[CTRL] FW: SOURCES eJOURNAL - National Security Ramifications of "Global ization"

[Jeff Hearon]

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> "Globalization"
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> WASHINGTON, DC -- January 13, 1999
> National Security Problems Loom in Wake of Globalists' Financial Wheeling
> and
> Dealing
>
> A growing chorus of experts from opposing ideologies is saying that
> unregulated
> financial globalization is the cause of an international crisis rippling
> around
> the world. They say this crisis is brought on by the cynical manipulations
> of
> international banks, mutual funds, pension funds, and hedge funds, leading
> to
> the impoverishment of millions around the world, and a long-range national
> security problem for the West and other developed, and developing,
> nations.
>
> The debt crisis in Latin America in the early 1980s is an example of the
> national security headaches that can erupt as a result of the kind of
> economic
> crises discussed in the following two reports. The problems accompanying
> Latin
> America's debt crisis led to the National Security Council successfully
> engineering a new economic intelligence collection program specifically
> designed to eavesdrop on foreign financial activities. As detailed in
> previous
> reports by SOURCES, this was part of an "early warning" system to alert
> policymakers of potentially troublesome foreign economic problems,
> primarily at
> the International Monetary Fund and World Bank.
>
> Today, similar economic crises around the world, wrought by deliberate
> economic
> policies as part of U.S. and Western foreign policy, threaten to do the
> same.
> The two following reports by SOURCES contributing editor, Dr. Cliff
> Kiracofe,
> and Professor Michel Chossudovsky, a Professor of Economics at the
> University
> of Ottawa, examine the portion of U.S. foreign policy which is apparently
> working to destabilize the international economic arena. They discuss the
> resulting devastation of Third World economies which is causing an
> impoverishment and breeding ground for violence and political instability.
>
> PARIS - January 13, 1999
> The National Security Ramifications of "Globalization"
>
> By Dr. Cliff Kiracofe
>
>  From Paris to Kuala Lumpur, a chorus of voices from opposing ideologies
> are
> being raised against the dangers said to be posed by a powerful network of
> international financiers and transnational corporation heads who are
> acquiring
> dominance over global political and economic affairs. Leading statesmen,
> as
> well as an international front of progressive organizations and
> intellectuals,
> are calling attention to the consequences of unregulated "globalization"
> by
> this clique. Unregulated globalization is an essential feature of certain
> finance capitalists' international strategies. Their detractors maintain
> that
> today's worsening international financial crisis is a direct result of the
> cynical manipulations of these so-called global "Goldfingers" who control
> international banks, mutual, pension, and hedge funds. Specialists in
> Washington and an increasing number of congressional leaders are openly
> concerned that such instability is leading to the impoverishment of
> millions
> around the world, creating a growing long range national security problem
> for
> the United States and other developed, and developing, nations.
>
> As SOURCES previously pointed out in the report, "The Global Goldfingers
> Super
> NAFTA Plot: Will it Create a Widespread Political, Social, and Security
> Crisis?" the Multilateral Agreement on Investment (MAI), which calls for
> deregulation of global banks and multinational corporations, will likely
> create
> severe social tensions, especially in Third World and emerging
> nation-states.
> The MAI presents a problem to those who are professionally interested in
> the
> political progress and stability of developing countries. The current
> failure
> of globalization, exacerbated by potential consequences of a global MAI,
> raises
> the issue of resurgent nationalist and revolutionary movements in
> developing
> nations, which will pose a multitude of corporate image and security
> problems
> for U.S. companies.
>
> Critics say globalization is the real cause of the current international
> financial crisis-a "vicious cycle" in which speculators "deregulate"
> national
> currencies, become creditors of the state, and then underwrite the public
> debt
> with which to finance International Monetary Fund (IMF)-sponsored
> bailouts. The
> IMF itself is financed by taxpayers, so the result of the overall process
> is
> "corporate welfare" and "crony capitalism." For some critics, the
> imposition of
> "globalization" policies resembles 19th century British Imperialism and,
> they
> say, a new phase of "colonialization" is taking place around the world
> under
> the guise of so-called "neo-liberal" economic models and globalization.
> Critics also point to the deregulation of financial markets, capital
> markets,
> and foreign exchange markets as the primary cause of the fragility of
> today's
> international financial system. Such deregulation has been intensively
> promoted
> by transnational business lobbies since the late 1970s and early 1980s.
>
> Once the brunt of primarily conservative critics, progressive and liberal
> thinkers are worrying about transnational business lobbies, ranging from
> international chambers of commerce to corporate powerbrokers' clubs like
> the
> Trilateral Commission http://www.trilateral.org/. The Bilderberg Group is
> promoting the global Goldfingers' so-called "neo-liberal" economic agenda
> by
> lobbying for deregulation and globalization. The MAI (originally
> propounded by
> Sir Leon Brittan, the influential British member of the European
> Commission and
> taken up by the Clinton administration) is a case in point, critics say.
> The
> neo-liberal economic model, pushed by powerful advocates from Wall Street
> and
> London's financial district, is the main cause of today's financial crisis
> in
> Asia, critics argue. They also point to the influence of men like Robert
> Rubin,
> U.S. Secretary of the Treasury, a chief advocate of globalization in the
> Clinton administration. Rubin is a former senior partner of Goldman Sachs,
> the
> well-known Wall Street firm deeply involved in international finance and
> Asian
> "restructuring."
>
> The extraordinary diplomatic gaffe by U.S. Vice President Al Gore during
> the
> November meeting of the Asia Pacific Economic Cooperation (APEC) forum
> added
> fuel to the fire of concern over Asia's financial crisis. Gore, at a
> dinner of
> the APEC Business Summit, called anti-government street demonstrators
> "brave
> Malaysians." His blatantly undiplomatic remark provoked a torrent of
> denunciations from APEC members for interference in the internal affairs
> of a
> member state. Nevertheless, Gore was backed by Clinton, further deepening
> concern in a region beset by instability and socio-economic crisis.
>
> The fact that Malaysian Prime Minister Dato Seri Dr. Mahathir Bin Mohamad
> is a
> leading critic of globalization raised suspicions that the U.S. government
> may
> have a secret agenda to unseat the plucky leader of this rising nation.
> Memories of the U.S. ouster of Philippine strongman Ferdinand Marcos, and
> the
> recent fall of Indonesia's Suharto, contribute to a climate of increasing
> suspicion of U.S. intentions in Kuala Lumpur and in the region.
>
> Malaysia's hard-working multi-racial society has made significant advances
> over
