The Myth of Independence – Economic Imperialism

“The notion that Pakistan controls the reigns to the economic resources of the country is incorrect—she doesn’t. The G-7 does. They are the ones who make all the economic decisions for us, for our country, through their institutions like IMF, World Bank, and WTO through the policies of SAP, TRIPS, and TRIMS. The idea is to expropriate our land, our labor, our raw materials, and our markets for their own profits. This is what economic imperialism is all about.”

Pakistan stands in debt of in excess of $38.8 billion ¹ (2005 est.) to IMF and World Bank (WB), a debt perpetually increasing ² (courtesy of Interest), a debt impossibly repayable (?), and yet, this scarcely bothers our lenders! So why do the IMF and WB continue to lend? And equally more important to know is from where do they find all this extra money to lend, especially when they are never repaid in full? (this is in itself a separate chapter of discussion altogether) The answer to first question however is straight-forward and obvious: they want to see us and keep us in debt forever, for debt is a kind of slavery, and a tool, a means, for them, to achieve their own economic agenda, the economic agenda being expropriation of our land, labor, raw materials, and markets, for owns profits. (Michael Parenti) This is what is known by Economic Imperialism.

Tools of Imperialism

Having put us in debt, the IMF and WB, through the Structural Adjustment Programs (SAP), enter Pakistan, in the disguise of helping us repay loans, restructure our economics, and to eliminate poverty (which they themselves created!). SAP is non-negotiable i.e. our government has absolutely no say or any input whatsoever in the matter and is only required to implement it, as it is. SAP is a series of economic policies dictating us what goods or services we should produce, consume, and distribute. Needless to say that Pakistan is in fact not a sovereign country and that she is actually being run by foreign imperial nations (G-7 countries) and institutions (IMF, WB, WTO, etc) and multinational corporations.

Dr. Ishrat Hussain, ex-Governor, State Bank of Pakistan (SBP) says:-

“The IMF enjoys excessive concentration of power and has a virtual monopoly of knowledge and ideas in prescribing as to what are the right policies a country ought to follow. It has disproportionately large influence on financing provided by other players—development banks, fund managers, debt relief by Paris and London Clubs and syndicate lending by commercial banks. A negative assessment by the IMF or even a failure to complete on time places the reputational capital of the borrowing country at great risk, erodes its credibility in the financial markets and reduces financial flows into the country. There are instances where this created a snowball effect amplifying the disequilibrium in macroeconomic balances as the IMF and other financiers collectively withheld their assistance.”

Quoted by Jawed Bukhari, “IMF Conditionalities Lead to Coercive Relationship”, Dawn, 8 Sept 2001.

Seeing us in debt is what IMF and WB wants. Seeing us also that we cannot repay these loans, IMF, through SAP, intervenes to help us make available whatever funds they can to reduce this debt. This is the very moment when the economic reins to the country are surrendered to IMF and WB.

The first dictation from IMF, through SAP, to our government, is to drastically cut down on social expenditure, like: health, education, child-care, pension plans etc, and on subsidies for basic goods, like: bread, petrol, sugar etc. No wonder, GNP allocation for health and education in 1990 was reduced from 2.1% and 0.7% disrespectively to 1.7% and 0.6% in 2003. Last year, in 2006, it was only 0.7% and 2%. Whatever money that is not spent on social sector is then transferred into the coffers of IMF and WB. Pakistan’s GDP is about $63 billion and the saving rate is about 17%. This obviously has direct and immediate impact on the poor (Poverty Head Count was 20.74% in 1990 increased to 32.78% in 2003); cost of living goes up… school and medical fees becomes unaffordable which in return increases illiteracy rates, mortality rates, health risks, all which only adds fuel to the cycle of poverty. Civil unrest ensues as a result. The worst affected lot is the female gender. For those women activists and feminist NGOs working in Pakistan towards the facilitation of women’s rights to good education and proper health opportunities should stop beating around the bush and understand and acknowledge the real root cause of high female illiteracy and mortality rates: i.e. SAP, and should rally against these economic policies instead of other less important issues, if they really want to see any improvement in the lives of women.

IMF, through SAP, also pressurizes our governments to sell off public assets and companies i.e. to privatize everything. Remember the only recent privatization of Pakistan Steel Mill ³ and the Karachi Electric Supply Corporation (KESC)? [PTCL, WAPDA?] Perhaps now you realize and see who actually is making all these decisions—the IMF. We are often told and taught how privatization does wonders to the effectiveness and efficiency of the company privatized. This may or may not be true, a matter in which I am not going to indulge. What I however do know and do understand is that the government is usually the largest employer in the country and privatization of public companies mean only one thing: massive layoffs, henceforth increasing unemployment and desperation to work at any wage. Besides, privatization also means running businesses only for the sake of profits, not social welfare. Privatization also means transfer of ownership of local companies to foreign multinationals.

Our governments are also pressurized into removing all economic trade barriers and tariffs and regulations. What this means is that Pakistan is forced to open up its economy to free trade and foreign investments, allowing multinational corporations the access to our natural resources and workers at bargain basement prices (i.e. at reduced or discounted prices). This enables them to purchase and control everything from water, health-care and educational facilities to agricultural technology and indigenous plants and knowledge (case in point: Basmati Rice). This foreign ownership of domestic resources, services, and production, compromises local initiative and industry, and undermines our sovereignty and democratic rights. Do you know that to attract these “lucrative” foreign investments, we have to first promise them tax breaks, low labor wages, free trade zones ⁴, and pledges not to enforce labor and environmental laws? We also promise not to collect taxes on imports. This measure benefits export markets and greatly biases if not eliminates local competition and producers as low-cost foreign goods out-compete domestically produced goods. What more, whatever profits they make here is transferred out into their own countries.

