Scoop Column: VisionCorp To Replace World Bank
East Timor independence leaders will meet with officials of the IMF and World Bank in Washington this week, while high-powered critics are calling for both organisations to be cut down to size to break their hold on poor nations. Scoop's West Coast correspondent John Howard has visions of a VisionCorp.
East Timor independence leaders, Xanana Gusmao and Jose Ramos-Horta will meet with IMF and World Bank officials for talks on future financial aid for war-torn East Timor when it becomes independent later this year.
The talks are being billed as "joint steps for reconstruction and development in East Timor," said Peter Stephens, a world bank spokesman. Prospective donors have also been invited to the talks including Portugal, Australia, Japan, the United States, the UN and the Asian Development Bank.
Gusmao is also scheduled to visit New York to meet with UN Secretary-General, Kofi Annan.
Meanwhile, worldwide charities, African finance ministers, a Harvard University economist, a US congressman and Irish rocker and U2 singer, Bono, all took shots at the IMF ahead of this weeks annual meetings of the IMF and World Bank.
Harvard University economist, Jeffrey Sachs said, to qualify for relief countries must meet stringent conditions set by the IMF. He described the IMF as "sinister" and "silly" and said that IMF managing Director, Michael Camdessus, had "his head in the clouds."
Aid agency Oxfam said the IMF has worsened poverty in Africa and the "one-size-fits-all policies" it used after the recent financial crisis in Asia plunged millions more into destitution.
Oxfam's Kevin Watkins kicked off the charity's news conference in a church across the street from the IMF by holding up a box of "IMF pills." The "pills" were labelled "IMF - Bitter Economic Medicine for Third World - Do Not Expose To Reality."
We believe the IMF has fundamentally failed, he said. "The IMF should be removed from development economics completely." He said poor nations should craft their own economic and poverty reduction strategies in conjuction with others and not be dictated to by the World Bank and IMF.
Call them what you will, there are currently 93 "conflicts" occuring around the world with each of them capable of escalating into regional, if not world war. Many of them continue because of stringent IMF and World Bank conditions. It seems to me that banks and arms dealers are also main beneficiaries. Of course, some countries are not unhappy about it either, particularly, when they see their own businesses reaping rewards from development and exploitation of the resources and rebuilding of a deliberately impoverished nation.
Is it a conspiracy? Yes, according to Harvard economist Jeffrey Sachs. "The IMF and World Bank want to run these countries and they never want to let go, the conditions imposed are too high a price," he said.
In my view, the real trouble throughout the world is we, with one or two exceptions, have a group of political leaders and economists who don't think beyond the square. Vision to them is next month's political poll or economic forecast. And in too many cases they get it wrong.
Contrary to the goverment's orthodox thinking I see the world as entering into a deflationary phase. The primary cause is huge world over-production or overcapacity of almost every brand and variety of goods - from A to Z. Too much oil, too much corn and wheat, too many cars, too much steel, too many computers, too many textiles - too many and too much of everything.
With huge new capital investment in plant and equipment, industrial capacity rose 25% globally over the last five years while the percent of manufacturing capacity actually being used remained flat.
Chinese factories are now producing at half capacity - likewise throughout Asia. Yet while those countries still remain in recession, and producing at a fraction of their capacity, they are dumping more goods on the world than it needs. Multiply that for the US, Latin America, the EU and many other nations - there simply isn't the need for all those goods and materials, at least, not where they're going.
As they dump, it puts pressure on manufacturers elsewhere in the world to cut their prices in order to compete. This in turn is collapsing earnings. Hence the growing pressure for trade sanctions which, incidentally, helped to precipitate and exacerbate the great depression of the early 30's.
Doesn't anybody find it strange that some US-listed companies have never made a profit yet their shares are currently trading at 3500 times their listing price? As Barton Biggs, Chief Global Stock Strategist at Morgan Stanley Dean Witter said recently, " We're in one of the great speculative bubbles of all times. It's the ascendancy of greed over fear."
As the effects of over-production spreads and the global debt pyramid contracts, the U.S. Federal Reserve - trying to function as the world's central bank - has pumped several hundred billion dollars into the world financial system to prop it up. The Fed, through The Working Group on Financial Markets, aka, the Clinton Plunge Protection Team, is buying up futures contracts - 5,000 to 20,000 at a time at key junctures in the market.
Can they prop up the market indefinitely? Probably not, it was done in Japan in 1988 and 1989 by the government, but market forces finally overwhelmed those efforts and the Nikkei Dow collapse ultimately dropped 70 percent and a 10 year recession followed.
And In case you haven't noticed a fairly large percentage of the world's growth at the moment is due to firms stock-piling inventories in anticipation of y2k computer problems. That won't last.
With proper and humane assistance, the people's of the developing world will attack poverty and also contribute to the world's future growth. The Internet knowledge economy? - most of the world's population still hasn't made a phone call.
And that's my vision for a VisionCorp.