The global capitalist crisis (part VI) A question of control The following article was published in "The Guardian", newspaper of the Communist Party of Australia in its issue of Wednesday, December 9th, 1998. Contact address: 65 Campbell Street, Surry Hills. Sydney. 2010 Australia. Fax: (612) 9281 5795. Email: <[EMAIL PROTECTED]> Webpage: http://www.peg.apc.org/~guardian Subscription rates on request. ****************************** By Anna Pha A casual glance at recent headlines in the media could lead one to think that the International Monetary Fund (IMF) and Australia's Prime Minister have abandoned their blind faith in the financial markets and were considering some form of control over capital movements. But nothing could be further from the truth. They are just as obsessed with opening up financial markets as ever. Because of the present crisis and the widespread questioning of "the system" they are being forced to manoeuvre. Their problem is how to maintain their objectives without bringing down the capitalist system itself. At the very most they are prepared to accept some temporary measures to restrict the flight of capital during a crisis -- a form of crisis management. "The global financial system ... failed us", Howard told an international conference of banking supervisors in Sydney on October 22, 1998. He put forward three specific proposals. The first called for the "monitoring and supervising [of] highly leveraged short-term financial flows, off balance sheet commitments and derivative transactions". He did not call for controls or limits on the highly speculative operations of banks and hedge funds, only less secrecy so that the risks being taken are more widely known. Crisis management Howard's second recommendation was for "measures to better manage future crises", and "to facilitate private sector involvement in crisis management". "These [measures] might include standfast arrangements to prevent lenders from exiting economies in a destructive stampede ..." These "standfast arrangements" during a crisis are the nearest he comes to any form of control. His third point is: "the need for the IMF to be able to provide speedy and substantial support to appropriately qualified countries caught in international contagion ...". The latter two points are a de facto admission that the current policy direction will result in further big crises. Howard reassured his international banking audience: "We do not want to constrain the natural workings of the market beyond what is necessary to ensure its stable operation." Ian Macfarlane, Governor of the Reserve Bank of Australia, had put similar propositions to the same conference the day before. The calls for greater private sector involvement, greater disclosure and some sort of "standfast" arrangements for crisis management fall in behind the IMF's approach. IMF Managing Director, Michel Camdessus, described the crisis as "systemic", and if treated properly a "temporary setback". Refusing to acknowledge the role of the hedge funds and financial markets or the IMF's policies, he said that many of the problems stemmed from "managed development" and "too close a link between banks, corporations, and the state ... a global crisis requires a global response. The architecture of the system needs to be strengthened, but not by direct intervention [by government]." More orderly deregulation Instead of abandoning the deregulation of capital flows the IMF is calling for a "more orderly liberalisation". The IMF fears a setback to its objective of full deregulation and the exclusion of governments. This fear was expressed by Macfarlane: "One reaction to the instability of the international system would be for countries to unilaterally impose quite restrictive controls on inward and outward capital movements... We have already seen this starting, and it would be regrettable if it were to spread." More powers to the IMF The G7 (seven leading capitalist nations) meeting in November decided on measures to strengthen the role of the IMF. It should intervene in economies before a crisis hits. If governments are prepared to accept the IMF's conditions then their credit would be topped up by loans from G7 countries and from the private sector. This was the approach with Brazil. The IMF recently stepped in with a US$30 billion package conditional on budget cuts and austerity measures to prevent a crisis and promote the stability of the international financial system. The G7 countries agreed on a number of other measures to carry out closer scrutiny of and "strengthen the international financial system". The IMF will charge more for loans and insist they be repaid faster and will, claims the G7, be more open. G7 governments are committed to opening markets further at the same time as limiting the swings of boom and bust. These are contradictory aims. The swings and the boom-bust cycle are inherent to capitalism and the greater the power of financial institutions to manipulate markets, the more likely the economies and peoples of the world will be hit by more big crises. The unfettered movements of capital and the financial speculation on stock-exchanges and futures markets will make that elusive stability and sustainability that capitalists yearn for but can never achieve, even more impossible. The G7 decisions have the aim of tightening the grip of the IMF, the World Bank and private capital over national governments. That is why Howard and others talk of involving private capital directly in crisis management. They are prepared to sacrifice the national sovereignty of Australia and other countries to secure the universal control by private capital. Role of private sector Right-wing US Republicans support this objective but with a twist. Recognising that the IMF is discredited they have suggested that the IMF should play a more placid role and hand its bailout role over to the private banking sector. The International Institute of Finance (IIF) (representing