The IMF, as we have seen, is there to lend countries money in times of need. However, this does not come as a gift – the IMF insists on a substantial say in the economic policies of the Governments they lend money to.
One needs only to read Naomi Klein’s The Shock Doctrine to see how the IMF exploits countries that are in need of funding, and how this benefits US Big Business.
From Wikipedia we learn how the IMF managed to interfere with the Turkish economy:
“Tekel, (Turkish, literally single-hand or monopoly) is a Turkish tobacco company. It was nationalised in 1925 from a French company, the “Regie Compagnie interessee des tabacs de l’empire Ottoman“. Tekel evolved into the sole manufacturer and distributor of all alcohol and tobacco products in Turkey. Today, Tekel is no longer a monopoly but it does control taxing and distribution of all alcohol and tobacco products in Turkey. In 2008 it was sold to British American Tobacco.”
In one paragraph we see how there was a nationalised organisation (i.e. one where the profits went to the Turkish Government to be used for social projects) and this simply became a British owned company where the profits – admittedly after tax – went to the shareholders of BAT.
What does this have to do with the IMF?
“In January 2003, then Turkish Deputy Prime Minister Abdullatif Sener announced plans to privatise Tekel in the first half of the year, as part of a $16bn loan agreement with the International Monetary Fund (IMF), stating, “These are privatisations which have been planned for years and should have been taken care of a long time ago.” He promised that the jobs of workers affected by the privatisations would be safeguarded but warned unprofitable businesses would be closed down.”
This all sounds great to Classical Economists. However, read the paragraph again and think. Because what it says is:
The Turkish economy was in the doldrums and in need of a loan from the IMF. As a precondition for this loan Turkey has to privatise its tobacco industry – a demand they can hardly refuse given their economic situation. They agree that there are inefficiencies in a nationalised monopolistic industry – else he would not have promised that the workers that lose their jobs will be ‘looked after’.
This was a loan, not a gift, from the IMF. It has to be repaid and the interest on it has to be served. In layman’s terms: the IMF did not give anything away; in exchange they managed to get for BAT ownership of the Turkish tobacco industry. It was not their problem to look after the unemployment that this caused.
Japan threw a spanner in the works by offering $1.15billion for Tekel. This did not suit the IMF and plans for privatization were temporarily shelved.
“Tekel was eventually bought by the UK-based British American Tobacco (BAT) in a televised auction on 22 February 2008 for $1.72bn, making it the second largest tobacco company in the country with a 36% market share.”
It does appear to be too coincidental that since 2008 the US government suddenly had to subsidize its tobacco farmers!
Remember that subsidies are paid when the price of a commodity decreases below the cost of production. It does appear as if, when BAT bought TEKEL the costs of tobacco suddenly decreased, but this did not bother the US farmers – only the people that had to be kept in jobs in Turkey.
Who buys the Turkish leave crop? Take a guess.
Yes, you are right:USA. At 34, 000 metric tons Turkey is the second largest supplier to the USA of raw material.
We have heard the promises that were made about how the new jobless workers will be looked after:
“In December 2009, following the privatisation, the Turkish government announced that 12 Tekel factories would close with the 10,000 workers redeployed in other public sector jobs on 11-month temporary contracts (4/C status) with pay-cuts up to 40% and reduced employment rights. This sparked industrial action, which began on 15 December, by the workers who claimed the changes would cut their monthly wage and leave them without any severance pay. An estimated 12,000 workers from across the country set up camp in a central park in Ankara where they were forced off with teargas and pepper spray fired by riot police.”
“ Turkish Prime Minister Recep Tayyip Erdogan said the government would not “dole out money to workers for not producing anything” and challenged the protestors, who he claims are being influenced by “ideological groups and extremists” who had turned it into an “anti-government campaign,” to start their own businesses and ordered Finance Minister Mehmet Şimşekand Labour Minister Hayati Yazıcı to find a formula to resolve the dispute.
“On 4 February 2010 tens of thousands of Turkish workers took part in a one day general strike organised by Türk-İş in support of the protest. Public services including transport were disrupted across the country and the largest demonstrations were reported in Ankara (20,000 demonstrators) and Izmir (15,000 demonstrators).”
As one would expect, the IMF and the US did not care about this. They rather subsidised their own tobacco industry – in the form of Carson Barnes, the Sweet Potato King.
Readers should really spend time reading Naomi Klein’s ….
You might believe that this is a once-off example of how the IMF benefits the tobacco giants, and the US economy, but here is a press release by Essential Action in 2002:
[Intl-tobacco] Tobacco Privatization Kills! – Essential Action report & demo
Robert Weissman firstname.lastname@example.org
Wed, 25 Sep 2002 11:25:27 -0700
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From: Anna White <email@example.com>
The global Merchants of Death, a.k.a Philip Morris British American
Tobacco, have a good friend in the International Monetary Fund. The IMF
doesn’t think twice about forcing low-income nations to sell their
inefficient tobacco monopolies to multinational tobacco corporations
that are true masters of killing for profit. Yesterday, Essential Action
released a report detailing how the IMF pushes policies that undermine
public health and help Big Tobacco. We also held a demonstration in
front of the IMF headquarters to expose the IMF’s “pack of lies”!
