How Poor Countries Are Preyed On
November 19, 2008
Today I was digging around to find more examples of how money
is taken from the poor and middle class to enrich the wealthy.
It is unfortunately easy to find examples, and most of them seem
to involve billions of dollars. I came across an example of how
our money is used to prey on the people in poor countries to
keep wealthy bankers happy and well, wealthier.
The IMF (International Monetary Fund) is one of the multi-national
financial organizations that the U.S. Government contributes
to. It often works in conjunction with other lenders to help
economically troubled nations. Contributions vary and there may
be none in some years, although I found examples of contributions
of as much as 17 billion in others, and this is just one of the
organizations of this sort that taxpayer money is used for. Others
include the World Bank and the Treasury Department’s Exchange
Stabilization Fund (the latter often works together with the
IMF).
Now at first glance it seems like a nice idea to help a struggling
country, but how do these organizations actually work? According
to the information I found, they do more harm than good. The
money loaned byt the IMF, for example, is used to repay creditors,
who are often large U.S. Banks. This allows the troubled nations
to borrow even more money from banks, even as they still owe
the money to the IMF. However, countries that get these debts
in order to repay other debts have to meet strict IMF demands.
These can include tax increases, budget cuts, and other “austerity
measures.”
In other words, poorly run governments are bailed out –
probably with much of the money going to corrupt officials –
and the people of these poor countries are taxed more heavily
so the wealthy owners of the banks can get wealthier. As Ralph
Nader points out, this is effectively a subsidization of banks
at our expense and the expense of the poor in those countries.
Plus, the process perpetuates what it’s supposed to remedy:
the effects of bad loans. The IMF (usually working with our Treasury
Department) bails out the banks, effectively taking away the
risk and saying, “if you loan too much we won’t let
you fail.”
This is another example of a transfer of wealth from taxpayers
to a wealthy few. What makes it especially tragic is that it
just doesn’t help the poor in the end. For example, Andrew
Mwenda, the political editor of the Daily Monitor in Kampala,
Uganda, says that, “foreign aid and debt relief can exacerbate
Africa’s problems by postponing economic reforms and the
emergence of a transparent and accountable government.”
He points out that despite hundreds of billions in aid, per capita
income in sub-Saharan Africa declined by 11 percent between 1974
and 2003.
As a more specific example, he noted that foreign aid in the
1990s provided the government of Uganda with 50% of its revenue,
allowing it to avoid accountability to citizens, and to pay the
bills without undertaking necessary economic reforms. It enabled
the government to borrow even more money and to waste it on military
equipment and political patronage. His conclusion: “To promote
democracy and accountability, the West should discontinue future
aid flows.”
A Cato Institute editorial points out that “the West
already spent $2.3 trillion on foreign aid over the last 5 decades
and still had not managed to get 12-cent medicines to children
to prevent half of all malaria deaths. The West spent $2.3 trillion
and still had not managed to get $4 bed nets to poor families.”
The list went on, but the bottom line is that one way or another
the poor are not only not helped, but money from taxpayers here
help make things worse while enriching the wealthy few who truly
do benefit financially from these programs. There conclusion:
“the IMF, World Bank, and other development banks have consistently
made loans to the very Third World governments that have created
the worst impediments to economic growth.”
What do you call it when you help a poor country get poorer,
while helping the corrupt governments stay in power with large
loans, and require the poor citizens to pay back those loans
so wealthy western bankers can get wealthier? I call it preying
on poor countries. And the taxpayers here – poor or not
– get to pay for the process.
Note: This is part of a series. You can find all of
the pages listed and linked to here:
The Redistribution
of Wealth to the Wealthy
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