The Daily Grasshopper

Today's papers report that the "Battle for Baghdad" is under way, as U.S. troops enter the area around Iraq's capital city and prepare for the most intense fighting of the war to date. Other headlines assure us that we can expect a sharp increase in casualties in the days to come, including these from the front page of today's New York Times: "Iraq Is Planning Protracted War" and "Arab Volunteers Seek To Join Fight for Iraq." And while the road to Baghdad has been full of surprises (heated official denials notwithstanding), it's worth recalling that Bush's planned invasion of Iraq was hobbled from the start by perhaps the biggest surprise of all: the decision of the Turkish parliament to deny U.S. troops the ability to invade Iraq from the north. It's too early to say what the full impact of the decision will be, but if things go really badly in Iraq, it could possibly go down in history as a major turning point in 21st century world affairs.

If that seems like an overstatement of the Turkish parliament's role, consider some of the problems the U.S./U.K. forces (don't expect me to call it "the coalition," OK?) have faced in the early going. Forced to invade from the south, the U.S./U.K. allowed Hussein to mass his troops below Baghdad, stiffening the resolve of the resistance there and buying much-needed time. Had a pincers attack been used, it's possible the regime would have fallen by now. The U.S. Army's 4th Infantry Division, scheduled to deploy through Turkey into Northern Iraq, is instead just now getting into Kuwait. According to today's Wall Street Journal, the Iraqis are taking advantage of the situation: "U.S. surveillance has also seen elements from several Iraqi Republican Guard divisions, previously deployed to the north and west of Baghdad, moving southward to join this alignment, primarily in pickup trucks mounted with 50-caliber machine guns." (WSJ "U.S. Forces Hit Republican Guard In Pivotal Assault" 4/02/03, p. A1)

And the surprises just keep coming. "Pentagon officials were particularly surprised earlier this week," the same article continues, "when they found dozens of Republican Guard troops from the Nebuchadnezzar Division, which U.S. officials thought was in northern Iraq, defending a bridge about 10 miles east of Karbala." And although U.S. planners were publicly sanguine about the Turkey vote and the resulting shift in plans at the time, Secretary of Defense Donald Rumsfeld was more honest yesterday during his Pentagon briefing. Asked about what kind of changes had been made to the troop deployment plans, Rumsfeld said: "The biggest and most obvious was the fact that the Fourth Infantry Division did not go through Turkey. It had to come down around to the south." (NYT "Excerpts From Rumsfeld and Myers in a News Conference" 4/02/03, p. B10).

I raise the issue of Turkey because there's an opinion piece in today's Wall Street Journal by Claudia Rosett, a columnist for WSJ Europe. The article is entitled "How the IMF Lost Turkey," and you can read it online here:

http://www.opinionjournal.com/columnists/cRosett/?id=110003282

As the title indicates, Rosett argues that the financial burden that the international lending institution put on the Turkish economy is what resulted in the diplomatic failure between the U.S. and its Turkish ally. In other words, structural adjustment, the policies that the IMF imposes on all its clients in the developing world, may well be responsible for the quagmire the U.S./U.K. face in Iraq. A bold statement? Let's look at Rosett's case:

"How did we lose the loyalty of Turkey, and with it that much-wanted northern front for the war in Iraq?

It sure wasn't for lack of largesse.

Over the past four years, at the clear behest of the U.S., Turkey's troubled economy has received--via the International Monetary Fund and World Bank--more cheap loans than any other country on the planet. Since 1999, the IMF has approved some $30 billion in below-market funding for Turkey, making it one of the IMF's top clients. Over the same period the World Bank has lent Turkey $7 billion at subsidized rates, making it one of the bank's biggest customers, too. At every juncture, meanwhile, until Turkey's turncoat vote last month on troop transit for the Iraq war, the U.S. government had sent the message that Turkey was simply too strategically vital to be allowed to fail. And Turkey's politicians, knowing that the money would pour forth, kept coming back for more...