> the past three decades since major race riots between Malay and Chinese
> broke
> out in 1969, and an emphasis on traditional Islamic values has helped
> prevent
> the penetration of Iranian and Libyan versions of radical Islam in this
> constitutional monarchy. An aggressive development program involving free
> market economic policies and affirmative action social policies for
> minorities
> such as the Chinese and Indian communities achieved remarkable gains until
> the
> Asian financial crisis brought the country up short in 1997. Today, the
> top
> three investors in the country are Japan, Taiwan, and the United States.
>
>
> Leading Intellectuals Denounce the Global Goldfingers
> In October, while high-level government officials schemed behind closed
> doors
> at the Paris-based Organization for Economic Cooperation and Development
> (OECD)
> to implement the globalist MAI, several hundred leading intellectuals and
> progressive activists from around the world gathered in the City of Light
> to
> analyze the current international financial crisis and to plan further
> opposition to the globalists' latest assault on world markets. SOURCES
> covered
> the meeting, which was called to focus attention not only on the MAI, but
> also
> on the world-wide manipulations of a network of international bankers and
> corporate powerbrokers.
>
> Economist Susan George, the conference host, is blunt in her assessment of
> the
> international financial situation: "The real 'crony capitalism' is the
> International Monetary Fund's (IMF) bailouts designed exclusively for
> major
> investors to save their crony capitalists," George told SOURCES. "Billions
> are
> being taken from taxpayers in the North primarily to bail out the major
> investors in the South."
>
> Michel Chossudovsky, economics professor at the University of Ottawa, is
> equally direct in describing the overall international financial crisis.
> "This
> is the most serious economic and social crisis in modern history," he told
> SOURCES. "It surpasses the global Depression of the 1930s and involves the
> impoverishment of huge sectors of the world's population. This is a period
> of
> social decomposition predicated on a displacement of existing economic
> systems,
> so we are witnessing the destruction of national economies."
>
> The scope of the social devastation caused by the financial crisis is just
> coming
> to be understood. For example, according to a recent report by Oxfam
> International, more than 15 million Indonesians will be out of work by the
> end
> of 1998. In South Korea, local governments have opened orphanages to
> handle the
> tens of thousands of children being abandoned by parents who are without
> employment and income. Labor rights are becoming seriously threatened as
> evidenced by a police crackdown on a strike by workers at South Korea's
> Mando
> Machinery, part of the Halla Group and one of the largest automobile parts
> manufacturers in the world.
>
> Executives of the Wall Street-based Rothschild Group, which is
> administering
> the "restructuring" of the Halla Group, reportedly demanded that the
> strike be
> put down.
> Professor Chossudovsky emphasizes the social instability resulting from
> the
> crisis, which,
> in his view, has been brought about by the systematic manipulation of a
> network
> of international bankers and financiers-a network backed by international
> financial organizations like the IMF. "What we are seeing is the
> decomposition
> of the state and its social programs as well as the destruction of small
> and
> medium producers," Chossudov-sky says. The "structural adjustment"
> programs of
> the IMF, combined with the speculative movement of capital and certain
> actions
> of the World Trade Organization, have led to the current crisis, he
> argues.
> Pointing to the situation in South Korea, he says the IMF bail-out
> agreements
> caused the bankruptcy of 80 percent of the construction industry.
>
> Considerable international attention is now focused on speculative
> movements of
> capital, so-called "hot money." Martin Khor, a leading Malaysian
> journalist and
> head of the Third World Network, is succinct in his assessment. "Asia is
> in
> crisis caused by speculative movements of capital, and many people have
> suffered from this disaster," Khor told SOURCES. "We have seen that
> freedom of
> capital flows has caused tremendous disruption and catastrophe. In
> Southeast
> Asia, we are losing confidence in foreign capital investments and in the
> movement of capital."
>
> During the early to mid-1990s, growth rates in East Asia were high. China
> recorded annual growth rates of between 9 percent and 14 percent, while
> Indonesia, Malaysia, and Thailand recorded rates of between 7 percent and
> 12
> percent. Net capital inflows for China and Vietnam were foreign direct
> investment (FDI) denominated. But net capital inflows for Indonesia, South
> Korea, Malaysia, and the Philippines were substantially short-term.
> Thailand
> had a high level of short-term inflows, about 7 percent to 10 percent of
> GDP,
> each of the years during 1994 to 1996, while its FDI was only one percent.
> On
> the other hand, in Malaysia, for example, between 1995 and 1996,
> short-term
> capital was about 4 percent to 4.5 percent of GDP, while its FDI was at 5
> percent.
>
> Capital flows of previous decades were primarily government-to-government,
> or
> from
> multilateral agencies, but in the early 1990s there was a dramatic
> increase in
> the flows of private capital to these emerging economies. The amount of
> private
> capital flowing into world-wide emerging markets rose from U.S.$50 billion
> in
> 1990 to U.S.$336 billion in 1996. Daily currency turnover in the foreign
> exchange markets rose from an average of U.S.$190 billion a decade ago to
> some
> U.S.$1.2 trillion in 1995.
>
> Khor explains that given extreme volatility in capital movements, the
> Malaysian
>
> government in early October 1998 correctly placed capital controls on
> capital
> movements, following the Chinese model. Malaysia also followed the Chinese
> model with exchange controls in order to prevent the manipulation of the
> value
> of the national currency by speculators. But the IMF has told Indonesia
> that it
> is not allowed to impose capital controls. Khor emphasizes the negative
> consequences of unregulated capital flows. "This crisis will become a
> permanent
> feature and it will get worse in the years to come," he warns.
>
> Experts say there is an estimated $21 trillion moving around the world for
> international investments. Of this total, they say, pension funds account
> for
> about $5 trillion, financial institutions account for about $7 trillion,
> and
> insurance companies account for about $7 trillion. In this situation, they
> say,
> a shift of only one percent of these funds can destabilize countries.
> National
> sovereignty is under attack by a clique of international financiers, they
> say.
>
> Concerned analysts on opposite ends of the political spectrum appear
> unanimous
> on the political dimension of the financial crisis. The Asian crisis is a
> result of a "political project," Philippine intellectual, Antonio Turan,
> president of the Ibon Foundation, told SOURCES. "Globalization is a
> political
> construction, a political project," he says. "It is political in its
> application in the sense of imposing neo-liberal reforms. And the Asian
> crisis
> is important because Asia was promoted as a special model of
> globalization,
> particularly to Third World Countries." The original model, Turan
> explains,
