The Warring Camps

We’re daily subjected to a lot of pious hand-wringing over the helpless victims of lethal and degrading austerity. Amid all the compassionate boo-hoo-hoo we will sometimes hear people berating the left for presenting no alternative. Economic predation is taken for granted with goodbye-cruel-world despair. What we in the US will never, ever hear is news of the evolving world standard of governance that lets the victims do something about it.

We’re trained to see only left and right, the Punch and Judy of our civic puppet show, when the real opposition is and always has been Bretton Woods versus Dumbarton Oaks. The two historic conferences meant from the outset to pull the world in different directions. They’ve never let go, and the map is now starting to tear, detaching NATO, the European Union, and the School of the Americas from their victims.

A world economy under democratic guidance was the original plan for the UN at Dumbarton Oaks. The world economy would be put to work to meet the needs of human beings. Hard to imagine now, with our fatalistic submission to manias and panics, and our ritual human sacrifice to almighty bond markets, but that’s what the world decided, by acclamation: commerce and finance ought to be subordinate to the will of the people.

The idea was put forward at Dumbarton Oaks in 1944. The UN General Assembly would vote on international initiatives, acting through a subordinate Economic and Social Council (ECOSOC). Unlike the hermetic Security Council, ECOSOC reports to the world. ECOSOC was to act through relations it developed with concerned associations within or outside the UN. At the San Francisco conference where the UN Charter took its final form, the public got a voice in ECOSOC. Article 71 gave ECOSOC a way to consult with non-governmental organizations (NGOs). All the nations of the world and even their peoples would have a say. The only stipulation was respect for human rights and fundamental freedoms, without discrimination. All UN members concur. Duly ratified, the UN Charter makes this US law.

The United States government naturally took a dim view of all this democracy. Unscathed by its victory in World War II, the US government had unchallenged power, and they planned to keep it where it belonged. With the bankers.

The Bretton Woods conference established its own system of economic governance for the world. Two institutions were to carry out the plan: The International Monetary Fund (IMF) and the World Bank (IBRD, for International Bank for Reconstruction and Development.) The bodies’ governance conformed to corporate models and the pay-to-play pattern of US politics. Each member country got a basic vote and earned additional votes by agreeing to a monetary quota. The distribution of quota shares is meant to reflect the relative “weights” of Fund members in the world economy. Weight means Gross Domestic Product.

The International Monetary Fund (IMF) can indicate the rich world’s heft. In terms of total votes the US has a share of 17 per cent. Germany and Japan each have 6 per cent, and China has 4 per cent. Of the member countries’ total voting power, basic votes originally amounted to eleven per cent but dwindled to two per cent before the crash of 2009. Collectively, the have-not third of humanity outside of the G-20 now have basic votes that come to five per cent of total voting power. If old empires Great Britain and France agree, the two can outvote all of Africa. Let’s be clear, the voting here is not a show of hands.

The result is financial autocracy, rule by the men who claim to speak for omnipotent markets. Jerry Mark Silverman has boiled down the annals of Bretton Woods’ remarkable sans gêne. When the IMF and World Bank Board of Governors first met, the President of ECOSOC invited the Bretton Woods bodies to become UN specialized agencies. Specialized agencies can be fully autonomous, but the Board of Governors fobbed ECOSOC off, saying, wait till we staff up. So at the first meeting of the new executive directors, the UN made overtures again. This time the UN’s letter came from the Deputy Secretary General. The Bretton Woods sisters’ response: relations would be premature. Trgyve Lie himself tried next, and they slammed the door in his face too, Secretary General or not.

The emollient rationale for rebuffing the UN was fiduciary duty. The Bank had a business to run, they maintained, and comments from the peanut gallery would scare off investors. Among friends the World Bankers admitted to a goodly admixture of aristocratic contempt.

Then John McCloy took over the World Bank. That was just his moonlight job. He also ran the world. If you had been at the cocktail-party star chamber where they put the hit on JFK, you would have bumped into McCloy.[1] As World Bank President, McCloy made it clear to the UN that he answered to the US Executive Director. America’s ruling class had paid good money for its outsized share of both institutions, and it would be asserting its ownership rights.

McCloy’s men did eventually deign to bring the UN into relation. As World Bank staff described the relationship, “they [the UN] wouldn’t like it and we wouldn’t recommend that they accept it… we wrote a draft agreement that was in effect a declaration of independence.” According to this magisterial bureaucratic middle finger, the Bank “is, and is required to function as, an independent international organization.” What the Bank does is “…to be determined by the independent exercise of the Bank’s own judgment.” As for the UN, they would be well advised to “refrain from making recommendations to the Bank with respect to particular loans or conditions of financing by the Bank,” bearing in mind that “the Bank does not rely for its annual budget upon contributions from its members, and that the appropriate authorities of the Bank enjoy full autonomy in deciding the form and content of such budget.” The agreement secured UN diplomatic privileges for the fully autonomous independent bankers as they swanned around the world shredding four of the UN Charter’s articles.

