Reasons for endless economic crisis explained in simple terms.

Introduction

Economic crisis never seems to end and the true reason for that is the control of global economy by the elite, who use the International Financial Institutions like the International Monetary Fund, World Bank and World Trade Organization to accomplish their sinister goals. The following process has been used for the past 65 years by the IMF and the World Bank. They destroyed the economies of Asia , Africa and Latin America in the past and now are doing the same thing in Europe in countries like Greece. The International Monetary Fund (IMF) approved on May 9, 2010 a €30 billion three-year loan for Greece as part of a joint European Union-IMF €110 billion financing package to help Greece fight its debt crisis. But as usual imposing conditionalities that led to the cycle of economic crisis.

The Process works as follows

Nation borrows money from the IMF and the World Bank.

Nations approach IMF and the World Bank for loans. A nation needs money for various purposes like to build dams, pipelines,  infrastructure, refinery etc or it needs to borrows when it’s hit by an economic crisis like Balance of Payment crisis. Generally the economic crisis is artificially created.

IMF and World Bank give loans but on the condition to implement various economic reforms.

The IMF and World Bank covertly work under the orders of the Wall Street and Corporate Powers. IMF and WB imposes conditionalities on the loan receiving countries, calling them as economic reforms that will be beneficial and lead to economic growth. This starts the process of plundering of the country.

The Conditionalities Include.

* Opening up domestic markets for foreign competition.

* Privatization of industry and infrastructure.

* Remove restrictions like ownership of land and farms by foreign companies.

* Currency devaluation.

* Austerity.
* Export natural resources to MNCs so that debt can be repaid.

* Increase interest rates.

* Reduction of social spending.

* Allow greater increase in Foreign Direct Investment.

* Open financial markets for foreign investors.

Disastrous  consequences of these Conditionalities.

The effects of the IMF and World Bank conditionalities are very negative. As competition increases small scale industries can’t compete with MNCs and are driven out of the market. Because of Privatization of Industry and infrastructure private owners that are mostly foreign take away the revenue generated from them. As interest rates are increased the investment falls effecting production in the next years.  With opening up of financial markets and the movement of capital relaxed, a period of destabilizing financial speculation and capital flight often results that further benefits wealthy foreign investors and speculators while domestic companies suffer. Devaluation of currency usually worsens (lowers) the country’s terms of trade, and reduces country’s real income and saving.  Austerity measures leads to cuts in essential services like health and also increases income taxes which drastically reduces the purchasing power of the ordinary people.

Other International Institutes like WTO play their part.

World Trade Organization (WTO) deals with regulating the world trade. Its rules further open up the markets. Some WTO agreement  are –

Agreement On Agriculture (AOA)  – One of its rule sets the limit for subsidy given to farmers, this subsidy limit damages farmers in developing countries, A key reason for  farmer suicide in developing countries.

Trade-Related Aspects of Intellectual Property Rights (TRIPS) –  This agreement deals with intellectual property. This agreement allowed patenting of seeds by corporations like Monsanto, DuPont and Syngenta. 10 corporations control 76% of world seeds.

Trade Related Investment Measures (TRIMS) – It opens the domestic finance sector to corporate control, removing a country’s right to shape their own policies and rules relating to foreign investment and capital controls.

The General Agreement on Trade in Services (GATS) – It deals with the service sector and has played a major role in various services being taken over and monopolized by transnational corporations.

The cycle of debt, crisis and economic stagnation continues because of the way the economy is set up.
There are long periods of low economic activity because of the way the economy is set up. Countries cannot recover and they ask for more loans and the debt slavery continues. Governments have very small amount of money left to spend on infrastructure and development projects as the country is repaying all kinds of debts and paying for imports. The country losses its economic  assets and also natural resources to transnational corporations. Unemployment and Poverty increase as small-scale industries and business are kicked out of the market. Wealth is systematically drained out of the Nation directly into the hands of International bankers,Transnational corporations and Wealthy investors. Not only wealth but resources, technology, services and key assets are transferred  in the hands of these already rich elitist.