> involved management for investment, controlled investment regimes, and
> competitive exports, but the model was then shifted to involve financial
> deregulation and trade liberalization.
>
> Turan agrees that speculative capital flows contributed to the crisis. For
> him,
> large capital flows into Southeast Asian countries, the main bulk of which
> are
> speculative portfolio investments, are at the heart of the problem. "In
> the
> Philippines, 85 percent of the increase in foreign investments were
> speculative
> in the stock market, in the bond market, and in the real estate market,"
> he
> says. "But money started to leave the Philippines and Thailand in 1996 and
> there was a decline of exports accompanied by outward net capital flows.
> In
> 1997, there was the crash and it involved liquidity problems." But
> interest
> rates have been high, Turan says, and so Philippine businessmen have
> become
> angered by IMF-imposed rates and have demonstrated against the IMF to
> dramatize
> their concerns. "Labor has also been marginalized, and there were over
> 100,000
> laid off in the first six months of 1998 alone," he points out.
>
> Background of the Goldfingers' Globalization Strategy
> The roots of the current international financial crisis reach back several
> decades,
> according to experts. "The globalization of poverty did not begin in the
> 1990s," Professor Chossudovsky says. "It began with the debt crisis of the
> early 1980s and the reforms imposed by the IMF. This led to the
> impoverishment
> of peoples and a destruction of economic activity." He says the process
> has
> been complex. "The structural adjustment programs of the IMF involve
> repressive
> mechanisms and policies. There have been successive devaluations and no
> limit
> to macro-economic manipulation." So-called "neo-liberal" economic models
> have
> been imposed on governments who "pretend to be Social Democratic,
> Socialist,
> and even Communist" Professor Chossudovsky says. The imposition of this
> model
> is "predicated on minimizing the cost of labor and minimizing employment
> on a
> world-wide level," he argues. Consequently, "we see a collapse in the
> standard
> of living and a decline in the levels of spending, as well as a
> displacement
> and destruction of productive capacity which exists. This kind of
> expansion of
> capitalism is only at the expense of existing economic systems."
>
> Professor Chossudovsky told SOURCES that he sees a systematic program of
> manipulation being implemented by a powerful combination of international
> bankers and transnational corporations. "The Asian economic crisis is a
> result
> of the manipulation of financial markets," he says. "The so-called
> 'contagion,'
> as reported in the mainstream media, is a fabrication. The real policy of
> the
> international manipulators is to destabilize money, the currency. but the
> press
> distorts the real cause of the global crisis, which is the deliberate
> collapsing of currencies through the use of special instruments."
>
> Whether or not this is part of a premeditated grand globalist scheme.
> Chossudovsky appears to be correct in saying that "large financial
> institutions
> [are using] ... instruments [such] as derivatives and foreign exchange
> speculation," and that the use of these special instruments can "create
> conditions where national currencies. What we have is the programming of
> bankruptcy to displace the existing economic system. And when the IMF
> calls for
> the closing of large sectors of the economy, the industries are bought up
> cheaply by foreign interests"
>
> Global Goldfingers' Attack on Central Banks Sparks Crisis
> Although the world-wide financial manipulations which create such
> situations
> are highly
> complex and conducted in secret, a cause and effect is apparent to the
> observer, experts say. A key observable element is systematic attacks on
> the
> central banks of nations which are targeted by the manipulators. Professor
> Chossudovsky told SOURCES that "These speculative assaults are coordinated
> attacks by institutional speculators, the large banks and investment
> banks," he
> explains. "They coincide with IMF pressures to create the conditions for
> the
> collapse of national currencies. The Indonesian currency, for example, was
> unpegged just a few months before the crisis and we can see the results."
>
> When a nation's currency is under attack, central banks respond by
> attempting
> to defend the currency. "To maintain parity, the central bank sells
> dollars,"
> explains Professor Chossudovsky, "but this leaves the central bank with
> [a]
> multi-billion dollar debt." Korea, Thailand, and Indonesia are examples of
> the
> consequences of this manipulation, he points out, adding that it is the
> same
> institutions that approve the bail-out agreements. "These are large
> multi-billion dollar financings [which] reimburse the speculators," he
> says.
> "So what we really have is welfare for the private speculators... Once the
> bail-outs are implemented, the same international speculators are called
> in to
> put the productive assets on the auction block and so the national
> economies
> are sold off to international capital via privatization."
>
> The result of attacks on central banks is the appropriation of reserves
> and
> this amounts to privatization of the central banks, Professor Chossudovsky
> asserts.  "This spells the end of the central bank as a national
> institution,"
> he says. "With this privatization of central banks, development finance is
> left
> in the hands of external creditors, and countries lose control over their
> national economies."
>
> French financial expert, Professor Francois Chesnais, a panelist at the
> Paris
> conference, agrees that speculative finance is at the bottom of the
> present
> international crisis. "There is a transfer of wealth from those who
> produce it
> to the financial profiteers," he told SOURCES. "There are over $1.3
> trillion
> per day in financial transactions involving the movement of money from one
> currency to another. Perhaps two or three percent has economic meaning,
> and
> most of it is speculative. The international speculators create turbulence
> in
> order to make profits." Professor Chesnais maintains that "stable exchange
> rates are needed." Trade liberalization and de-regulation are forms of
> "tax
> evasion" he says, and governments are borrowing "from the very people they
> refuse to tax." He favors the so-called "Tobin Tax" (a suggestion offered
> several years ago by a U.S. Professor Tobin to place a tax on speculative
> foreign exchange transactions) as a means to restrain speculative
> activity.
>
> The Global Goldfingers Target Malaysia
> The Asian financial crisis has spurred considerable thought and action on
> the
> part of regional governments. Although Asian successes have been built on
> carefully managed market policies, some leaders believe that globalization
> has
> gone too far and that deregulation of financial markets opened the door
> for
> destabilizing manipulation by international speculators.
>
> Malaysian Prime Minister Dr. Mahathir Mahamad, a moderate Muslim and
> nationalist, is a leading critic of such speculators. "We put in place
> tried
> and tested strategies for a continuous thirty-year growth plan," he says.
> "We
> had practically no foreign debts, our growth was high, our inflation low.
> We
> dismissed the rumor that Malaysia would go the way of Mexico. We did not
> realize how close we came to a manipulated economic crisis and we blithely
> sailed on. But now we know better." The Mahamad says that the current
