Volume 22 Issue 10, October 2018
 
 

 

Leon, France 1996. Conference of the Socialist International. The tall figure of Professor Galbrith was standing before me. Putting his hand affectionately on my shoulder, he said, “Senator, it is high time you stopped borrowing from these IFIs”. He then started smiling at my puzzled look. “Relax Senator, when you do not have the money, you start looking for solutions and you always find them.”

This advice I have treasured ever since. Economic development, if it is planned objectively and monitored carefully, should always result in raising standards of living of the people and enhancing their incomes and purchasing powers, which in turn leads to higher and more efficient production, higher employment and creation of export surpluses.

It was at that very Conference that, guided by late Prime Minister Shaheed Benazir Bhutto from back home, I explained how regional conflicts had multiplied military budgets, creating large budgetary deficits and had compelled nations to borrow from those very countries who had left these disputes unresolved at the end of the colonial era. With the delegation from India carefully taking notes from across the conference table, I pointed out that in almost every country which had suffered from regional conflicts, debt servicing expenditures had now surpassed their defence expenditures. ”There was no justification, logical or moral of continuing with regional conflicts,” I had submitted. The Conference ultimately adopted a resolution to resolve regional conflicts urgently and peacefully.

The loans to fill up the deficits and trade gaps as also to meet the development needs of increasing populations of the Third World countries come from institutions like the World Bank and the IMF. Both these institutions were created at the same time at the end of the Second World War by two noteworthy economists, namely John Maynard Keynes and Harry Dexter White. Perhaps the intention of rebuil-ding destroyed economies was genuine and justified, but the philosophy of routing development through the private sector had inbuilt weaknesses. This philosophy could only create poverty instead of reducing it. It could only widen income gaps further rather than closing these gaps. The loans came with structural adjustments that transferred the burden of the loans to the poor and its benefits to the rich in every country. These policies followed the imperialist agenda of dominating the people of the world both economically and militarily.

The state works for the benefit of the elite. The congruence between the aims of the state structures and the IFIs made developing states lap up the offered loans, whatever the terms and conditions. Wealth created by the people of Third World countries like ours has been going into the pockets of the elite of these countries, mostly through corrupt and illegal practices. The elite transfer this wealth offshore in what are known as tax havens abroad.

The President of the World Bank James Wolfenshon (1995-2005) appointed by US President Bill Clinton, identified corruption as a major issue for the poverty of developing countries. There was a much greater emphasis during his days on structural adjustments within the borrowing countries, thus shifting greater burden on the people of those countries in the shape of higher utility tariffs and more indirect taxes. Nothing, however, was done to discourage the offshore companies and tax havens that continued to enjoy the shelter and patronage of Western developed countries. The recent disclosures through the Panama Papers, which are just a tip of the iceberg, give an idea of how much national wealth of the developing countries has been siphoned abroad and what kind of tax evasions have been taking place as a routine matter. How the state of Pakistan offered to legalize ill-gotten wealth at a tax rate which was only one tenth of the tax rate on legal wealth is a classic example of the state working for the corrupt elite. The World Bank chooses to ignore these obvious realities.

My late father used to tell me that their generation fought the British since they were slaves. The British needed us and our resources. We wanted freedom and control over our resources. As an independent nation now a situation of dependence on them had emerged where we could not run our country without their support. The precarious condition in which we find ourselves today is a direct result of our continued reluctance to stand on our feet and our over dependence on IFI support.

It is noteworthy that the Word Bank gave its first loan of 250 million dollars to France. The condition attached to that loan was that the French Communist Party should be excluded from the coalition government. France complied with this condition. Things have changed since then but only cosmetically. In the face of growing worldwide protest against its policies, the World Bank has had to bring about policy changes. The former President of the World Bank, Mr. Robert McNamara (whom I had the opportunity of meeting in Kashgar, China of all places) expanded the financing sectors of the World Bank and included social sectors and capacity building in its loan portfolio. President Barack Obama broke the long tradition of having only Americans as Presidents of World Bank and nominated Mr. Jim Yong Kim as the first non-American President of the Bank. But, as said before, the initial weaknesses of policy persist.

There have been serious objections about the policies of the Bank from within the Bank. The most important of these was the criticism of the Bank’s policies from the Bank’s own Chief Economist and Nobel Prize winner Joseph Stiglitz. His concern for the poor and the powerless resulted in his being fired from the World Bank. However, his views expressed in some of his books, like “The Great Divide – Unequal Societies”, “The Price of Inequality”, “Stability with Growth”, and “Fair Trade for All” greatly exposed the economic disasters that the IFIs have caused through their flawed policies. But even before Joseph Stiglitz, the developing countries had started looking for alternate economic models.

One such economic model near home, which Mr. Wolfensohn personally visited, accompanied by the then Finance Minister of Pakistan, was the Orangi Pilot Project (OPP) founded by Dr. Akhtar Hameed Khan. Highly impressed, Mr. Wolfensohn offered unlimited support of the World Bank to the OPP. The accompanying Finance Minister suggested in Urdu to Dr. Khan to ask for 100 million dollars.

“Mr. Wolfensohn, you have misunderstood our basic concept. We organize the working people, enhance their skills and mobilize and invest their savings in projects that they themselves design with our assistance for their own wellbeing without taking foreign loans,” Dr. Khan explained.

“But Dr. Khan, OPP is like a small island. You need World Bank support to enlarge it”, Wolfensohn commented.
“Let us go on building these small islands. One day there shall be many”, was the cool reply given by Dr. Akhtar Hameed Khan.

The writer is a former senator and has shared his thoughts extensively on nuclear policy issues, left-wing ideas and literary and political philosophy. He can be reached at tajhaider1@gmail.com
 
 

 
 
     
   
 
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