As world banker Richard Demuth put it, “It’s a very difficult relationship at best, because in the hierarchy of things the UN is the top agency. They’re the central global body, and they feel they ought to be able to exercise authority over all the other international agencies. On the other hand, the Bank has the money.” On the basis of that sort of even-handed appraisal the WTO made formal coordination commitments with the IMF and World Bank, but not with the UN.

The UN soldiered on with its economic mission, going its own way. The World Bankers liked to drop into countries and cook up the kind of projects that they knew how to run. By contrast, the UN focused on technical assistance to let countries define projects for themselves.

The UN’s approach gradually pulled the World Bank in its wake. The UN cast a broader geographic net, and in many countries UN technical assistance was not backed up with World Bank funding. Pressure from UN members, including threats to compete, drove the World Bank to cater to poor countries with the International Development Agency. The UN’s direst threat was democracy: projects chosen by all, one country, one vote. The World Bank bribed India to scuttle that plan with $80 billion dollars over 55 years.

The UN also challenges Bretton Woods with a competing concept of development. The Bretton Woods institutions lend their funds in hopes of spurring enough growth to outrun the mounting debt. The rationale was simple: growth, wrote Nobel laureate W.A. Lewis, “gives man greater control over his environment and thereby increases his freedom.” Standards of living can then rise… for all mankind. Who winds up with how much of the incremental wealth, and how it’s used, that’s politics, and that’s between the rulers and the ruled.

In fact the Bretton Woods technocrats had clear ideas about who ought to get how much. Another Nobel laureate, Russian émigré Simon Kuznets, squinted hard at the data to find that growth and inequality go hand in hand to benefit the poor. That came in handy for debunking communism. In practice, the US Establishment made its preferences known by toppling reformers and assassinating democrats worldwide. Turns out the US government’s pampered banana republics skewed Kuznets’ inequality data: growth and inequality don’t actually go hand in hand unless the US knocks over your country and puts you in charge. Given the dubious evidence, the World Bank took the middle road – to balance growth and misery, the World Bank let countries siphon off a bit of their precious borrowed “growth” for the minimum needs of the poorest of the poor.

By contrast, the UN holds the state to detailed obligations. Humans have rights that give rise to duties of the state. UN Charter Article 55(c) gives the UN authority to set specific standards for the state. In the realm of economics, state duties are set out by the Covenant on Economic, Social, and Cultural Rights (CESCR). The Limburg Principles and General Comments set concrete compliance standards for judging states’ progress and attainment. The UN doesn’t care whether your state uses markets or central planning. Either way, the state must do its best to let you get what you need to live in dignity and freedom from want.

In 1987 the world affirmed the state’s duties in the Declaration on the Right to Development, with one dissenting vote: the USA. From the standpoint of traditional American banking suzerainty, the sticking point was clear. In the declaration, supplying more material resources is not enough. The objective of development is free exercise of rights by humans. Free exercise of all human rights. Economic rights mean government can’t wash their hands of you when you’re in need. Political rights mean corporations can’t push you around. The declaration defined development to require the full participation of the individuals concerned. The state may not make arbitrary decisions that affect you. The public has to have a say in what is done. Development entails transparency and accountability, equity and justice. As America’s victims of fraudulent eviction, or oligopoly exaction, or extortionate collection can tell you, that’s just not how it’s done.

Development means attainment of all human rights and fundamental freedoms? That’s news to the IMF. The tenacious bird dogs of Inner City Press delight in putting that idea to the Fund. They puzzle the IMF technocrats with strange questions: What about military mobilization and scorched-earth conflict in Sri Lanka? What about martial repression in Myanmar and ethnic war in Kachin Province? But… that’s political analysis, in which the fund has “no comparative advantage.” There’s no economic activity to speak of in war-torn ethnic areas. That puts them out of scope. Armaments expenditures are not within the purview the fund. Hell on earth is paying back the Paris Club of creditors, What more do you want?

Yet the right to development made headway. The world coaxed the US to join it in adopting the Vienna Declaration and Program of Action. The IMF changed its remorseless Structural Adjustment Programs into Poverty Reduction Strategies that give civil society a voice, and the Fund has done rigorous empirical research linking inequality with its remit, macroeconomic instability.

