He voices his opinions as to how thankless can the thanksgiving dinner be, and how blue and dark the turkey feels on the happy Christmas table. What struk me most was the fact that he writes these for little children. Yet adults too can learn a thing or two by reading Silverstine's poems.

Point of View by Shel Silverstein
“Thanksgiving dinner’s sad and thankless
Christmas dinner’s dark and blue
When you stop and try to see it
From the turkey’s point of view.
Sunday dinner isn’t sunny
Easter feasts are just bad luck
When you see it from the viewpoint
Of a chicken or a duck.
Oh how I once loved tuna salad
Pork and lobsters, lamb chops too
Til I stopped and looked at dinner
From the dinner’s point of view”

Burning Burma

Tiananmen square student crackdown-1989

Myanmar uprising-2007

A picture is better than a million words. The advancing tanks in Tiananmen and the military crackdown in Myanmar are no different from one another....Brutal, violent and inhumane. Who stands to profit from all these? Surely not the people or the political leaderships of China or Myanmar.......

The gospel of 'democracy' preachers are having a field day just by glancing at the latest pictures smuggled out of Myanmar.

Fundamentals of Pragmatism

1. People only think of the pleasures of acquiring and don’t consider the trouble it involves. Suppose you have a hundreds of everything: cars, servants, houses…… life will be in a total mess!!
2. We are born with nothing and will die with nothing .
3. People who suffer most always find a way out, try squeezing a handful of mud it oozes between your fingers.
4. Just learning the theory want tell what the reality is, but practicing theory will.
5. Wisdom is in oneself, just like a sweet ripe mango is in a young green one.

(Adopted form- A tree in the forest by Ajahn Chah)

A tale of a theory

A keen observer will perhaps see that the modern day’s mainstream economics is largely neoclassical in assumption and implementation. And for many of us the neoclassical version of economics is the only economics we seem to know despite the existence of many other schools of thoughts. The popularity of Neoclassicism lies in its originality and its coherence with human nature.

Neoclassicism begins and ends with the single word, "maximization" and is sturdily built on the concept of "marginal’s". As far as neoclassicism goes maximization of desired marginals and minimization of the undesired seem to be the order of the day. The maximizing behavior is nothing new to humans. Realism believe that by nature human beings are greedy and self centric . Thus, "maximizing the marginals " approach is perhaps the closest theory that can explain man's behavior if one is to side with realism. Yet can ones maximization create anothers maximization? If one is to maximize at the expense of another can there be any progress in a society as a whole?Or else if maximization is rational behaviour what must be maximized in bringing harmony and prosperity to society ? (profit??)

In Aid of Aid

Aid and Development: Aid is currently looked upon as being instrumental for reduction of poverty and is being commonly defined as "concessionary loans" plus "Effective development Assistance". The modern day "aid bureaucracies” largely believe that aid disbursement has the potential to create growth through increased investment, a premise based on the "celebrated" work of Burnside and Dollar (2000) which has apparently become the "guiding angel" for many a western policy makers.

Contrary to this popular belief (of aid creating development through increased investment), Boone (1996), Hansen and Trap (2000) brings out solid empirical evidence that proves aid has increased consumption rather than investment. There is nothing wrong in financing consumption but financing consumption of a few against the general wellbeing of a society is something that is a bit hard to bite in.

William Easterly who tested the Two Gap Analysis on aid (which considers aid as a mechanism that first increases investment and then growth ) found that aid only increased the investment rates in 6 out of 88 countries that were studied and investment help increase the growth rates of only 4 countries, while both hypothesis tested to be significant for only one country(Tunisia).The international development policy establishments(IDEPs) can truly be happy for at least one out of the eighty eight had, for some reason or the other, benefited from foreign aid.

Aid & Distribution: The distributional mechanism of aid considers both the success of past aid to follow conditions and the failure of past aid to follow conditions as justification for future aid (Eastly:2003). Hence if a country is a good performer it will receive funds from the good performer fund and if it is a bad performer it will receive funds from the bad performer fund. Either way you end up getting aid as far as you need it!! Thus conditions become a mere wishful thought rather than having any significant impact on effectiveness in aid distribution. Aid agencies are reluctant to give honest and truthful evaluations regarding the performances of aid distributed so far, which if done will no doubt lead to a genuine acknowledgment that aid has failed to achieve sufficient levels of development.

Thus there should be a genuine commitment to evaluate aid. The results of such an evaluation can shed light on what must be considered as "best " in terms of the functioning of donors and receivers alike.

Aid and America: United States' 34th president, Dwight D Eisenhower believed that America's foreign aid could be just as important in fighting "wars" as its military might. Hence it is not surprising that Washington has been using aid as a tool for fighting terrorism. Aid now can be received as part and parcel of supporting America's war on terror, rather than as a instrument handled efficiently and prudently for inducing growth and development. This was seen happening with Pakistan.

 
Aiding development: Aid selectively and efficiently handled has the potential of increasing growth, yet it is not the so called IDPEs that must single handedly decide on what aid and how much must be given in order to finance development. Developing nations must be given sufficient amounts of freedom in deciding how the aid must be utilized under given domestic socio-economic or cultural conditions . Until such time "politicized" aid will not create growth or achieve development.

No longer can one hold material wealth as the sole outcome of development. Because meterial wealth has not solved all the problems in society. (Can you explain the high crime rates in America? can wealth created in the American fire arm industry make America a safe society? ) Thus wealth creating developemnt is no longer a wisdom of convention.

Since growth of wealth or GDP in numbers does not mean anything . ....then what perhaps should be coined as development? And how should it be interpreted? Development as Freedom?(A. Sen), development as Ethical growth? (J. Stiglitz) or developemnt as social justice(D.Seers) ?

Freedom of and from!

Freedom is everything to man. The freedom of speech, mind, religion, expression, the press, information are some of the common forms of freedom that man seeks to win. On the other hand Man strives to attain the deprived freedoms such as the freedom from slavery, hunger, addiction, poverty, abuse, fear, discrimination, despair, unhappiness, violence and bondage. Thus freedom from the undesired and the freedom of the desired is what amuses man. How much of the desired freedom can we achieve and how much of the undesired can we be free of is what determines a human society's fortitude. Yet the choices we make and the freedom to make them totally depend upon us and the environment that we create.

Freedom

The word freedom has a powerful emotive force. It is by no means a neutral term and has been consistently used to defend a verity of political and social conditions of life.

The word has two parts in its formation,” Free" and "doom". The word free originally meant beloved usually used in relation to a friend. With later developments to the language it came to evolve in to its present day meaning, incorporating the idea that one who is a beloved is a friend, free of bondage. The word "doom" originally meant of a considered judgment in contrast to its modern day interpretation of something unpleasant or harsh in judgment. Connecting the two words, freedom simply means a state where considered judgment can be made without bondage.

Freedom is a condition or a state that seems to be worthy and noble. Yet freedom like all good things is essentially something internal. It begins within us and transcends to the outer most spares of the universe through our deeds, words and thoughts. These self determined thoughts, words and deeds or lack of it has the power to decide our destiny.

(Picture: Water-Lily Pond, Claude Monet 1897)