> international financial crisis can been seen as a manipulated phenomenon.
> "We
> know now that Mexico's economic crash was manipulated and made to crash,
> and
> that the economies of other developing countries too can be suddenly
> manipulated and forced to bow to the great fund managers who have come to
> be
> the people to decide who should prosper and who shouldn't."
>
> In the Prime Minister's view, the crisis in Japan and Korea, as well as in
> Mexico, have been manipulated by international speculators. "We had
> forgotten
> the experience of Japan and Korea," he says. "When these two countries
> seemed
> about to catch up with the developed world, things began to happen to
> them. The
> Yen was yanked up in order to reduce the competitiveness of Japanese
> goods,
> while Korea was designated an NIC, a newly industrializing country which
> must
> be stopped in its track. We had even forgotten the lesson of Mexico whose
> economy was suddenly blighted when foreign funds were suddenly withdrawn.
> Mexico was forced to borrow 20 billion U.S. dollars in order to tide over
> and
> restore its fractured economy. Someone made a packet from this loan."
>
> When Malaysia became independent in 1957, the per capita income of its 5
> million people was $350. By June 1997, after four decades of single-minded
> effort, the per capita income of its 20 million people was some $5,000.
> "All
> along we tried to comply with the wishes of the rich and the mighty," says
> the
> Prime Minister. "We have opened up our markets, including share and
> capital
> markets. We were told that we must allow our money to be traded outside
> our
> country. We were told to permit short selling, even to let trading in
> borrowed
> shares be legalized. We were told to slow down our growth. In particular,
> we
> were told we should not venture into big projects, even if only to provide
> the
> necessary infrastructure we were told we needed."
>
> Like a growing number of Asians, the Prime Minister has deep suspicions of
> the
> developed nations. "Quite a few people ... in control of the big money
> seem to
> want to see these South East Asian countries, and in particular Malaysia,
> stop
> trying to catch up with their superiors and to know their place. There may
> be
> no conspiracy as such but it is quite obvious that a few at least ... fund
> managers, have their own agenda which they are determined to carry out."
>
> Currency speculation and manipulation, is a major concern for Malaysia.
> "The
> currency traders apparently make billions with each transaction," he says.
> "But
> when the funds at their disposal are huge, and they are in a position to
> influence the values of the currencies with their investments and
> divestments,
> then the currency markets become cash cows to them. Unfortunately, their
> profits come from impoverishing others, including very poor countries and
> poor
> people. Southeast Asian countries have now become their target simply
> because
> we have the money but not enough to defend ourselves."
>
> Notwithstanding concerns about unscrupulous international financiers, the
> Prime
> Minister indicates an openness to foreign investment. "Despite our
> bitterness
> over the attempts to push us back by a decade through forced devaluation
> of our
> currency through the rape of our share market, we in Southeast Asia and in
> Asia
> are still keen to receive investments from Europe and America. But it
> should be
> appreciated that we of Southeast Asia, at least, are now very scared about
> foreign capital. We will have to be more circumspect. We still believe
> that
> there are sincere investors out there, but there are also quite a few
> rogues
> who can cause an avalanche forcing others to run for cover."
>
> Clinton Globalist Policy Gored
> The provocative speech given in Malaysia on November 16 by Vice President
> Al
> Gore set off a fire storm of denunciations by APEC leaders. New Zealand's
> Prime
> Minister Jenny Shipley was quick to point out that it was not her
> country's
> style to use "megaphone diplomacy." New Zealand will host next year's
> annual
> APEC meeting. Singapore Prime Minister Goh Chok Tong expressed similar
> sentiments, as did Japanese Prime Minister Keizo Obuchi, who said, "We do
> not
> make such comments and we see it inappropriate for us to make such
> comments."
>
> For his part, Prime Minister Mahathir calmly said, "We cannot accept moves
> to
> forcibly shake the elected government with mass movements or
> demonstrations."
> Malaysian Foreign Minister, Datuk Seri Abdullah Badawi, however, blasted
> the
> United States in a strongly worded statement that accused the U.S. of
> inciting
> civil unrest and interfering in the internal affairs of the country. The
> Director-General of the Taiwanese Foreign Ministry International
> Organizations
> section said Taipei did not know why the U.S. had to make such public
> statements.
>
> American businessmen present at the dinner were reportedly aghast and
> immediately contacted the headquarters of the U.S. Chamber of Commerce in
> Washington to express their outrage at what they view as the Vice
> President's
> arrogant and grossly misinformed views. In order to assuage Malaysian
> feelings
> and to protect American business interests, former U.S. Ambassador Richard
> Holwill, now head of the Asia Task force at the U.S. Chamber of Commerce
> in
> Washington, issued an immediate apology on behalf of the Chamber and
> denounced
> the Vice President's "appalling performance." Holwill said that Gore's
> interference in an on-going domestic political and legal dispute was
> unwarranted and inappropriate. "Most disturbing, his decision to make
> these
> statements at an international forum where several international statesmen
> were
> prepared to discuss important issues trivialized the power and influence
> of the
> United States," Holwill said.
>
> Savvy Asian observers, however, are concerned that Gore's provocative
> language
> and interference represents more than meets the eye. Indeed, they say that
> because President Clinton was quick to endorse his Vice President's
> statement
> as official U.S. policy, it is clear that an attempt is being made to
> discredit
> the leadership of Prime Minister Mahathir to prepare the way for a
> destabilization of the country. They note the fates of Philippine
> strongman
> Marcos and Suharto of Indonesia (who were both removed from power by the
> United
> States).
>
> The membership in the global "Goldfingers" group cuts across party lines.
> It is
> no secret that the Democratic Party is just as beholden to Wall Street
> insiders
> as is the Republican Party. Populist Democrat Jim Hightower, former Texas
> Secretary of Agriculture, recently wrote that "Wall Street's finest have
> long
> had a backroom affair with the Democratic hierarchy."
>
> Wall Street machinations precede many global conflicts and wars, and often
> flourish amidst them. The problem is, with borders dissolving (the way
> Wall
> Street likes them to) and businesses (small and large) increasingly
> required to
> become global, the financial problems create social turmoil which leads to
> security problems-for business certainly, but more importanly for
> sovereign
> governments.
>
> FOR MORE INFORMATION, SEE:
> IMF Home Page
> http://www.imf.org/external/index.htm
>
> Prime Minister's Office of Malaysia
> http://www.smpke.jpm.my
>
> Corporate Watch
> http://www.corpwatch.org
>
> Third World Network
> http://www.twnside.org.sg
>
> Focus on the Global South
> http://focusweb.org <<ATT00005.html>>
>
Jeff Hearon

