Economy: Obama chooses those who have a record of failure

1 December 2008 by Eric Toussaint , Damien Millet

Some expected Barack Obama, the newly elected president of the United States, to appoint a completely new economic team so as to implement another New Deal. Obama was going to completely change capitalism, since he couldn’t actually do away with it, and a whole new series of economic regulations were supposed to be on the books. But in fact Obama has selected the most conservative among the Democrats advisors; the very ones who organised frenzied deregulation when Bill Clinton was president at the end of the 1990s. The consistence of his choice, through three emblematic names, is revealing.

Robert Rubin was Secretary of the Treasury from 1995 to 1999. As soon as he came into office he had to face a financial crisis in Mexico, which was the first major failure of the neoliberal model in the 1990s. Later, hand in hand with the IMF IMF
International Monetary Fund
Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.

When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.

As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).

The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.
, he enforced shock therapies that actually worsened the crises that occurred in South-East Asia in 1997-98 and in Russia and Latin America in 1999. Never for a moment did Rubin doubt the benefits of liberalisation and he contributed to imposing on the populations of developing countries the very policies which have caused their living conditions to deteriorate and social inequality to deepen. In the United States he insisted on the abrogation of the Glass Steagall Act – officially named the Banking Act - voted in 1933 to ensure that deposit banks and investment banks were not in the same hands. Its abrogation opened the door to all sorts of excesses on the part of finance people greedy for more profits, and eventually led to the current international crisis. To come a full circle, the repeal of Banking Act made it possible for Citicorp to merge with Travelers Group and become the banking giant Citigroup. Rubin was later to become one of the main executive officers of Citigroup… which the US government recently bailed out in November 2008 in that it guaranteed over 300 billion dollars of assets! And in spite of his record, Rubin is one of Obama’s main advisors.

Lawrence Summers has been appointed to the position of Director of the National Economic Council, a position inside the White House. Yet his CV is marred by a number of stains, some of which should have been indelible… In December 1991, when he was the World Bank World Bank
The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.

It consists of several closely associated institutions, among which :

1. The International Bank for Reconstruction and Development (IBRD, 189 members in 2017), which provides loans in productive sectors such as farming or energy ;

2. The International Development Association (IDA, 159 members in 1997), which provides less advanced countries with long-term loans (35-40 years) at very low interest (1%) ;

3. The International Finance Corporation (IFC), which provides both loan and equity finance for business ventures in developing countries.

As Third World Debt gets worse, the World Bank (along with the IMF) tends to adopt a macro-economic perspective. For instance, it enforces adjustment policies that are intended to balance heavily indebted countries’ payments. The World Bank advises those countries that have to undergo the IMF’s therapy on such matters as how to reduce budget deficits, round up savings, enduce foreign investors to settle within their borders, or free prices and exchange rates.

’s chief economist, Summers went so far as to write in an internal note: The under-populated countries of Africa are largely under-polluted. Their air quality is unnecessarily good compared to Los Angeles or Mexico (...) There needs to be greater migration of pollutant industries towards the least developed countries Least Developed Countries
A notion defined by the UN on the following criteria: low per capita income, poor human resources and little diversification in the economy. The list includes 49 countries at present, the most recent addition being Senegal in July 2000. 30 years ago there were only 25 LDC.
(...) and greater concern about a factor increasing the risk of prostate cancer in a country where people live long enough to get the disease, than in a country where 200 children per thousand die before the age of five [1]. He even adds, still in 1991: There are no limits on the planet’s capacity for absorption likely to hold us back in the foreseeable future. The danger of an apocalypse due to global warming or anything else is non-existent. The idea that the world is heading into the abyss is profoundly wrong. The idea that we should place limits on growth because of natural limitations is a serious error; indeed, the social cost of such an error would be enormous if ever it were to be acted upon [2]. With Summers at the helm productivist capitalism has a bright future ahead.

When he became Secretary of the Treasury under Clinton in 1999, he exerted pressure on the president of the WB, James Wolfensohn, for him to get rid of Joseph Stiglitz, who had succeeded him as chief economist and who was highly critical of the neoliberal policies that Summers et Rubin were implementing wherever financial fires broke out on the surface of the earth. After George W. Bush’s arrival he became president of Harvard University in 2001, and hit the headlines in February 2005 when he antagonised the academic community in a debate within the National Bureau of Economic Research [3]. Asked why there are so few women in senior positions in the scientific field he claimed that women are naturally less gifted for scientific studies than men and swept aside possible explanations based on family or social background, or on discrimination. This led to a hot controversy [4] both within and outside academia. Although he did apologise, under besiege by the outraged Harvard professors and students, he had to resign in 2006.