the world's largest banks and investment houses) has called for the creation of a Private Sector Advisory Council to give advice and supervise the activities of the IMF. The IMF responded to the IIF proposals with calls for steps "to strengthen private sector involvement" in crisis management, for some "power sharing arrangement". The aim of the IIF is to transform the IMF so that the private sector takes over the IMF's present functions of inspecting economies and telling governments what to do. The IMF on which governments are represented would end up with some sort of token role. This would give the big international banks, investment houses and other speculators invaluable inside information and put them in the front seat for speculative raids as they stood over governments, took over industries or destroyed whole economies. The TNCs are already heavily involved in driving the agenda of the World Trade Organisation and IMF but they want total and exclusive control. If the IMF moves down the path of power sharing and eventual takeover by the TNCs, and governments continue to liberalise trade and their financial systems, the question of a direct dictatorship by TNCs is well and truly on the agenda. Sovereignty Christopher Lingle writing in the "Australian Financial Review" says: "... the idea that nation-states can control capital markets is obsolete. Many governments refuse to acknowledge that their policies and the political culture supporting them are outmoded... "The retrograde action of attempting to impose control over capital is the last refuge of scoundrels." But controls are the only means by which financial and other economic matters can be stabilised. Hence it is not surprising that controls were central to the demands of those governments that have defied the IMF's free market dictates. (See Part V of this series, "Guardian", Dec 2, 1998) Heresy it might be to the Camdessuses, Lingles and Macfarlanes but for many millions of people it is a matter of survival. Apart from the immediate economic consequences of handing over controls to the "markets", there are serious ramifications for the democratic rights of the people. The election of governments is one of the few means by which people are given any opportunity to express their will, to determine the sort of society they live in. As deregulation, privatisation and the surrender of governments erode those democratic rights the power of monopoly capital increases. People's policies The responses of most of the governments which have taken some measures to protect their financial systems basically centre around imposing limits on speculation and sudden shifts in capital flows. There are many desirable reforms that can be demanded to alleviate some of the problems in the short term. These involve the imposition of controls on foreign investment, capital flows, interest rates, currency exchange rates and currency trading and the outlawing of speculative trading. There are other measures relating to accountability and reporting which are necessary so all trading is on the books. Hedge funds should be abolished, or failing that not allowed to borrow such vast sums on relatively small amounts of capital. The IMF, World Bank and WTO must come under the democratic control of all governments, not just the most powerful. The whole question of new approaches to international co-operation are needed. These types of measures need further study and development, particularly in the light of today's technology and communication systems and the nature of transnational corporations and their global structures. The aim of such measures is to give governments the power to prevent or resolve crises when they occur, to curb the powers of the big financial institutions and put limits on speculation. While technological developments make globalisation a reality -- the question is how to make it serve the interests of people instead of monopoly capital. None of the above measures would prevent future crises occurring, end the exploitation of workers, or remove the gross inequalities between the rich and poor. To bring the financial sector under democratic control the banks and other financial institutions have to become publicly owned. Private sector failed The private sector has proved to be a dismal failure. It cannot manage to provide people with the basics of clean drinking water, electricity, fuel, housing, hospitals, or food. Capitalism has failed to harness for the people the potentials offered by technological change, by the incredible advances in science, communications and transportation. Even in the industrialised countries like Australia, New Zealand and the US, it has failed to maintain the level of services that were previously supplied by the public sector. On a global scale it is destroying the environment and threatening the future of humanity. Capitalism is holding back progress, it cannot provide environmentally sustainable development or meet the needs of the people on a global scale. The contradictions between the drive for profits and the needs of people and the environment are becoming sharper and clearer. This conflict of interest can only be resolved by the public ownership and democratic running of industry and services, including financial services, in the interests of the people. That is socialism. Then, big enterprises would become the servants, not masters, of the people. ****************** Next week: The crisis and issues for Marxists. The Guardian 65 Campbell Street, Surry Hills. 2010 Australia. Email: <[EMAIL PROTECTED]> Website: http://www.peg.apc.org/~guardian end ============== Leftlink - Australia's Broad Left Mailing List As vilified, slandered and attacked by One Nation mailto:[EMAIL PROTECTED] http://www.alexia.net.au/~www/mhutton/index.html Sponsored by Melbourne's New International Bookshop Subscribe: mailto:[EMAIL PROTECTED]?Body=subscribe%20leftlink Unsubscribe: mailto:[EMAIL PROTECTED]?Body=unsubscribe%20leftlink