Dear SOURCES Reader,

This is to notify you that, as we implement our new system, all
Investigative eJOURNAL and Global BRIEFINGS stories will be
delivered to you via email for the duration of your subscription.

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If you have questions or comments, please contact us at [EMAIL PROTECTED]

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WASHINGTON, DC -- January 13, 1999
National Security Problems Loom in Wake of Globalists' Financial Wheeling and Dealing

A growing chorus of experts from opposing ideologies is saying that unregulated financial globalization is the cause of an international crisis rippling around the world. They say this crisis is brought on by the cynical manipulations of international banks, mutual funds, pension funds, and hedge funds, leading to the impoverishment of millions around the world, and a long-range national security problem for the West and other developed, and developing, nations.

The debt crisis in Latin America in the early 1980s is an example of the national security headaches that can erupt as a result of the kind of economic crises discussed in the following two reports. The problems accompanying Latin America's debt crisis led to the National Security Council successfully engineering a new economic intelligence collection program specifically designed to eavesdrop on foreign financial activities. As detailed in previous reports by SOURCES, this was part of an "early warning" system to alert policymakers of potentially troublesome foreign economic problems, primarily at the International Monetary Fund and World Bank.

Today, similar economic crises around the world, wrought by deliberate economic policies as part of U.S. and Western foreign policy, threaten to do the same. The two following reports by SOURCES contributing editor, Dr. Cliff Kiracofe, and Professor Michel Chossudovsky, a Professor of Economics at the University of Ottawa, examine the portion of U.S. foreign policy which is apparently working to destabilize the international economic arena. They discuss the resulting devastation of Third World economies which is causing an impoverishment and breeding ground for violence and political instability.

PARIS - January 13, 1999
The National Security Ramifications of "Globalization"

By Dr. Cliff Kiracofe

From Paris to Kuala Lumpur, a chorus of voices from opposing ideologies are being raised against the dangers said to be posed by a powerful network of international financiers and transnational corporation heads who are acquiring dominance over global political and economic affairs. Leading statesmen, as well as an international front of progressive organizations and intellectuals, are calling attention to the consequences of unregulated "globalization" by this clique. Unregulated globalization is an essential feature of certain finance capitalists' international strategies. Their detractors maintain that today's worsening international financial crisis is a direct result of the cynical manipulations of these so-called global "Goldfingers" who control international banks, mutual, pension, and hedge funds. Specialists in Washington and an increasing number of congressional leaders are openly concerned that such instability is leading to the impoverishment of millions around the world, creating a growing long range national security problem for the United States and other developed, and developing, nations.

As SOURCES previously pointed out in the report, "The Global Goldfingers Super NAFTA Plot: Will it Create a Widespread Political, Social, and Security Crisis?" the Multilateral Agreement on Investment (MAI), which calls for deregulation of global banks and multinational corporations, will likely create severe social tensions, especially in Third World and emerging nation-states. The MAI presents a problem to those who are professionally interested in the political progress and stability of developing countries. The current failure of globalization, exacerbated by potential consequences of a global MAI, raises the issue of resurgent nationalist and revolutionary movements in developing nations, which will pose a multitude of corporate image and security problems for U.S. companies.

Critics say globalization is the real cause of the current international financial crisis-a "vicious cycle" in which speculators "deregulate" national currencies, become creditors of the state, and then underwrite the public debt with which to finance International Monetary Fund (IMF)-sponsored bailouts. The IMF itself is financed by taxpayers, so the result of the overall process is "corporate welfare" and "crony capitalism." For some critics, the imposition of "globalization" policies resembles 19th century British Imperialism and, they say, a new phase of "colonialization" is taking place around the world under the guise of so-called "neo-liberal" economic models and globalization.
Critics also point to the deregulation of financial markets, capital markets, and foreign exchange markets as the primary cause of the fragility of today's international financial system. Such deregulation has been intensively promoted by transnational business lobbies since the late 1970s and early 1980s.

Once the brunt of primarily conservative critics, progressive and liberal thinkers are worrying about transnational business lobbies, ranging from international chambers of commerce to corporate powerbrokers' clubs like the Trilateral Commission http://www.trilateral.org/. The Bilderberg Group is promoting the global Goldfingers' so-called "neo-liberal" economic agenda by lobbying for deregulation and globalization. The MAI (originally propounded by Sir Leon Brittan, the influential British member of the European Commission and taken up by the Clinton administration) is a case in point, critics say. The neo-liberal economic model, pushed by powerful advocates from Wall Street and London's financial district, is the main cause of today's financial crisis in Asia, critics argue. They also point to the influence of men like Robert Rubin, U.S. Secretary of the Treasury, a chief advocate of globalization in the Clinton administration. Rubin is a former senior partner of Goldman Sachs, the well-known Wall Street firm deeply involved in international finance and Asian "restructuring."

