---------- Forwarded message ----------
Date: Wed, 16 Sep 1998 22:02:06 -0400 (EDT)
From: Robert Weissman <[EMAIL PROTECTED]>
To: Multiple recipients of list STOP-IMF <[EMAIL PROTECTED]>
Subject: Bello: The Revolt Against Neoliberalism
BREAKING WITH THE FAITH
By Walden Bello*
(This column appears in the Sept. 17, 1998 issue of the Far Eastern
Economic Review.)
Malaysia's recent moves to impose fairly stringent capital controls
elicited the predictable cries of dismay from the usual suspects: the
International Monetary Fund, US Undersecretary of the Treasury Larry
Summers, the Wall Street Journal, and Philippine Central Bank Governor
Gabriel Singson.
But what was interesting about the global response this time was the
way it revealed widening cracks in the establishment consensus. Mahathir's
move had the effect of separating diehard ideologues from pragmatists,
whose growing ranks include Massachusetts Institute of Technology hotshot
Paul Krugman and the Financial Times, which editorialized that "under
certain conditions," [capital controls] could prove the way forward for the
Asian crisis economies."
There was a widespread sense that however one judged them, Malaysia's
moves were understandable. While editorializing against the measures, even
the Economist conceded that "the economic pain being imposed [by global
capital markets] on the ex-tigers is out of all proportion to the policy
errors of their governments."
Also palpable was a sense that neoclassical orthodox approaches had
been given a chance to stabilize the situation for over a year and found
severely wanting. The so-called "Washington Consensus" solution had been
to give even more freedom for speculative capital to enter and exit
economies, coupled with a dose of the IMF deflationary medicine of high
interest rates and tight fiscal policies. The cure proved worse than the
disease, turning a serious crisis into a descent into hell.
So discredited is the Fund that it has been unable to resist its ward,
the Thai government's recent adoption of Keynesian recovery program
consisting of government deficit spending to the tune of 3 per cent of GDP,
bringing down interest rates, and de facto nationalization of the banking
system-all no-no's in the IMF orthodoxy.
But the key to the increased willingness of the pragmatists to break
with the neoclassical church is fear-fear that the madcap activities of
unregulated global speculative capital now threaten to sink not just Asia
but the rest of the world as well, including the US economy. There is
nothing like terror to make the blind see, even if like Columbia University
Professor Jagdish Bhagwati-another prominent defector-one has made a living
preaching the virtues of the market.
Welcome to reality, we say to them, but we must also point out that
they are merely catching up with the rest of the world, with the truths
that ordinary people experience when they are run over by this process
called "globalization."
The Asian financial crisis has simply served to underline the fact
that the theory about the net benefits of globalization via the engine of
free markets in goods and capital has had little or no empirical backing.
As with all ideologies, it was faith parading as science. Indeed, history,
cunning as usual, appeared to derive a perverse pleasure from contradicting
at almost every turn the Benthamite pronouncements of people like Larry
Summers that free markets and the free flow of capital would result in the
greatest good for the greatest number--with the dissonant data ranging from
the common net welfare losses for the US, Canada, and Mexico in NAFTA, to
the pervasive stagnation imposed by free-market structural adjustment
programs imposed by the IMF on most Latin American and Third World
economies, to the environmental devastation wrought by unregulated local
and transnational firms in East Asia, to the spawning of mafia capitalism
by the radical free market reforms in Russia and Eastern Europe, courtesy
of the Fund, Washington, and, yes, Harvard's Jeffrey Sachs, yet another
luminary that has recently seen the light.
The question is no longer whether the world will move away from the
rule of the invisible hand but how fast it will do so.
While the former ideologues are paralyzed with doubts about the old
and fears of the new, others have already moved or are moving toward a new
order, though some of the contours of that order may not be discernible at
this point and the process leading to it might be fraught with
unpredictability and uncertainty. What are some of these trends, which are
likely togain momentum over the next few months and years?
One might, first of all, point to the fact that owing to the fatal
combination of the IMF's blundering in Asia and Russia and Monica Lewinsky,
it is now unlikely that the House of Representatives will grant the Clinton
administration's demand for $14.5 billion to finance the US quota increase
in the Fund. This will likely result in the great reluctance of other rich
countries to cough up the other $67 requested by the IMF, setting the stage
for either the reform or effective neutering of this dinosaur.
One should also expect that tremendous pressures from civil society,
governments, and even sections of international capital itself (pace George
Soros) are likely to lead either to more Malaysia-type unilateral measures,
or to the eventual adoption of the Tobin Tax or one of its variants, which
would be levied on capital movements across borders in an effort to throw
sand on the wheels of speculative investors and currency speculators.
In Asia, year II of the financial crisis is likely to lead away from
the failed Philippine strategy of distancing oneself from the rest of the
pack in an invidious effort to draw investors fleeing one's neighbors to
regional coordination in the setting of exchange rates, trade policy, and
debt repayment policy. Now burdened with having to pay off the debts of
their irresponsible private sectors with public funds-debts which come to
80 per cent of total external debt in the case of Thailand and
Indonesia-many Asian governments are beginning to realize that unless they
get together to formulate a common stand to write off part of the debt,
write down much of the rest, and reschedule the remainder, they risk
repeating the experience of the Third World in the 1980's, when the
creditors, united behind the IMF, took advantage of debtor disunity to pick
the debtors off one by one and imposed draconian debt repayment policies on
all of them.
Within societies in the region, we are likely to see a move away from
dependence of foreign investment and export orientation and toward economic
strategies based principally on domestic financial resources and the local
market. Which means greater pressures for asset and income redistribution
to create the dynamic domestic market that can serve, in place of the
rollercoaster that is the global economy, as the engine of growth.
People who say that there is no alternative to today's market-driven
globalized economies are wrong. The elements are already being actively
discussed throughout the region. What is still unclear is how these
elements will hang together. The new political economy can be embedded in
religious or secular approaches and language. And its coherence may rest
less on considerations of narrow efficiency than on the stated ethical
preference given to community solidarity and security.
Moreover, the new economics is unlikely to be imposed from above in
Keynesian technocratic style but is likely to be forged in social and
political struggles. For if there is anything that is certain, it is that
mass politics with a class edge, which was frozen by the superficial
prosperity before the crash of 97, is about to return to center stage in Asia.
The Economist bewails the emergence of the "sentiment that it is not
merely the international capital market but the basic principles of
capitalist economics that need to be questioned." But institutions like
the Economist have only themselves to blame, for the rising revolt against
the irrationalities of free-market capitalism has been provoked to a large
extent by hubris, by the arrogance of its partisans and their lack of
connection to real people, with real troubles and real fears.
*Walden Bello is professor of sociology and public administration at the
University of the Philippines and co-director of Focus on the Global South,
a program of the Chulalongkorn University Social Research Institute
(CUSRI). He is the author or co-author of a number of books on Asian
economies and societies, including the prescient Dragons in Distress:
Asia's Miracle Economies in Crisis (London: Penguin, 1991) and, most
recently, A Siamese Tragedy: Development and Disintegration in Modern
Thailand (London: Zed, 1998).
