John Perkins recounts times spent hoodwinking developing economies out of their resources for the US and warns how his Chinese counterparts are raising the bar.

I was an economic hit man (EHM) for the US through the 1970s. My job was to dupe other countries into believing that what the US did would be a benefit to all the people in those countries. Nothing could have been further from the truth.

This same hit-man strategy continues today. And now, China has taken it to new levels.

The strategy US employs involves identifying low-income nations that possess oil or other resources but lack sufficient means and/or the political will to develop them. It then sends EHMs to convince the resource-rich nations to accept large loans from what’s known as the Washington Consensus (the World Bank, International Monetary Fund, US Treasury Department, and related institutions). The target countries must use their undeveloped resources as collateral.

An important condition in our strategy is that the loans are earmarked to hire US companies to build power grids, ports, industrial parks, and other infrastructure projects that drive economic growth. These companies reap huge profits, a few local elite business owners benefit from the improved infrastructure, and everyone else suffers because funds are diverted from health services, education, and other public sectors to pay interest on the loans. The debts are so large they can’t be repaid and the countries default on their loans. This process is often referred to as debt-trap diplomacy.

As a first step toward addressing the default problem, the EHMs demand that the low-income nations sell their oil, minerals, or other collateralised resources at rock-bottom prices to US transnational corporations (which often don’t pay US taxes but are supported by US policies), with few (if any) environmental and social regulations. 

When a country’s collateralised resources turn out to be insufficient to pay off the debt, the second step is to implement what are known as neoliberal policies. These include imposing austerity programmes that reduce taxes for the rich and cut wages and social services for everyone else, reduce government regulations, privatise public-sector businesses and sell them to North American investors, and discourage collective bargaining — all of which support “free” markets that favour transnational corporations. 

When a country’s collateralised resources turn out to be insufficient to pay off the debt, the second step is to implement what are known as neoliberal policies.

In modern times, the justification for EHM tactics is the perception that they produce better lives for those in low-income countries, raising them to higher-income status and elevating the poorest people to the middle class. “We are the good guys” is the story taught in economics and business courses at universities, as well as in World Bank and IMF reports. Neoliberal advocates promote the perception that money will “trickle down” from the corporations and elites to the rest of the population and that everyone will benefit.

For many years, I believed this story and I was convinced to spread that perception. Like so many involved in the economic development business, I thought I was doing the right thing. My staff and I compiled impressive statistics to “prove” that our strategy resulted in greater prosperity, equality, and democracy. Eventually, I realised that we were promoting a lie. The Washington Consensus and its neoliberal policies almost always cause greater inequality. We were cheating people who deserved better.

The Free Trade Agreements scam

After the collapse of the Soviet Union in 1991, US EHMs recognised a great opportunity. Countries that had accepted World Bank and other EHM-sponsored loans were told that the debts could be restructured if the countries adopted “free trade agreements,” such as the North American and Central American Free Trade Agreements and, in 2019, the United States–Mexico–Canada Agreement. 

These pacts were promoted as benefitting the participating countries. However, many Latin American and Caribbean (LAC) people see them as a one-sided ploy that profits US corporations and their own countries’ corrupt ruling elites. 

The agreements prohibit tariffs on imports of US agricultural products that compete with local LAC farmers but allow the US to subsidise its agribusinesses. Thus, US corporations can sell US-grown corn, rice, cotton, and other products to LAC countries for less than it costs either them or LAC farmers to grow them.

In addition to financially ruining the farmers, there is a catastrophic ripple effect on the millions of people who own or work for small businesses that process, transport, market, and consume these goods locally. They have few options but to work in sweatshops and other businesses owned by local elites that export to US markets. Or they can emigrate to the US, leaving behind economic devastation that causes gang wars, corruption, crimes, and political turmoil.

One such immigrant told me, “Leaving the country I love and my family was heart-wrenching and dangerous, but we were starving. Here in yours, I mow lawns and weed gardens and send the money home so my children can live.”  

Another added, “Our politicians succumb to corruption, but America’s corporations do the corrupting.”

