Friday, September 4, 2009

Stagflation kills Capitalism

Every now and again I look at the pieces of the economic history I've compiled and find myself mulling over a picture that emerges that appears to describe the imminent collapse of capitalism itself. However, the evidence points to stagflation rather than 'the market' as the chief culprit in bringing a quick end to our industrial and consumer way of life. The market hasn't failed because it simply hasn't been employed by what John Perkins (former 'economic hit man') calls the global 'corporatocracy'.

The other interesting observation is that the capitalist system appears to have been almost continuously propped up since the late 1960s by ever-increasing loads of sovereign, corporate and personal debt. Despite insolvency.

1972 – 1981 – The price of oil increased nine-fold. This fueled stagflation. Important changes occurred within the World Bank as a result of the energy crisis. It moved from supporting protection for infant industries and state planning and lending for state-owned enterprises to a commitment to trade liberalization and abandoned its support for public enterprises.

1987 – "A confidential World Bank report found little or no evidence that the Bank's lending has caused significant movement toward greater reliance on markets."[1]

"The [World] bank is notorious for giving bad advice....Bank aid has helped many countries build unneeded steel factories, underused airports, and roads that crumble as soon as they are completed. The World Bank is currently run like a Soviet factory, concerned only with meeting its quantitative production goals…. Bank officers have pressured Third World governments to borrow more than they wished to borrow, a practice having dire results for the country… A Congressional Research Service study concluded in 1980, "The Bank is seen as presiding over the buildup of debts which will ultimately be defaulted."[2] ....Despite the fact that 56 Third World countries have now fallen behind in their debt repayments, the bank continues to push for ever greater lending--both by itself and by commercial banks--to Third World governments…. In 1968, Robert McNamara became bank president and dedicated the bank to achieving ever higher loan levels. Between 1968 and 1981, when McNamara resigned, the bank's lending levels increased twelvefold, from $883 million to over $12 billion, and they have continued soaring since then." [3]

[1] Elliot Berg and Alan Batchelder, "Structural Adjustment Lending: A Critical View," CPD discussion paper no. 1985-21, World Bank (January 1985), p. 22. As quoted in: The World Bank Vs. the World Poor by James Bovard. September 28, 1987

[2] Cited in A. Hughes, "Is the World Bank Biting Off More Than It Can Chew?" Forbes, May 26, 1980, p. 123.As quoted in: The World Bank Vs. the World Poor by James Bovard. September 28, 1987.

[3] The World Bank Vs. the World Poor by James Bovard. September 28, 1987.

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