The extraordinary diplomatic gaffe by U.S. Vice President Al Gore during the November meeting of the Asia Pacific Economic Cooperation (APEC) forum added fuel to the fire of concern over Asia's financial crisis. Gore, at a dinner of the APEC Business Summit, called anti-government street demonstrators "brave Malaysians." His blatantly undiplomatic remark provoked a torrent of denunciations from APEC members for interference in the internal affairs of a member state. Nevertheless, Gore was backed by Clinton, further deepening concern in a region beset by instability and socio-economic crisis.

The fact that Malaysian Prime Minister Dato Seri Dr. Mahathir Bin Mohamad is a
leading critic of globalization raised suspicions that the U.S. government may have a secret agenda to unseat the plucky leader of this rising nation. Memories of the U.S. ouster of Philippine strongman Ferdinand Marcos, and the recent fall of Indonesia's Suharto, contribute to a climate of increasing suspicion of U.S. intentions in Kuala Lumpur and in the region.

Malaysia's hard-working multi-racial society has made significant advances over the past three decades since major race riots between Malay and Chinese broke out in 1969, and an emphasis on traditional Islamic values has helped prevent the penetration of Iranian and Libyan versions of radical Islam in this constitutional monarchy. An aggressive development program involving free market economic policies and affirmative action social policies for minorities such as the Chinese and Indian communities achieved remarkable gains until the Asian financial crisis brought the country up short in 1997. Today, the top three investors in the country are Japan, Taiwan, and the United States.


Leading Intellectuals Denounce the Global Goldfingers
In October, while high-level government officials schemed behind closed doors at the Paris-based Organization for Economic Cooperation and Development (OECD) to implement the globalist MAI, several hundred leading intellectuals and progressive activists from around the world gathered in the City of Light to analyze the current international financial crisis and to plan further opposition to the globalists' latest assault on world markets. SOURCES covered the meeting, which was called to focus attention not only on the MAI, but also on the world-wide manipulations of a network of international bankers and corporate powerbrokers.

Economist Susan George, the conference host, is blunt in her assessment of the
international financial situation: "The real 'crony capitalism' is the International Monetary Fund's (IMF) bailouts designed exclusively for major investors to save their crony capitalists," George told SOURCES. "Billions are being taken from taxpayers in the North primarily to bail out the major investors in the South."

Michel Chossudovsky, economics professor at the University of Ottawa, is equally direct in describing the overall international financial crisis. "This is the most serious economic and social crisis in modern history," he told SOURCES. "It surpasses the global Depression of the 1930s and involves the impoverishment of huge sectors of the world's population. This is a period of social decomposition predicated on a displacement of existing economic systems, so we are witnessing the destruction of national economies."

The scope of the social devastation caused by the financial crisis is just coming
to be understood. For example, according to a recent report by Oxfam International, more than 15 million Indonesians will be out of work by the end of 1998. In South Korea, local governments have opened orphanages to handle the tens of thousands of children being abandoned by parents who are without employment and income. Labor rights are becoming seriously threatened as evidenced by a police crackdown on a strike by workers at South Korea's Mando Machinery, part of the Halla Group and one of the largest automobile parts manufacturers in the world.

Executives of the Wall Street-based Rothschild Group, which is administering the "restructuring" of the Halla Group, reportedly demanded that the strike be put down.
Professor Chossudovsky emphasizes the social instability resulting from the crisis, which,
in his view, has been brought about by the systematic manipulation of a network of international bankers and financiers-a network backed by international financial organizations like the IMF. "What we are seeing is the decomposition of the state and its social programs as well as the destruction of small and medium producers," Chossudov-sky says. The "structural adjustment" programs of the IMF, combined with the speculative movement of capital and certain actions of the World Trade Organization, have led to the current crisis, he argues. Pointing to the situation in South Korea, he says the IMF bail-out agreements caused the bankruptcy of 80 percent of the construction industry.

Considerable international attention is now focused on speculative movements of capital, so-called "hot money." Martin Khor, a leading Malaysian journalist and head of the Third World Network, is succinct in his assessment. "Asia is in crisis caused by speculative movements of capital, and many people have suffered from this disaster," Khor told SOURCES. "We have seen that freedom of capital flows has caused tremendous disruption and catastrophe. In Southeast Asia, we are losing confidence in foreign capital investments and in the movement of capital."

During the early to mid-1990s, growth rates in East Asia were high. China recorded annual growth rates of between 9 percent and 14 percent, while Indonesia, Malaysia, and Thailand recorded rates of between 7 percent and 12 percent. Net capital inflows for China and Vietnam were foreign direct investment (FDI) denominated. But net capital inflows for Indonesia, South Korea, Malaysia, and the Philippines were substantially short-term. Thailand had a high level of short-term inflows, about 7 percent to 10 percent of GDP, each of the years during 1994 to 1996, while its FDI was only one percent. On the other hand, in Malaysia, for example, between 1995 and 1996, short-term capital was about 4 percent to 4.5 percent of GDP, while its FDI was at 5 percent.

Capital flows of previous decades were primarily government-to-government, or from
multilateral agencies, but in the early 1990s there was a dramatic increase in the flows of private capital to these emerging economies. The amount of private capital flowing into world-wide emerging markets rose from U.S.$50 billion in 1990 to U.S.$336 billion in 1996. Daily currency turnover in the foreign exchange markets rose from an average of U.S.$190 billion a decade ago to some U.S.$1.2 trillion in 1995.

Khor explains that given extreme volatility in capital movements, the Malaysian
government in early October 1998 correctly placed capital controls on capital movements, following the Chinese model. Malaysia also followed the Chinese model with exchange controls in order to prevent the manipulation of the value of the national currency by speculators. But the IMF has told Indonesia that it is not allowed to impose capital controls. Khor emphasizes the negative consequences of unregulated capital flows. "This crisis will become a permanent feature and it will get worse in the years to come," he warns.