While his part of responsibility for the current situation is not proven, his biography, on the Harvard university website, claims that he “led the effort to enact the most sweeping financial deregulation in 60 years” [5]. One can hardly be more explicit!

Finally, Timothy Geithner has been appointed Secretary of the Treasury. Currently president and chief executive officer of the Federal Reserve FED
Federal Reserve
Officially, Federal Reserve System, is the United States’ central bank created in 1913 by the ’Federal Reserve Act’, also called the ’Owen-Glass Act’, after a series of banking crises, particularly the ’Bank Panic’ of 1907.

FED – decentralized central bank :
Bank of New York he used to be Undersecretary of the Treasury for International Affairs from 1998 to 2001, under Rubin and Summers successively, and active in Brazil, Mexico, Indonesia, South Korea, and Thailand, which are all text-book cases of the damage ultraliberalism can wreak and which were all in deep crisis dueing that period. The measures put forward by this infernal trio led to the populations of these countries bearing the brunt the crises. Rubin and Summers are Geithner’s mentors. Now the pupil is catching up with his masters. No doubt he will continue to defend major private financial institutions and remain deaf to fundamental human rights, which are flouted in the United States and throughout the world as a consequence of the economic policies he so vehemently advocates.

Claiming that you intend to regulate the global economy while giving decisional power to people who are responsible for its deregulation, is like giving the job of fireman to arsonists.

Damien Millet is spokeperson for CADTM France. Eric Toussaint is president of CADTM Belgium. They are the authors of Who Owes Who? 50 Questions about World Debt, Zed Books, London, 2004.

Eric Toussaint is author of The World Bank: Critical Primer, Pluto Press / Between the lines / David Philip Publisher, London - Toronto - Cape Town, 2008

Translated by Christine Pagnoulle in collaboration with Elizabeth Anne.


[1Extracts were published in The Economist (8 February 1992) and in The Financial Times (10 February 1992) under the title ‘Save Planet Earth from Economists.’

[2Lawrence Summers, on the occasion of the annual assembly of the WB and the IMF in Bangkok in 1991, interview with Kirsten Garrett, ‘Background Briefing,’ Australian Broadcasting Company, second programme.

[3Financial Times, 26-27 February 2005.

[4The debate was also fed by the disapproval Summers’ attack against Cornel West met with. Cornel West is a black liberal academic, Professor of Religion and African-American Studies at the university of Princeton. Summers, a notorious pro-sionist, blamed West for his antisemitism because he supported students’ boycott of Israel’s products as long as the Israeli government did not respect the rights of Palestinians. See Financial Times 26-27 February 2005. Today Cornel West, who wholeheartedly supported Obama, is upset that the latter should have turned to deregulators like Summers and Rubin. See

Eric Toussaint

is a historian and political scientist who completed his Ph.D. at the universities of Paris VIII and Liège, is the spokesperson of the CADTM International, and sits on the Scientific Council of ATTAC France.
He is the author of Greece 2015: there was an alternative. London: Resistance Books / IIRE / CADTM, 2020 , Debt System (Haymarket books, Chicago, 2019), Bankocracy (2015); The Life and Crimes of an Exemplary Man (2014); Glance in the Rear View Mirror. Neoliberal Ideology From its Origins to the Present, Haymarket books, Chicago, 2012, etc.
See his bibliography:
He co-authored World debt figures 2015 with Pierre Gottiniaux, Daniel Munevar and Antonio Sanabria (2015); and with Damien Millet Debt, the IMF, and the World Bank: Sixty Questions, Sixty Answers, Monthly Review Books, New York, 2010. He was the scientific coordinator of the Greek Truth Commission on Public Debt from April 2015 to November 2015.

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Damien Millet

professeur de mathématiques en classes préparatoires scientifiques à Orléans, porte-parole du CADTM France (Comité pour l’Annulation de la Dette du Tiers Monde), auteur de L’Afrique sans dette (CADTM-Syllepse, 2005), co-auteur avec Frédéric Chauvreau des bandes dessinées Dette odieuse (CADTM-Syllepse, 2006) et Le système Dette (CADTM-Syllepse, 2009), co-auteur avec Eric Toussaint du livre Les tsunamis de la dette (CADTM-Syllepse, 2005), co-auteur avec François Mauger de La Jamaïque dans l’étau du FMI (L’esprit frappeur, 2004).

Other articles in English by Damien Millet (46)

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