SAP also forces us to switch from subsistence to export economies, meaning, that instead of growing for and feeding food to our own people, we must do so for their people. When all the countries which are in debt are forced to do the same, and told to grow the same commodities, a huge price war erupts, resources become even cheaper, and in order to survive we all are left with no option but to increase production, and exports, just to keep our currency stable and earn foreign exchange to pay off debts. While all this is happening, we must also keep in mind that these investors can pull out very easily (capital flight) if things get messy, leading to an economic collapse like we saw in 1997-99 in Asia, Mexico, Brazil, etc. This invariably means that we remain poor, or get poorer. How cruel it is when we have to buy the same food that we ourselves grew from the foreign markets at higher prices in foreign currency?

Because of low wages, low taxes, nonexistent work benefits, weak labor unions, and nonexistent occupational and environmental protection, transnational companies profit rates in the Third World are 50% greater than in developed countries. Citibank earns about 75% of its profits from overseas operations. The question is: how much of share do we developing countries get from this pie?

Enter WTO, and its own set of policies specifically designed for economic imperialism: Trade Related-Aspects of Intellectual Property Rights (TRIPS) and also, the Trade Related Investment Measures (TRIMS)—all in the name of free-trade to which we beat our drums to in joy. Free-trade is a rhetorical slogan and a utopian dream best practiced and promoted for the realization of multinational corporate interests only (profits, imperialism etc). One direct result of free-trade within and between countries is the polarization between the “haves” and the “haves-not” i.e. the rich (people and countries) keeps getting richer and the poor, poorer. Inequality in Pakistan has increased from 37.6 in 1990 to 41.6 in 2003. The richest 10% share nearly 1/3 rd of the wealth while the poorest 10% shares only about 4%.

Today there is a worldwide over campaign for the abolishment of TRIPS agreement altogether. If you remember, IMF, through SAP, was advocating for the privatization of companies. Now, WTO, through TRIPS, is advocating for the privatization of knowledge and even life forms and living organisms! This stems from the typical capitalist mentality that anything and everything can be privately owned, even if it happens to be a biological resource! By this what it basically is after is the total control over the supply of food and medicine in the world which is but a blatant declaration of economic imperialism! As of today, six corporations alone own 70% of patents on staple food crops, allowing them to set market price for them and block competition for 20 years!

We must understand the implications of TRIPS to our economic survival. About ½ of our population is employed in agriculture which accounts for 22% of GDP! In 1997 RiceTec which is a Texas-based company patented for themselves our Basmati Rice as their own invention. By doing this they have claimed ownership of all Basmati Rice grown anywhere in the world, obligating the farmers to buy seeds from them and pay royalties on it, thus monopolizing on its production and distribution.

The Third World Network concludes:

“TRIPS is… not a step towards “free-trade.” It is the reverse: it restricts rather than promotes technology flow, giving a boost to monopoly practices instead of curbing them.”

Khor, M. (1996). Free Trade – For Whom? Orbit Magazine No 60.

Michael Perelman in his book, Steal This Idea: Intellectual Property and the Corporate Confiscation of Creativity (Palgrave, 2001), writes:

“Stronger intellectual property rights will reinforce class differences, undermine science and technology, speed up the corporatization of the university, inundate society in legal disputes, and reduce personal freedoms.”

OXFAM INTERNATIONAL ON TRIPS

Apart from the threats to public health, developing countries are worried that high levels of IP protection will raise the cost of acquiring technology and knowledge-intensive goods. There are also fears that TRIPS will strengthen corporate power in agriculture, weaken farmers’ seed-saving rights, and reduce national control over biological resources.

Yet another serious infringement on democratic rights are the Trade Related Investment Measures (TRIMS) which pressurizes our governments to open domestic finance to corporate control, eliminating our ability to shape our own policies relating to foreign investment and capital controls. TRIMS are rules specifically designed to prevent us from looking after our own domestic firms in favor of multinationals. Do we not have the right to use policy options to increase the capacity of our own productive sectors, especially small and medium enterprises?
Pakistan must begin to understand clearly that no developed country has industrialized without protection and government support of critical industries, and additionally, more importantly, that all those developing countries which have conceded to the demands of IMF, WB, and WTO, by throwing their economies open to international markets have only sunk deeper and deeper into vicious cycles of poverty and debt. Simply put it: we must stop borrowing loans and find practical ways to solve our economic crisis.

“Make no mistake. Global corporations are in Pakistan for one reason – to extract as much wealth as possible, as quickly as possible, and move on to another country as soon as a better opportunity presents itself. In the meantime they will buy politicians and government officials to get exceptions from taxes, labor standards, and environmental regulations. They will strongly resist unionization by whatever means and seek to keep wages and benefits low.”

David C. Korten, has over thirty-five years of experience in preeminent business, academic, and international development institutions.

FOOTNOTES:

¹This figure gives the total public and private debt owned to nonresidents repayable in foreign currency, goods or services; This figure when divided by population count, comes approx to Rs. 28,000/person i.e. every Pakistani is in debt of this amount to IMF and WorldBank
²14.22% increase in Debt was recorded in 2006
³The decision has been sensibly reversed by the Supreme Court of Pakistan
⁴A ‘free trade zone’ means that goods can cross the border in either direction without tariffs or taxes of any kind.