Experts say there is an estimated $21 trillion moving around the world for international investments. Of this total, they say, pension funds account for about $5 trillion, financial institutions account for about $7 trillion, and insurance companies account for about $7 trillion. In this situation, they say, a shift of only one percent of these funds can destabilize countries. National sovereignty is under attack by a clique of international financiers, they say.

Concerned analysts on opposite ends of the political spectrum appear unanimous on the political dimension of the financial crisis. The Asian crisis is a result of a "political project," Philippine intellectual, Antonio Turan, president of the Ibon Foundation, told SOURCES. "Globalization is a political construction, a political project," he says. "It is political in its application in the sense of imposing neo-liberal reforms. And the Asian crisis is important because Asia was promoted as a special model of globalization, particularly to Third World Countries." The original model, Turan explains, involved management for investment, controlled investment regimes, and competitive exports, but the model was then shifted to involve financial deregulation and trade liberalization.

Turan agrees that speculative capital flows contributed to the crisis. For him, large capital flows into Southeast Asian countries, the main bulk of which are speculative portfolio investments, are at the heart of the problem. "In the Philippines, 85 percent of the increase in foreign investments were speculative in the stock market, in the bond market, and in the real estate market," he says. "But money started to leave the Philippines and Thailand in 1996 and there was a decline of exports accompanied by outward net capital flows. In 1997, there was the crash and it involved liquidity problems." But interest rates have been high, Turan says, and so Philippine businessmen have become angered by IMF-imposed rates and have demonstrated against the IMF to dramatize their concerns. "Labor has also been marginalized, and there were over 100,000 laid off in the first six months of 1998 alone," he points out.

Background of the Goldfingers' Globalization Strategy
The roots of the current international financial crisis reach back several decades,
according to experts. "The globalization of poverty did not begin in the 1990s," Professor Chossudovsky says. "It began with the debt crisis of the early 1980s and the reforms imposed by the IMF. This led to the impoverishment of peoples and a destruction of economic activity." He says the process has been complex. "The structural adjustment programs of the IMF involve repressive mechanisms and policies. There have been successive devaluations and no limit to macro-economic manipulation." So-called "neo-liberal" economic models have been imposed on governments who "pretend to be Social Democratic, Socialist, and even Communist" Professor Chossudovsky says. The imposition of this model is "predicated on minimizing the cost of labor and minimizing employment on a world-wide level," he argues. Consequently, "we see a collapse in the standard of living and a decline in the levels of spending, as well as a displacement and destruction of productive capacity which exists. This kind of expansion of capitalism is only at the expense of existing economic systems."

Professor Chossudovsky told SOURCES that he sees a systematic program of manipulation being implemented by a powerful combination of international bankers and transnational corporations. "The Asian economic crisis is a result of the manipulation of financial markets," he says. "The so-called 'contagion,' as reported in the mainstream media, is a fabrication. The real policy of the international manipulators is to destabilize money, the currency. but the press distorts the real cause of the global crisis, which is the deliberate collapsing of currencies through the use of special instruments."

Whether or not this is part of a premeditated grand globalist scheme. Chossudovsky appears to be correct in saying that "large financial institutions [are using] ... instruments [such] as derivatives and foreign exchange speculation," and that the use of these special instruments can "create conditions where national currencies. What we have is the programming of bankruptcy to displace the existing economic system. And when the IMF calls for the closing of large sectors of the economy, the industries are bought up cheaply by foreign interests"

Global Goldfingers' Attack on Central Banks Sparks Crisis
Although the world-wide financial manipulations which create such situations are highly
complex and conducted in secret, a cause and effect is apparent to the observer, experts say. A key observable element is systematic attacks on the central banks of nations which are targeted by the manipulators. Professor Chossudovsky told SOURCES that "These speculative assaults are coordinated attacks by institutional speculators, the large banks and investment banks," he explains. "They coincide with IMF pressures to create the conditions for the collapse of national currencies. The Indonesian currency, for example, was unpegged just a few months before the crisis and we can see the results."

When a nation's currency is under attack, central banks respond by attempting to defend the currency. "To maintain parity, the central bank sells dollars," explains Professor Chossudovsky, "but this leaves the central bank with [a] multi-billion dollar debt." Korea, Thailand, and Indonesia are examples of the consequences of this manipulation, he points out, adding that it is the same institutions that approve the bail-out agreements. "These are large multi-billion dollar financings [which] reimburse the speculators," he says. "So what we really have is welfare for the private speculators... Once the bail-outs are implemented, the same international speculators are called in to put the productive assets on the auction block and so the national economies are sold off to international capital via privatization."

The result of attacks on central banks is the appropriation of reserves and this amounts to privatization of the central banks, Professor Chossudovsky asserts.  "This spells the end of the central bank as a national institution," he says. "With this privatization of central banks, development finance is left in the hands of external creditors, and countries lose control over their national economies."

French financial expert, Professor Francois Chesnais, a panelist at the Paris conference, agrees that speculative finance is at the bottom of the present international crisis. "There is a transfer of wealth from those who produce it to the financial profiteers," he told SOURCES. "There are over $1.3 trillion per day in financial transactions involving the movement of money from one currency to another. Perhaps two or three percent has economic meaning, and most of it is speculative. The international speculators create turbulence in order to make profits." Professor Chesnais maintains that "stable exchange rates are needed." Trade liberalization and de-regulation are forms of "tax evasion" he says, and governments are borrowing "from the very people they refuse to tax." He favors the so-called "Tobin Tax" (a suggestion offered several years ago by a U.S. Professor Tobin to place a tax on speculative foreign exchange transactions) as a means to restrain speculative activity.

The Global Goldfingers Target Malaysia
The Asian financial crisis has spurred considerable thought and action on the part of regional governments. Although Asian successes have been built on carefully managed market policies, some leaders believe that globalization has gone too far and that deregulation of financial markets opened the door for destabilizing manipulation by international speculators.

