Posts Tagged ‘Economic Hit Man’

An ‘economic hit man’ tells his story

September 22, 2015

I read CONFESSIONS OF AN ECONOMIC HIT MAN by John Perkins on the recommendation of a fellow blogger known as Holden.

Perkins wrote this memoir in 2004 about his work as an international economics consultant in the 1970s.  He said his job was to intentionally make bogus projections of economic growth for Third World countries such as Indonesia, Ecuador and Iran.

The idea was to encourage developing countries to borrow heavily to finance economic development projects using U.S.-based contractors.  The countries’ leaders were promised that these projects would bring about rapid economic growth, and make their countries prosperous and modern.

14273_johnperkins_nWhen the countries became unable to finance their debt, this created opportunities for American and international companies to buy up their national assets at bargain prices.

And even when the economic development plans worked, they only benefited tiny elites while leaving the majority of the people just as badly off or even worse off.

To stay in power, the elite accepted U.S. military aid in return for supporting U.S. foreign policy or hosting U.S. military bases or both.

Perkins said he was in on U.S. negotiations with Saudi Arabia following the 1973 oil embargo, which led to the U.S.-Saudi alliance which endures to this day.

The Saudi royal family agreed to manipulate oil production in order to protect the U.S. economy from big fluctuations in world oil prices.  The Saudis further agreed to invest their revenues in U.S. Treasury bonds

In return, the U.S. Treasury Department invested the income from those bonds in infrastructure projects, all carried out by U.S. contractors, to give Saudi Arabia the appearance of being a modern country.  The U.S. Defense Department provided a military shield for this weak, thinly-populated country against enemies such as Iraq and Iran.

The problem, as I see it, is that it has made the United States hostage to Saudi ambitions to dominate the Middle East.

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Greece and the economic hit men

August 3, 2015

Like many people, I once naively believed that banks made a profit by lending money to people who would pay them back.  I’m sure that is still true of the many honest bankers still left in the world.

But it can be more profitable for banks to lend money to people who can’t pay them back.  The lender collects higher interest rates.  Sometimes the loans are securitized and sold to suckers.   Foreclosures are profitable if the value of the underlying asset is greater than the loan.

And last, but not least, if the lender is large enough and politically powerful enough, a government will bail him out.

John Perkins, author of Confessions of an Economic Hit Man (which I haven’t read), gave an interview to a Greek radio station explaining how this works.

Essentially, my job was to identify countries that had resources that our corporations want, and that could be things like oil – or it could be markets – it could be transportation systems.  There are so many different things.

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John Perkins

Once we identified these countries, we arranged huge loans to them, but the money would never actually go to the countries; instead it would go to our own corporations to build infrastructure projects in those countries, things like power plants and highways that benefited a few wealthy people as well as our own corporations, but not the majority of people who couldn’t afford to buy into these things, and yet they were left holding a huge debt, very much like what Greece has today, a phenomenal debt.

And once [they were] bound by that debt, we would go back, usually in the form of the IMF – and in the case of Greece today, it’s the IMF and the EU [European Union] – and make tremendous demands on the country: increase taxes, cut back on spending, sell public sector utilities to private companies, things like power companies and water systems, transportation systems, privatize those, and basically become a slave to us, to the corporations, to the IMF, in your case to the EU, and basically, organizations like the World Bank, the IMF, the EU, are tools of the big corporations, what I call the “corporatocracy.”

via TruthOut.

The so-called “bailout” of Greece is not a bailout of the Greek people and does not reduce the Greek debt burden.  It is a bailout of banks by European governments and the International Monetary Fund.

I’d guess that’s the reason the Russian government turned down a Greek plea for help.   The Russians would get no benefit from providing funds to Greece that would flow through to European governments that support the Ukrainian government’s fight against pro-Russian separatists.  Far better, from the Russian standpoint, to wait until Greece defaults and disconnects from Europe, and then step in.

Ukraine itself will soon be in the same situation.  It has greater debts than it ever can repay, and rich assets, especially in agricultural land, that speculators would like to acquire.

∞∞∞

An Economic Hit Man Speaks Out: John Perkins on How Greece Has Fallen Victim to “Economic Hit Men”, an interview by Michael Nevradakis for Dialogos Radio in Greece.

Bailout Money Goes to Greece, Only to Flow Out Again by Jack Ewing and Liz Alderman for the New York Times.

Who Really Benefits From Bailouts? by Barry Ritholtz for BoombergView.