rn: Debt & Jeffrey Sachs


Jan Slakov

Dear RN,            July 26

Two postings, one to remind us of what our economic system means for many of
the world's people. It means, if you are an adult, being helpless to prevent
the children around you from succumbing to hunger and disease. And if you
are a child, it means, sometimes, being sold or living on the streets...

The other posting reminds us of what Hanah Arendt called "the banality of
evil" (when she wrote about Eichmann). Jeffrey Sachs apparently seems like
someone we could easily relate to. But his "economic medicine" is poison.

all the best, Jan
From: •••@••.•••
Date: Thu, 22 Jul 1999 23:02:42 -0300
Subject: (en) Debt killing kids in Africa

Not only in Africa!    From Russia to Argentina !

Date: Thu, 22 Jul 1999   Reply-To: •••@••.•••
From: Robert Weissman <•••@••.•••>
To: Multiple recipients of list STOP-IMF <•••@••.•••>
Subject: Debt killing kids in Africa

>From the BBC:
               Thursday, July 22, 1999 Published at 13:13 GMT 14:13 UK

               Debt 'killing children'

               Children's health is suffering as governments struggle to
pay debts

               Mortality rates among mothers and children are rising as a
result of the crippling cost of debt in the world's poorest countries, says
a United Nations report.

                              Unicef says women and children are bearing
the brunt  of the debt crisis, especially in Africa, where many governments
are diverting resources away from health   and education.

                              As a result, hundreds of millions of people
are suffering from ill health, and children are being condemned to a life
without schooling, says the annual Progress of Nations report.

                                     The report draws up a league table of
                                     countries where children are most at risk.
                                     Angola comes out as as the worst country
                                     for a child to live in.

                                     It also assesses the progress being made in
                                     the battle against polio, and the impact of
                                     Aids on children.

                                     Following Angola, the organisation ranks
                                     Sierra Leone, Afghanistan and Somalia as
                                     the next most dangerous places to grow

                                     In Angola, the continuing civil war, the
                                     virtual collapse of the health system, a
                                     lack of basic education and nationwide
                                     food shortages combine to make it the
                                     worst place for children.

                                     See: Angola - no place for a child

                                     The quality of life indicators chosen by
                                     Unicef are

                                           Mortality rates for under-fives
                                           The percentage of underweight
                                           Primary school attendance
                                           Risk from armed conflict
                                           The prevalence of Aids.

               Not surprisingly, advanced western countries do best.

               New call for debt relief

               The UN children's organisation calls for the outright
cancellation of all debt.

                                     It says the present scheme to offer debt
                                     relief to the world's 41 poorest and most
                                     heavily-indebted countries is too rigid and
                                     too slow.

                                     Countries have to wait six years before
                                     becoming eligible and so far only three -
                                     Uganda, Bolivia and Guyana - have

                                     Its executive director, Carole Bellamy,
                                     says sub-Saharan Africa is the worst

                                     "Sub-Saharan Africa alone is caught in a
                                     debt trap. The governments spend more on
                                     servicing their more than $300bn debt
                                     than on the health and education of their
                                     children "

               Far from rewarding irresponsibility, Unicef believes debt
relief is an essential
               weapon in the fight against poverty.

               Without it, the agency says, the goal of cutting world
poverty by half by 2015 is

Date: Mon, 26 Jul 1999 00:13:17 +0600
From: "wendell w. solomons" <•••@••.•••>

For the last 20 years the theory has been 'privatization.'
Apparently, a mother will look after meals better if her
child pays for it.

This 'privatization' theory entered all the Western text
books since 1976 (Reagan and Milton Friedman.)

History is different. When the U.S. wanted to consolidate,
Lincoln took business to school. He focused attention on
railways. Through that state focus, business developed tracks,
engines, steel and machine building. In 50 years time, U.S.
GNP was twice that of Britain's. Germany and Japan chose this
path of development themselves.

Small countries have to focus on something or they get ruined
and end up at the pawnshop. The pawnshop today is hidden behind
the IMF. Big banks collect on the loans to poor countries.

These same banks and funds control the main Western TV stations.

So any rationality gets lost. This confused Western Rightists
and Leftists; 'privatization' has degraded many to self-centred

The only purposeful Western group I have so far come across is
Canada based. They have proposed that a tax be collected on all
mega fund transactions and distributed to poor countries. The
party leading this is the Canada Action Party (CAP).

An associated group is the coalition against the Multilateral Agree-
ment on Investment. Then we see important posts from Janet Eaton,
again Canadian.