In the past decade, China has become extremely successful at replicating, modifying, and improving the EHM strategy. China has learned from the successes and failures that I and other US EHMs have made over the years. As a result, and despite some recent setbacks, China has become the dominant economic power in many countries around the world. It’s the number one investor and/or trading partner throughout much of Africa, Latin America, Asia, the Middle East, the island nations, Europe, and even North America .

China cheats Ecuador

One of China’s many loans to Ecuador was used to pay the Chinese Sinohydro Corporation to construct a massive hydroelectric dam that promised to generate more than one-third of Ecuador’s electricity, stimulate business and industry, produce hundreds of thousands of jobs, and expand international trade. Ecuador’s leaders knew that electricity was the key to Ecuador’s future development.

But the costs mounted. China bailed Ecuador out with more funds. Again and again. Debt piled on debt.

Then everything went terribly wrong — all at once.

The Chinese Sinohydro Corporation built the dam too close to a highly active volcano, Reventador, in a rainforest that’s prone to earthquakes. Nearly 1,000 Chinese workers were brought into the country to construct the facility, which included a 22km underground tunnel and eight generator units — a sore point for Ecuadorian workers who could have done much of that work themselves.

Within two years, the generator building was riddled with cracks. The reservoir was clogged with silt, trees, and other jungle debris. Lands both upstream and downstream of the dam became horribly eroded. A spectacular and ecologically-important waterfall that had been expected to generate tourist revenues was destroyed. Pipelines were undermined, burst, and spewed oil into the jungle. When operators switched on the generators, Ecuador’s electricity grid shorted out.

Despite all the problems, Beijing demanded that Ecuador honour its $19bn debt for this and other projects by turning 80% of its oil – its most valuable resource – over to Chinese companies. 

In the past decade, China has become extremely successful at replicating, modifying, and improving the EHM strategy.

It’s important to keep in mind that rhetoric around China’s modifications disguises the fact that China’s EHMs are using the same basic tactics as those employed by the US. The EHM strategy — whether implemented by the US or China — has created a degenerative global system, known as a “Death Economy”, that maximises short-term profits and materialistic consumption, ignores the social and environmental costs, exploits and depletes resources, expands inequality, buries countries in debt, and accelerates climate change.

The EHM strategy must end. It’s time to replace the Death Economy based on short-term profits for the few with a regenerative, Life Economy based on long-term benefits for all people and nature.

Taking individual and collective action to usher in a Life Economy requires:

  • promoting and supporting economic activities that pay people to regenerate destroyed environments, recycle, and develop benign technologies;
  • spreading the idea that transitioning into a regenerative Life Economy is essential to life;
  • supporting local businesses, cooperatives, farms, and other institutions that employ sustainable practices and help preserve nature;
  • mapping out a personal campaign for changing perceptions so blog writers should inspire people; carpenters should use only sustainable materials and declare it, and parents should teach their children about the Life Economy; and
  • Joining or starting a social media campaign by emailing a corporation’s chief executive to say you are ceasing to buy the corporation’s products until it rights its wrongs (stops polluting, pays fair wages to all employees and so on). Ask all your contacts to do the same. When chiefs receive enough of these they will respond to the threat to their business.

We live at a critical moment in human evolution. Let us see it as a great opportunity. Let us stop duping ourselves and others into acting in ways that are destroying life. Let us redefine what it means to be successful human beings on a fragile planet. Let us recognise that the US and China — and all of us around the world — can disagree on many things, but let’s agree that no one prospers, no one survives, on a dead planet.

Let us agree that it’s time to join together in transforming the Death Economy into a Life Economy.

John Perkins

John Perkins was formerly a Chief Economist at a major consulting firm, and advised the World Bank, UN, Fortune 500 corporations, leaders of countries in Africa, Asia, Latin America, the …

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2 Comments on “The Beijing sting”

  1. Back in the 1970,s I was a small time feeder at the trough of the World Bank, Inter-American Development Bank and other funding agencies. My quarterly contacts would identify projects, my proposals successful and our execution were well executed (I believe) But, try as we might, we could never convince the agency to include follow up oversee. Poor management and maintenance would often see the project fail. The agencies seemed only interested in the opening, not benefit for the country. Their staff seemed to be agents of their member countries.

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