ESSENTIAL ACTION REPORT: NEEDLESS HARM
International Monetary Fund Support for Tobacco Privatization and for
Tobacco Tax and Tariff Reduction, and the Cost to Public Health
To access the report, go to:
In particular, Essential Action’s investigation found that the IMF has
pushed for tobacco privatization in: Bulgaria, Korea, Mali, Moldova,
Thailand, Turkey. Essential Action also found that the IMF has supported
excise tax or tariff reductions in: Djibouti, The Gambia, Macedonia,
Peru, and Uganda.
So, already in 2002 the list was getting long. Not only privatising an industry that was yielding income for the depressed governments, but also reducing import taxation – i.e. making imported cigarettes cheaper. Who are these cigarettes imported from? You guessed it!
Now go to Youtube to see these happy ex-employees of TEKEL in 2008.
(I wonder why this video’s embedding has been ‘disabled by request’?)
DID I LEARN SOMETHING FROM THIS CASE STUDY?
I did my economics degree back in the 70’s and we were taught the Adam Smith free-market philosophy.
In fact, when I told my son-in-law, a more recent Econmics Graduate about my suspicions of what is happening in the cigarette industry and its relationship to the call by some politicians for nationalisation in South Africa he expressed shock and horror: Certainly Nationalised Industries are very inefficient and Free markets are much more efficient!
Yes, I still agree with this. It certainly is the perception of the bulk of the worlds population (6 billion).
But, just think about it againwst the background of this case study:
- Turkish tobacco exports comprised a major part of the Turkish economy,
- It also comprised an important part of the tobacco import as for the US economy, to be blended into cigarettes and then exported all over the world,
- Many Turks were employed in this inefficient nationalized industry, and this would have caused the price to be too high (due to inefficiencies),
- Because Turkey needed a loan from the IMF (the capital had to be repaid as well as the interest) a pre-condition was the privatization of the tobacco industry, and the opening of its borders for international investors,
- These were simply Politically Correct words (or, Economically Correct Words) for saying: allow BAT to buy your industry and run it much more efficiently,
- So far this all sounds good,
- EFFICIENCY means: let’s fire a lot of people Turkey and thereby decrease their cost inefficiencies so that they can sell their tobacco at a lower price to us,
- If this decreased inefficiencies mean a decreased tobacco price and this means our farmers suffer, then we simply subsidize them.
- We do this by lending them money, which they have to repay with interest and as a added benefit sell their tobacco industry to us.
- ‘O, by the way: what they do with these unemployed people is their problem’.
Interestingly this is exactly what Classical Economics is all NOT about. Adam Smith [propounded non-interference in markets so that they can find their natural levels of production and price.
If the US was not subsidizing their tobacco farmers (As Classical Economics argues) it is possible that the price of Turkish tobacco declining would have led to increased need for production – as the US tobacco farmers switched their land to financially more viable crops. This would have increased the demand for Turkish exports and the whole system would have worked. Unfortunately the IMF did not include this in their conditions.
This website is about bans on cigarette advertising and also bans on smoking. The current situation in Turkey is:
Turkey currently bans smoking in government offices, workplaces, bars, restaurants, cafes, shopping malls, schools, hospitals, and all forms of public transport, including trains, taxis and ferries.Turkey’s smoking ban includes provisions for violators, where anyone caught smoking in a designated smoke-free area faces a fine of 69 liras (~€32/$45/£28) and bar owners who fail to enforce the ban could be fined from 560 liras for a first offence up to 5,600 liras.
Smoking was first banned in 1997 in public buildings with more than four workers, as well as planes and public buses.
On 3 January 2008, Turkey passed a law banning smoking in all indoor spaces including bars, cafés and restaurants. It also bans smoking in sports stadia, and the gardens of mosques and hospitals. The smoking ban came into force on 19 May 2008; however, bars, restaurants and cafes were exempted until mid-July 2009. On 19 July 2009, Turkey extended the indoor public smoking ban to include bars, restaurants, village coffeehouses and nargile (hookah) bars
Interesting that the bans came into effect the year that BAT bought TEKEL? Is this coincidence? In fact the bans happened before BAT bought TEKEL – the beginning of the year. It sounds as if this was a pre-condiction for BAT to buy TEKEL! Do you really still think that BAT’s management is bad strategists and buys into situations where the market is going to decline? (Incidetally the same happened in South Africa where BAT bought the Rembrandt Group – and thereby the majority market share – at the same time that anti-smoking laws were enforced.
What about cigarette companies wasting money of advertising?
“Tobacco Advertising, Promotion and Sponsorship: Turkey has a near comprehensive ban on tobacco advertising, promotion and sponsorship. A few aspects of tobacco advertising, promotion and sponsorship are heavily regulated, but not completely banned. For example, point-of-sale advertising is allowed, but it may not be seen from the outside or accessed by minors. Additionally, internet sales are prohibited, except by authorized dealers. Publicity of tobacco sponsorship is restricted; however, the financial contribution or in-kind support itself it not prohibited.”
“Roadmap to Tobacco Control Legislation: In Turkey, the Law on Prevention and Control of Hazards of Tobacco Products, Law No. 4207, is the primary law governing tobacco control. Law No. 5727 of 2008 substantially amended Law No. 4207 and regulates, among other things, prohibitions on public smoking; tobacco advertising, promotion and sponsorship; packaging and labeling of tobacco products; education campaigns; and penalties for violations.
One would have thought that if you are buying a company then you would insist that the seller will not nearly immediately do things that devalues the company.
Now that you have read this, read about what is happening in Malawi (where Imperial Tobacco is solving the problem with 183 oxen, and claiming this as how they are helping the economy.) https://antismokingscam.wordpress.com/the-market/compare-malawi-to-barnes/