Today I find that it is rather a waste of my time to be on lists
when Americans or Brits try to discuss economics because it often
just boils down to the theory that a mother must collect pennies
from her child to give good food.

--- -- -

So you see I have come rather close to your view that we are in a
dangerous situation.

No one else's calamity matters so it seems that the USA must fall
into isolation and under economic siege among a 100 poor countries
for Americans to wake up and understand that they have provided the
lair for the beast. It is indeed great to find that a small number
of Canadians are alert to the danger and taking action.



---- -

From: Jonathan Larson
web page at:

For Jeff Sach to criticize the IMF for its failings is a little like a hog
criticizing someone for their foul odor.

I am including a piece of an essay written in 1993 called "The Rot at the
Top" about J. Sachs.  For those who do not know the man and his work, I
hope this is a helpful primer.


           "In this case, the Ugly
           American had been replaced by the Utterly Ignorant
           American. Sadly, the damage done may last a
           generation. And if the historic opportunity of 1989
           is lost in Russia and the world becomes more
           dangerous, the ignorance of Jeffery Sachs must be
           considered a significant reason."

           * Ignorance is Dangerous *

           Jeffery Sachs must be considered, quite
           legitimately, as representative of Harvard
           University. In fact, he is a Harvard hotshot who was
           granted a full professorship with tenure at the
           still-tender age of 36. He is such a star in their
           intellectual firmament that they regularly give him
           time off from his other duties to advise foreign
           governments on matters of public policy.

           Sachs is an economist. Modern economists are ranked
           by their ability to mathematically model human
           behavior with highly complex equations. Modeling
           specialists are called "quant jocks" for their
           dedication to the highly specialized gymnastics of
           advanced math. Make no mistake, if mathematic
           modeling were an Olympic sport, Sachs would be a
           medal contender.

           For an economist, Sachs borders on hip. His writing
           is not exactly exciting, but unlike most of his
           peers', it can be read by the general public. He
           wears his hair in the mop-top style of the 1964
           Beatles and projects the persona of a caring
           individual who is at ease with the responsibilities
           of a public intellectual. Coming from a distinctly
           middle-class background, Sachs has none of the
           clenched-teeth snobbery usually associated with Ivy
           League schools. He is even good on television-that
           ultimate litmus test in American culture. There is
           no reason to believe that he is not loved and
           admired by his wife, children, students, or dog.

           In spite of this, Jeffery Sachs has become one of
           the most hated Americans around the world. Because
           he is obviously not evil, stupid, lazy, or socially
           inept, the only option for this seemingly bizarre
           outcome is ignorance. And if Sachs is ignorant,
           there is rot at the top of the American educational
           system. Obviously, this transformation from
           respected academic superstar to a person considered
           to be an enemy of humanity is a case worth studying.

           Sachs' first foreign adventure in public policy
           formation took place in Bolivia in 1984. Bolivia was
           an economic basket case caught in a debt spiral
           caused by corrupt overborrowing by a succession of
           military juntas. American banks had loaned billions
           that had been spent on weapons or simply squandered
           on payoffs that had increased the numbered bank
           accounts of anyone who could get their hands on the

           All of this lending was based on the shaky
           assumption of former Citibank Chairman Walter
           Wriston who made famous the saying, "Countries do
           not go bankrupt." Besides, Bolivia was a prime
           source of vital natural resource-tin. Tin is used
           for food packaging and electronic circuits. But in
           the go-go lending days of the 1970s, so many banks
           simultaneously took Wriston's advice seriously,
           Bolivia's income from tin was borrowed against many
           times over. Then the worst happened, the
           international price of tin collapsed as consumers
           around the world found substitutes-especially for
           food packaging.

           By 1983, it was obvious that there was no way that
           Bolivia could even pay a fraction of the interest it
           owed on the money it had borrowed. Not only had the
           price of tin collapsed, but none of the money
           borrowed had been used to create alternative sources
           of income. The money had been spent or stolen-not

           With money over committed for debt service,
           virtually none remained to import anything. Severe
           shortages of goods triggered an outbreak of
           hyperinflation sometimes running as high as 1600% a

           Sachs' job was to bring some order out of this
           chaos. His recommendations followed essentially
           standard practices for such situations. In return
           for modest debt restructuring, Bolivia was forced to
           "rationalize" the tin mines, sell off their
           publicly-owned companies, severely restrict the
           money supply, and embark on a course of fiscal
           austerity. By forcing the banks to take a small
           "haircut" in the deal, Sachs even gained a
           reputation for innovative and enlightened behavior
           in the eyes of the major Western business presses.
           In fact, some thought he had given the Bolivians too
           good a deal.

