Ralph Nader is a major proponent of free markets and one would have not expected him to be critical of the IMF’s efforts to free the Tobacco Market in countries.
Here are extracts from his newsletter in 2002.
“The IMF believes in unregulated markets, and pushes for policies of deregulation, privatization and marketization without regard to specific context. In nearly every country, in nearly every sector of the economy, the Fund’s message is always the same.”
“Although the tobacco industry has been firmly in private hands throughout U.S. history, in many countries, including in the developing world as well as in Eastern Europe and the former Soviet Union, state-owned enterprises have had responsibility for tobacco product manufacturing and distribution.
If these enterprises are privatized, they will likely be sold to Philip Morris, BAT or other giant multinationals. These companies swoop in, gain dominant market share, crank up their slick marketing machines to replace the sleepy marketing operations of the somnolent state-owned enterprises, bulk up their political leverage to block implementation of anti-smoking policies, and introduce flavorings and product manipulations that make smoking more appealing.”
Mr Nader might not be totally right here. Look at the consumption figures in countries where the trade is nationalized and you will see that these are countries with very high consumption rates already. However, he is right that these are the countries where the Big Business will probably swoop in and buy the state organisations. (As happened in South Africa where BAT swooped in.)
“Of crucial importance, the bank has examined the results of the opening of tobacco markets in East Asia. In the late 1980s and early 1990s, the United States threatened trade sanctions and forced open tobacco markets in Korea, Japan, Taiwan and, to a lesser extent, Thailand.”
The ‘bank’ that he refers to here is the World Bank.
“Following the U.S.-forced opening of East Asian markets to foreign tobacco imports in the late 1980s and early 1990s, smoking rates in the region surged. World Bank studies estimate smoking rates rose by 10 percent as a result of the tariff reductions. A GAO study found smoking rates among teenage girls quintupled the year after the market opening in Korea.
Now the IMF seems intent on repeating the market-opening disaster in East Asia. Privatization will replicate and deepen the harms from market opening, as the multinationals are able to entrench themselves. Reduced tariffs enable the multinationals to compete on price the World Bank points out.”
Here he explains how it is done. The IMF, as a prerequisite for a loan by a country, inter alia insists that the tariff on imported cigarettes be reduced.
We have seen that the one variable that directly influences the volume of smoking is price. the tariff reduction increases smoking, and at the same time allows Philip Morris and BAT to compete with local production.
This competition is especially in the form of imported cigarettes – i.e. exports from the USA – which means that the US farmers are under less pressure from the declining US market.
Mr Nader concludes:
“There is no reason to believe that the IMF wants to promote smoking, or advance the interests of Philip Morris — though that is the impact of its policies.
The IMF seems to be completely oblivious to these matters, simply not giving attention to the public health ramifications of its policies.
With tobacco, however, the public health consequences could not be higher. The stakes are life and death. So far, the IMF has put itself on the wrong side of this equation, recklessly endangering millions of lives.”
Mr Nader here invokes the Law of Unintended Consequences that I mention in Chapter 1 and also pure stupidity by the IMF – they are just oblivious to the facts that the World Bank and he points out!
I doubt that the IMF is stupid, or oblivious to the ‘unintended consequences’ I just think that they pressure other countries governments to do things that has consequences that these governments did not foresee.