Malaysian Prime Minister Dr. Mahathir Mahamad, a moderate Muslim and nationalist, is a leading critic of such speculators. "We put in place tried and tested strategies for a continuous thirty-year growth plan," he says. "We had practically no foreign debts, our growth was high, our inflation low. We dismissed the rumor that Malaysia would go the way of Mexico. We did not realize how close we came to a manipulated economic crisis and we blithely sailed on. But now we know better." The Mahamad says that the current international financial crisis can been seen as a manipulated phenomenon. "We know now that Mexico's economic crash was manipulated and made to crash, and that the economies of other developing countries too can be suddenly manipulated and forced to bow to the great fund managers who have come to be the people to decide who should prosper and who shouldn't."

In the Prime Minister's view, the crisis in Japan and Korea, as well as in Mexico, have been manipulated by international speculators. "We had forgotten the experience of Japan and Korea," he says. "When these two countries seemed about to catch up with the developed world, things began to happen to them. The Yen was yanked up in order to reduce the competitiveness of Japanese goods, while Korea was designated an NIC, a newly industrializing country which must be stopped in its track. We had even forgotten the lesson of Mexico whose economy was suddenly blighted when foreign funds were suddenly withdrawn. Mexico was forced to borrow 20 billion U.S. dollars in order to tide over and restore its fractured economy. Someone made a packet from this loan."

When Malaysia became independent in 1957, the per capita income of its 5 million people was $350. By June 1997, after four decades of single-minded effort, the per capita income of its 20 million people was some $5,000. "All along we tried to comply with the wishes of the rich and the mighty," says the Prime Minister. "We have opened up our markets, including share and capital markets. We were told that we must allow our money to be traded outside our country. We were told to permit short selling, even to let trading in borrowed shares be legalized. We were told to slow down our growth. In particular, we were told we should not venture into big projects, even if only to provide the necessary infrastructure we were told we needed."

Like a growing number of Asians, the Prime Minister has deep suspicions of the developed nations. "Quite a few people ... in control of the big money seem to want to see these South East Asian countries, and in particular Malaysia, stop trying to catch up with their superiors and to know their place. There may be no conspiracy as such but it is quite obvious that a few at least ... fund managers, have their own agenda which they are determined to carry out."

Currency speculation and manipulation, is a major concern for Malaysia. "The currency traders apparently make billions with each transaction," he says. "But when the funds at their disposal are huge, and they are in a position to influence the values of the currencies with their investments and divestments, then the currency markets become cash cows to them. Unfortunately, their profits come from impoverishing others, including very poor countries and poor people. Southeast Asian countries have now become their target simply because we have the money but not enough to defend ourselves."

Notwithstanding concerns about unscrupulous international financiers, the Prime Minister indicates an openness to foreign investment. "Despite our bitterness over the attempts to push us back by a decade through forced devaluation of our currency through the rape of our share market, we in Southeast Asia and in Asia are still keen to receive investments from Europe and America. But it should be appreciated that we of Southeast Asia, at least, are now very scared about foreign capital. We will have to be more circumspect. We still believe that there are sincere investors out there, but there are also quite a few rogues who can cause an avalanche forcing others to run for cover." 

Clinton Globalist Policy Gored
The provocative speech given in Malaysia on November 16 by Vice President Al Gore set off a fire storm of denunciations by APEC leaders. New Zealand's Prime Minister Jenny Shipley was quick to point out that it was not her country's style to use "megaphone diplomacy." New Zealand will host next year's annual APEC meeting. Singapore Prime Minister Goh Chok Tong expressed similar sentiments, as did Japanese Prime Minister Keizo Obuchi, who said, "We do not make such comments and we see it inappropriate for us to make such comments."

For his part, Prime Minister Mahathir calmly said, "We cannot accept moves to forcibly shake the elected government with mass movements or demonstrations." Malaysian Foreign Minister, Datuk Seri Abdullah Badawi, however, blasted the United States in a strongly worded statement that accused the U.S. of inciting civil unrest and interfering in the internal affairs of the country. The Director-General of the Taiwanese Foreign Ministry International Organizations section said Taipei did not know why the U.S. had to make such public statements.

American businessmen present at the dinner were reportedly aghast and immediately contacted the headquarters of the U.S. Chamber of Commerce in Washington to express their outrage at what they view as the Vice President's arrogant and grossly misinformed views. In order to assuage Malaysian feelings and to protect American business interests, former U.S. Ambassador Richard Holwill, now head of the Asia Task force at the U.S. Chamber of Commerce in Washington, issued an immediate apology on behalf of the Chamber and denounced the Vice President's "appalling performance." Holwill said that Gore's interference in an on-going domestic political and legal dispute was unwarranted and inappropriate. "Most disturbing, his decision to make these statements at an international forum where several international statesmen were prepared to discuss important issues trivialized the power and influence of the United States," Holwill said.

Savvy Asian observers, however, are concerned that Gore's provocative language and interference represents more than meets the eye. Indeed, they say that because President Clinton was quick to endorse his Vice President's statement as official U.S. policy, it is clear that an attempt is being made to discredit the leadership of Prime Minister Mahathir to prepare the way for a destabilization of the country. They note the fates of Philippine strongman Marcos and Suharto of Indonesia (who were both removed from power by the United States).

The membership in the global "Goldfingers" group cuts across party lines. It is no secret that the Democratic Party is just as beholden to Wall Street insiders as is the Republican Party. Populist Democrat Jim Hightower, former Texas Secretary of Agriculture, recently wrote that "Wall Street's finest have long had a backroom affair with the Democratic hierarchy."
 
Wall Street machinations precede many global conflicts and wars, and often flourish amidst them. The problem is, with borders dissolving (the way Wall Street likes them to) and businesses (small and large) increasingly required to become global, the financial problems create social turmoil which leads to security problems-for business certainly, but more importanly for sovereign governments.

FOR MORE INFORMATION, SEE:
IMF Home Page
http://www.imf.org/external/index.htm

Prime Minister's Office of Malaysia
http://www.smpke.jpm.my

Corporate Watch
http://www.corpwatch.org

Third World Network
http://www.twnside.org.sg

Focus on the Global South
http://focusweb.org