           From the point of view of the Bolivians, their chaos
           was replaced by utter desperation. This is one of
           the world's poorest countries. Che Guevarra was
           killed in Bolivia where he had gone to export the
           Cuban revolution. He had selected Bolivia precisely
           because he considered social conditions so desperate
           that the country was ripe for a revolution.

           Fighting inflation by restricting the supply of
           money obviously did nothing to increase the supply
           of goods. To the average citizen of La Paz, rapidly
           inflating money was better than having no money at

           The thousands of tin miners who lost their jobs were
           forced into an economy with few alternatives. Of the
           ways to survive, only one held any realistic
           possibilities-coca farming ...

           But such were the sordid details. Sachs was a hero
           who had protected the income stream of the banks by
           demonstrating that the calls for economic structural
           adjustments could be flexibly applied in even the
           worst-case scenario. The fact that he, an author of
           an agreement that would help swamp American cities
           with cheap crack, probably never even entered his
           head. No economic model demonstrates a link between
           tin mining and drug addiction so for Sachs, it
           didn't exist as a possibility.

           Flush with his "triumph" in Bolivia, Sachs would
           take his traveling economic salvation show to
           Poland. This was uncharted waters. No one had ever
           converted a Communist state-run economy to a
           Capitalist one before. But Sachs seemed not to have
           any doubts about his prescriptions that were called
           "Shock Therapy." Poland was to make its currency
           convertible so that they would become part of the
           international system of trade, deregulate prices and
           otherwise relax state controls, privatize
           state-owned industries, and close down inefficient
           operations. Any or all of these suggestions sounded
           perfectly logical on the face of things.

           Sachs, however, insisted that all of these things
           must happen together. Again, he offered the
           incentive of debt restructuring and since Poland was
           also so deeply in debt that even interest payments
           were impossible, this convinced the otherwise
           skeptical Poles who, in any case, had few
           alternatives. "Shock Therapy" was implemented to the
           cheers of the western financial press. And again,
           the results were utter chaos.

           Rents and food prices skyrocketed. Poland's shops
           filled with shiny western goods but people could not
           afford them. Government services that held together
           the social fabric like day-care were eliminated.
           Many Polish cities relied on a single industry. If
           they were deemed "inefficient" and closed, whole
           cities lost their very reason to exist. Forty
           percent unemployment rates became common in such
           areas. Massive unemployment drove people to
           flee-causing immigration problems in the rest of
           Western Europe. The unemployed who stayed behind
           were forced to become petty black marketers or
           worse. Crime became an epidemic.

           None of this seemed to trouble Sachs-if he had any
           awareness of the problems he had caused. More
           likely, he dismissed the cries of pain boiling up
           from the population as merely a sort of birth trauma
           for the new order. Sachs would tell whoever would
           listen that his prescriptions would lead to the
           prosperity of the West. For a while, the Poles
           believed him. But as the birth trauma disintegrated
           into social chaos, the rumblings of discontent began
           to sound pre-revolutionary. In 1992, a parliamentary
           election was held and the largest party turned out
           to be the Communists. Sachs' prescriptions had been
           so absurd that after 44 years of Stalinist misrule,
           Poland was ready to return to the "good old days."

           Sachs was on a roll. By 1989 he and his advice formed
           a corporation with offices in Helsinki. Yeltsin
           assumed power and Sachs became an official advisor
           to the fledgling Russian government. The results
           were even more devastating than in Poland.

           Opposition to Sachs' ideas began to solidify in the
           Parliament. In 1993, Yeltsin dissolved the
           Parliament and attacked his opposition with tanks.
           Elections were held and the biggest vote-getter was
           a 1930s-style Fascist named Vladimir Zhiranovsky. In
           fact, Yeltsin's "reformers" got less than 15% of the
           total vote.

           Sachs was a campaign issue in this election because,
           almost incredibly, he appeared on Russian television
           to sell the Yeltsin version of economic reform. His
           Russian counterpart, an economist named Yegor
           Gaidar, was blamed for the social disintegration of
           a country that had been a superpower. Following the
           elections, Gaidar was forced to resign as Yeltsin's
           chief economic advisor and Sachs quit his job
           shortly thereafter. He went home to the USA to write
           his own account of the Russian debacle in The New
           Republic. He was utterly unrepentant for causing the
           chaos that literally put a Hitler in line to run a
           country with over 10,000 nuclear weapons. His advice
           was sound, he maintained steadfastly, the only
           problem was that the Russians had not acted on his
           ideas quickly enough ...