I just finished reading Confessions of an Economic Hit Man by John Perkins. It’s his personal account of working as an economic forecaster for an international infrastructure engineering and consulting company called Chas. T. Main during the 1970s (it’s since been purchased by Pasadena’s very own Parsons). If I remember correctly, I got this book from Arjun.
It was widely criticized when it came out as being the rantings of a conspiracy theorist, and I think that by the end of the book, it definitely takes on that tone. This is unfortunate, because a lot of the problems that Perkins points out really do exist, and it actually doesn’t matter much whether they’re the result of a shadowy global conspiracy, or a structural problem with our international economic and development system. But most good conspiracy theories contain a grain of truth, and at the very least they can provide a useful lens into how the same situation and facts can be interpreted differently by people in different positions, with different experiences, and different incentives. In that light, the book is asking the reader to consider what debt-based foreign development aid looks like from the point of view of the poor people living in the countries receiving the aid. This is actually a really interesting thing to think about right now, because our current financial and economic crisis has been described by some as similar in many ways to the kinds of crises which the IMF and World Bank have historically been called on to deal with in “developing” economies.
Perkins worked as an economist, forecasting the economic growth of countries like Indonesia, Panama, and Saudi Arabia. The magnitude of development aid (loans) made available to those nations from the World Bank/IMF/USAID depends on their expected rate of growth. By overstating the prospects for rapid growth he facilitated the extension of excessive credit to these nations (sound familiar?) which they are unable to pay on schedule, because the growth does not materialize on schedule. Once we have them over the sovereign debt barrel, all kinds of international cooperation can be extracted, in the form of sites for military bases, votes in the UN, cheap access to raw natural resources, etc. Throw in the occasional CIA ‘jackal’ assassination, or even the credible threat thereof (think Salvador Allende in Chile, or Jacobo Arbenz in Guatemala) and we can also count on getting local political leadership friendly to US corporate interests. This is doubly profitable and convenient for the US, since we can (as we have recently been reminded) print dollars for free, and all of the engineering and construction contracts get awarded to US companies (like Halliburton, Parsons, and Bechtel). The bulk of the aid money in fact never even needs to pass through the recipient nation: it can go directly from the US government to the companies who get the contracts, and the country simply starts making interest payments as their hydroelectric dams, power transmission lines, irrigation systems, and roads get built. It’s all vaguely Stalinist style central planning and massive projects, except private companies are getting the money, and it’s all happening outside the country.
This is a powerful web of incentives, even if you leave out the coups and assassinations (which we don’t). The engineering and construction companies have a financial incentive to make sure the development projects (and thus debt) are as large as possible, and they have great access to the politicians in the US making the funding decisions. The bureaucrats and officials (elected or otherwise) in the developing nations who should be opposed to this system are relatively cheap to buy off, and it can often be done within the bounds of the law. The US has an incentive to create the foreign debt, in order to get a cooperative developing world (especially given that it’s denominated in dollars), and a debt that can’t be repaid is better than one that can’t for that purpose. Ostensibly, there are many employees at the funding institutions who ought to object to this kind of behavior, but their leadership is appointed by politicians from the nations who fund the agencies (largely the US).
Perkins spins a tale of his clandestine education, and subsequent guilt, of associations with the NSA, and very explicitly conspiratorial discussions early on in his career, but as we approach the present, these elements begin to fade. I can’t help but wonder whether he’s re-interpreted his earlier experiences in the light of how he now sees the system working, or sexed the story up to get an audience for what might otherwise be a very dull treatise on international development policy and economics. Ultimately, I don’t think it matters much. The real point is that our foreign aid policies are not altruistic, and there’s little reason to think that they’re optimized to help the nations recieving the aid. There are plenty of other better connected beneficiaries, who probably have more influence over the how the system is implemented, and we should be very wary of them.
I’m not sure exactly what the analogy is with our current mess, but I think it’s there somewhere. And I think it’s probably seriously weird and messed up. Like Simon Johnson said on This American Life a few weeks ago:
Sure is a nice global economy you’ve got there. Be a shame if anything happened to it…