The record of corruption and waste is endless. But the real eye-opener is in the failure of socialist ventures, those magnificent projects which were to bring prosperity to the underdeveloped countries. Here are just a few examples.
CONVERTING MONEY INTO FAILURE
Before receiving loans from the World Bank, Tanzania was not wealthy, but it fed its own people, and it had economic growth-1. Graham Hancock,
NEARER TO THE HEART'S DESIRE
103
After receiving more than 3 billion dollars in loans, it nationalized the nation's farms and industries and converted every business into a government agency. It built a truck assembly plant, a tire factory, electronic factories, highways, ports, railways, and dams. Tanzania's industrial production and agricultural output fell by almost one-third. Food was the main export in 1966. Under socialism, food had to be imported—paid for by foreign aid and more loans from the World Bank. The country is hopelessly in debt with no way to repay.
Argentina once had one of the highest standards of living in Latin America. But then it became the recipient of massive loans from the World Bank as well as commercial banks in the United States. Since the money was given to politicians, it was used to build the only system politicians know how to build: socialism. By 1982, the Gross National Product was in a nose dive, manufacturing had fallen to less than half of capacity, thousands of privately owned companies had been forced into bankruptcy, unemployment was soaring, and so was welfare. By 1989, inflation was running at an average of 5,000% and, in the summer of that year, topped at 1,000,000%! Banks were offering interest rates of 600%
per month in hopes of keeping deposits from being moved out of the country. People were rioting in the streets for food, and the government was blaming greedy shop owners for raising prices.
The nation was hopelessly in debt with no way to repay.
Brazil is run by the military, and the state controls the economy.
Government-owned companies consume 65% of all industrial
investment, which means that the private sector is limited to 35%
and is shrinking. The government used loans from U.S. banks to create an oil company, Petroleo Brasileiro S.A., which became Latin America's largest corporation. Despite huge oil deposits and record-high oil prices, the company operated at a loss and was not even able to produce enough gasoline for its own citizens. By 1990, inflation was running at 5,000%. Since 1960, its prices had risen to 164,000 times their original level. A new crime was invented called hedging against inflation,' and people were arrested for charging the free-market price for their goods and for using dollars or gold as money. Led by Communist organizers, mobs roamed the streets shouting 'We're hungry. Steal what you will!' The nation was hopelessly in debt with no way to repay.
1
104 THE CREATURE FROM JEKYLL ISLAND
The experience in Mexico was a carbon copy of that in Brazil, except that the amount of money was larger. When the world's fourth largest oil reserves were discovered, Mexican politicians reached for the brass ring. With billions borrowed from U.S. banks, they launched Petroleos Mexicanos (PEMEX) and soon became the world's fifth largest oil producer. They also built chemical plants and railroads, and launched many other industrial projects. These were run as welfare agencies instead of businesses: too many people on the payroll, too many managers, excessive salaries, too many holidays, and unrealistic benefits. The ventures floundered and lost money. Private businesses failed by the thousands, and unemployment rose. The government increased the minimum
wage causing more businesses to fail and more unemployment.
That led to more welfare and unemployment benefits. To pay for that, the government borrowed even more and began creating its own fiat money. Inflation destroyed what was left of the economy.
Price controls were next, along with rent and food subsidies, and doubling the minimum wage. By 1982, Mexicans were trading their pesos for dollars and sending their savings out of the country, as the peso became all but worthless in commerce.1 In 1981, the average wage for Mexican workers was 31% of the average wage for Americans. By 1989, it had fallen to 10%. Mexico, once one of the major food exporters in the world, was now required to import millions of dollars worth of food grains. This required still more money and more loans. All this occurred while oil prices were high and production was booming. A few years later, when oil prices fell, the failures and shortfalls became even more dramatic.
In 1995, Mexico's bank loans were once again on the brink of default, and, once again, U.S. taxpayers were thrown into the breech by Congress to cover more than $30 billion at risk. Although this loan was eventually repaid, the money to do so was extracted from the Mexican people through another round of massive
inflation, which plunged their standard of living even lower. The nation is now hopelessly mired in socialism. The Communist Party, promising 'reform' and still more socialism, is attracting a large following and could become a potent political force.
1. The same American banks that were making the loans were soliciting this flight capital and ended up getting deposits of the same money they had lent. It was nice business both ways.
NEARER TO THE HEART'S DESIRE 105
Thus, the saga continues. After pouring billions of dollars into underdeveloped countries around the globe, no development has taken place. In fact, we have seen just the opposite. Most countries are worse off than before the Saviors of the World got to them.
SUMMARY
The IMF and the World Bank, were created at a meeting of
global financiers and politicians held at Bretton Woods, New Hampshire, in 1944. Their announced goals were to facilitate international trade and to stabilize the exchange rates of national currencies. The unannounced goals were quite different. They were the elimination of the gold-exchange standard as the basis of currency valuation and the establishment of world socialism.