By contrast with the Bretton Woods upstarts, the original UN agencies labor in obscurity. Americans become aware of these agencies only when their government actively demonizes them.

The International Labor Organization (ILO) promulgates labor and employment standards. The ILO’s mission of promoting decent work is based on Article 7 of the CESCR. In particular, the ILO’s standards for collective bargaining, ILO Conventions 87 and 98, make the agency unspeakable here at home. The ILO also fleshes out state social security obligations under CESCR Article 9. Its GESS initiative promotes Global Extension of Social Security. The US is a furtive signatory of the CESCR and acutely sensitive to any mention of the duties it assigns to the state. Recent elections for ILO Director-General prompted some rare domestic acknowledgment of rights-based development, but only as a foil for the US panacea, growth. Like most US statist orthodoxy, this viewpoint sweeps corporate exploitation, market failure, and parastatal repression under the macroeconomic rug: just get the economic abstractions right, and legal conduct standards are not needed; abuse of power turns out fine. The invisible hand will straighten it out.

The UN Economic, Social and Cultural Organization (UNESCO) has been anathema in the US since the agency scrutinized global media concentration in the MacBride report, jeopardizing US propaganda. UNESCO’s oblivion briefly lapsed in America when it accepted Palestine as a member state, prompting a noisy US diplomatic tantrum.

The UN Conference on Trade and Development (UNCTAD) has been the voice of the overwhelming majority since it spawned the G-77, a group that speaks for 80 per cent of the world’s people. UNCTAD stood up for the rule of law to curb US economic warfare. It criticized the extortion and predatory-pricing racket imposed by the WTO. UNCTAD drew attention to the catastrophic failure of market idolatry in finance. In response, the US and its satellites have been attacking UNCTAD investigations as duplicative or unauthorized. The agency has not been demonized inside the US. By quietly choking off funding and authority, our government hopes to keep Americans safe from exposure to UNCTAD’s awkward findings or ideas. When the G-77 insisted on its critical message at the UNCTAD XIII conference, US satellites tried to derail the consensus with a sanitized outcome document of their own. UNCTAD adopted a version of each, preserving the death rattle of America’s looting class for posterity alongside the world’s consensus. We shall see how each holds up.

Acting through the United Nations, the world put its foot down after the crash of 2009. The UN General Assembly convened a panel of experts for an agonal autopsy of the stricken financial system. But as any spook or mobster knows, when the body turns up, you want the coroner under your thumb, and prompt cremation of remains to quell suspicions of foul play. So naturally the US said,

“Our strong view is that the UN does not have the expertise or mandate to serve as a suitable forum or provide direction for meaningful dialogue on a number of issues addressed in the document, such as reserve systems, the international financial institutions, and the international financial architecture.”

The General Assembly pulled rank as “the original authority under whose aegis the core institutions of the current architecture were established,” and,

“the only forum where those whose voices are least represented in the councils of global economic governance have to be heard and accommodated not as a matter of courtesy but of right.”

The Chinese struck the pitch-perfect democratic note: speak as the United Nations member states, they said. To rub it in, the UNGA President invoked the motto of the World Social Forum, the world’s least exclusive institution. The US was outvoted and outnumbered.

The Stiglitz report examined economic dogma, financial freebooting, and the painful torsion of the great powers’ commercial rise and fall. Diplomatic ambiguities soft-pedaled the pandemic crime and corruption of the bankers and their US puppet rulers, but the Stiglitz Report remains one of the most authoritative overviews of the banks’ ongoing collapse. The US government’s struggle to shut down the inquiry continued, but the project created a new and subversive forum: the G-192, which speaks for everybody in the world.

The US government has fought to seal itself off from the democratic demands of other states. But the same demands now come from within. US Occupy movements contributed to a shared statement of assemblies around the world: “All decisions affecting all mankind should be taken in democratic forums like a participatory and direct UN Parliamentary Assembly or a UN people’s assembly, not rich clubs such as G20 or G8.” The UN’s ideal has passed beyond diplomacy and into the world’s culture. The sprawling UNCTAD bloc was built to cohere at all levels, with international ties among governments, firms, academic institutions, civil society organizations, arts and culture, common citizens and the people at large. Their voice will reach whatever remains open in American society, and the public will point out that growth is no substitute for rights.

Brian Littlefair is the author of Desert Burial. As a consultant specializing in foreign direct investment he worked with foreign joint ventures, international financial institutions and bilateral aid agencies, with volunteer work in food security, transparency, and human rights in the global south. Read other articles by Brian.