As the dust settles over southeast Asia, it’s become clear that the financial crisis was not caused simply by a currency crisis, but by deregulated banks, expensive real estate speculations, globe-trotting investors looking for the highest rate of return, and governmental nepotism and influence-peddling on a wide scale. Now the International Monetary Fund (IMF) and the World Bank are stepping in to divide up the spoils and parcel them out to the highest bidders.
In a prior issue of Eat the State! (see “The Boom/Bust Cycle,” vol. 2, no. 10, 11/11/97) we talked about debt, wage stagnation, loan defaults, and the onset of the Asian financial crisis. Since then, things have gotten worse for people living in the countries immediately effected by the crisis–Thailand, Japan, Malaysia, Indonesia, South Korea, and Hong Kong. As each country’s currency has dropped in value, basic necessities have become more expensive to buy: food, clothing, fuel, medicine, etc. Wages, however, have fallen dramatically, because workers are being paid in their devalued local currencies. This is a boon for foreign businesses (like Nike) who can now get the same number of workers for much less money in U.S. dollars. These workers, however, still need to eat, and in places like Jakarta, Indonesia, the cost of most food items has increased 50–75% in the last two months. And many of the failing banks in Asia have either closed their doors, shortened their hours, or have frozen their assets, leaving depositors unable to access their savings accounts.
The IMF, World Bank, and western banks have stepped in with a bailout plan that will only make the crisis worse, and is deliberately geared toward hooking Asian governments into an increasing debt trap, similar to the credit card scams we discussed in the January 6 issue of ETS! The first part of the bailout plan involves getting western banks (i.e., BankAmerica, JP Morgan, Chase Manhattan, etc.) to extend the due dates for short-term loan payments (i.e., turning those short-term, high-interest loans into longer-term, high- interest loans) to give the Asian banks more time to raise money. Of course, in the meantime, those outstanding loans will continue to rack up more and more interest for western banks, thereby increasing instead of decreasing the debt burden for Asian banks.
The second part of the plan is an elaborate scam to shift the debt from failed commercial banks to the governments of Asian countries, thereby “nationalizing” the debt burden. For instance, JP Morgan has proposed that the South Korean government convert $15 billion in commercial-bank debt into government bonds. This will remove that debt from the books of commercial, private banks and make those banks “profitable” enterprises that can be purchased by western financial institutions at rock-bottom prices. Meanwhile, in Indonesia, the World Bank is forcing the government to sell off state-owned property, including its nationalized banks, oil companies, and utilities. But first the Indonesian government must make these entities into efficient, “marketable” properties by firing a large number of state employees, removing the debts from their books by turning them into direct government debts, and passing laws that allow foreigners and foreign companies to buy property. In Thailand, where real estate prices have plummeted, a large number of half-empty shopping malls, office complexes, and residential buildings are now up for sale for pennies on the dollar, while the IMF is forcing the new Thai government to “liberalize” its laws on foreign ownership of property. American and European developers, banks, and multinational corporations are poised to swoop down on southeast Asian properties like a group of vultures circling a fresh carcass.
Once southeast Asian governments take on this enormous debt load, they will be forced to implement IMF/World Bank austerity measures in order to meet their loan payments to western banks. This will include drastic cuts in social services that make any U.S. government “balanced budget” package look tame by comparison. For example, the new South Korean President Kim Dae Jung, formerly a supporter of organized labor, now supports wide-scale layoffs and privatizations. As utilities and state-owned oil and gas companies become deregulated and privatized, energy costs will rise and environmental controls will fall by the wayside. Government-funded retirement benefits will be cut, money for healthcare will dry up, and public education– already woefully underfunded in most of southeast Asia–will disappear. A growing class of unemployed, landless people, and the environmental devastation that comes with overdevelopment (remember the choking clouds of smoke over Indonesia this summer during the dry season?), will turn paradise into an impoverished wasteland.
Government repression will also increase as workers strike for higher wages, students demand lower-cost education, and the poor demand reforms. Human rights violations will increase–just they’ve increased in Mexico as a result of the 1994 $50 billion IMF/World Bank/U.S. bailout, which devastated the Mexican economy. We need only look toward Chiapas, Mexico, to see the political future of southeast Asia. While rich, western investors crack open champagne bottles to celebrate the acquisition of cheap Asian companies and the bailout that saved them from losing their shirts, indigenous people in Asia will probably be collecting old rifles, filling bullet casings, and tying scarves over their faces to exercise their last option for survival against the violence of the global marketplace.
In the meantime, there’s a movement afoot here in the U.S. to break apart one of the institutions directly responsible for much of the misery in debt-laden countries: the International Monetary Fund. This year, President Clinton is gearing up to present a bill to give the IMF $18 billion in funding, which will allow it to continue its destructive policies. He may present it to Congress as early as February, and will probably try to sneak it through as a rider attached to another, unrelated bill. To find out more about the struggle to de-fund the IMF, contact Fifty Years Is Enough at email@example.com or Global Exchange at 2017 Mission Street, Room 303, San Francisco, CA 94110, (415) 255-7296.