True, the Turkish economy is still afloat. It is even somewhat reformed. But for some time now, the average Turk has been drowning. Thanks to the IMF's stress on high-tax fiscal 'discipline' above economic growth and political realities, millions of Turks are out of work and short on hope. In 2001, the Turkish economy shrank 9.4%. This followed on a decision to float the currency, which led straight to a crash of the Turkish lira, halving its value against the dollar and devastating the savings and income of the country's poor and middle class.

Although the economy has since begun to grow again, lira policy remains uncertain and unemployment in this nation of 68 million people still tops 11%. 'People consume less and less day by day,' one Ankara official tells me. 'Life is tough in this country for the average Turkish person.'"

Recall that the loans that made up the multibillion dollar package that was to entice the Turkish government into letting U.S. troops into Southern Turkey were all subject to IMF conditions. Rosett offers a remarkably candid description of what the effects of IMF policies are on people in countries where they are imposed:

"The IMF tends to tie its loans to conditions that favor high taxes and devalued currency--the worst medicine for ailing economies. The fund also likes to meddle in local patronage arrangements, demanding reforms that, when imposed wholesale from outside, too often succeed not in restructuring a system, but in fracturing it. That in turn leads to more crisis, more IMF loans and more worship at the altar of high taxes and budget surplus--all at the expense of the client country's ordinary people, the folks least able to cushion themselves."

Of course, this is the exact argument that "anti-globalization" activists have been making for years in their protests outside the meetings of the IMF and World Bank - that the policies adversely affect "the folks least able to cushion themselves," while enriching the usual suspects. To see some of these realities acknowledged on the editorial page of the the nation's business newspaper is an encouraging development. Not that there hasn't been recognition of these facts before.

For some insight into how "structural adjustment" really works, read this article by Greg Palast, about former World Bank Chief Economist Joseph Stiglitz, who won the Nobel Prize for Economics in 2001.

"The Globalizer Who Came In From the Cold"
http://www.gregpalast.com/detail.cfm?artid=78&row=1

In it, Stiglitz identifies the four steps in the "Country Assistance Strategy," which is the one-size-fits-all program that is imposed on any borrowing country by the big international financial institutions - exactly what Turkey experienced at the hands of the IMF.

First, he says, comes privatization, where the country sells publicly-owned assets to foreign investors, with no small amount of corruption in the form of kickbacks to government officials who oversee the fire sales of formerly state-owned industries to giant multinational corporations.

After privatization comes "Capital Market Liberalization," whereby foreign investment is encouraged by removing any barrier to the instantaneous movement of capital into (or, more likely, out of) the country. Interest rates rise when money flows out of the economy, in order to attract investment, which results in step three:

Market-based pricing, or basically raising the cost of everything in sight. Which leads to what Stiglitz calls "Step three-and-a-half" - the IMF Riot. Stiglitz explains that when a country is "down and out, [the IMF] takes advantage and squeezes the last pound of blood out of them. They turn up the heat until, finally, the whole cauldron blows up."

The final step is the "poverty reduction strategy," whereby the rules of "free trade" are imposed on the country's economy. For those who have been reading these essays regularly, you know that this means forcing developing countries to accept the discipline of the "free market," while allowing developed economies to maintain the privileges that their power affords them.

Rosett concludes her piece by pointing out that the "overtaxed, underemployed and unhappy Turks voted out the old and voted in the AKP [Justice and Development Party], which refused America's request for help with its own crisis." This is a scenario that is playing out in other countries that have suffered under "structural adjustment," Brazil and Ecuador to name just two. So as we watch events unfold in the siege of Baghdad, we would do well to reflect on the role that the IMF and World Bank's policies play in shaping global opinion about the country that is leading the charge. As Rosett points out, the IMF "is heavily funded by the U.S." And as Palast points out, "A pattern emerges. There are lots of losers but the clear winners seem to be the western banks and US Treasury." Is it too early to add U.S./U.K. troops and Iraqi civilians to the list of losers?

PK
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