Date: 05/07/99
It was the crisis Asian economies had to have - Uncle Sam said so.
by CHALMERS JOHNSON
Addressing what did cause the crisis is the main business of the leaders
of East Asia as they reflect on what has happened over the past two years.
If they ignore this question and pretend that the road is still open to
"globalisation" in the Pacific, they risk being repudiated by their own people.
Here's the new explanation as it is developing in seminar rooms from Seoul
to Kuala Lumpur to Beijing.
With the end of the Cold War, the US decided it had to launch a rollback
operation in East Asia if it was to maintain its global hegemony. The high-growth
economies of East Asia had become the main challengers to American power
in the region, and it was time they were brought to heel.
The campaign worked in two phases. First, a major ideological barrage was
launched to soften up the Asians. The Americans mobilised famous professors
of economics from their universities, who never once faced a "market force"
in their lives, to preach the beauties of globalisation, in this case meaning
American economic institutions.
They include total laissez faire, destruction of unions and social safety
nets, staffing of regulatory agencies with retired financiers, indifference
to the pay differentials between chief executive officers and the ordinary
labour force, moving manufacturing to low-wage areas regardless of the social
costs, and totally unregulated flows of capital in and out of any and all
economies.
Since the Asia Pacific Economic Co-operation summit in 1993, the Americans
have hammered home to the Asians that they needed to "open up" their economies
in these ways.
Then came phase two. Once the Asian economies had begun to "deregulate" and
were standing in the world marketplace more or less naked, the "hedge funds"
were let loose on them. These funds are actually huge concentrations of capital
owned by very wealthy Western white men, who manipulate bewilderingly complex
financial instruments called derivatives.
They usually locate their offices in offshore tax havens such as the Cayman
Islands and do everything in their power to avoid regulators or tax collectors
in the so-called free-market democracies.
The funds easily raped Thailand, Indonesia and South Korea and then turned
the shivering survivors over to the IMF, not to help the victims but to ensure
that no Western bank was stuck with "non-performing" loans in the devastated
countries.
The IMF is also the US Government's chosen instrument for "reforming" these
countries to make them look more like New York.
The Americans suspected that all this might cause some trouble.
On March 4, 1998, Admiral Joseph Prueher, then commander in chief of American
military forces in East Asia and today the US ambassador-designate to China,
testified before Congress that the US military was on alert for "early signs
of instability" in East Asia, including "labour disputes." The Indonesian
armed forces, whom Prueher's special forces had been training for years,
got rid of Soeharto when it seemed necessary. The Indonesian troops killed
about 1,200 shopkeepers and raped more than 150 Chinese women doing so.
Then it all got a bit out of hand. One of the biggest hedge funds proved
so greedy that the US had to organise a bailout, which brought the scheme
out into the open. David Mullins, a former deputy to the Federal Reserve
chairman, Alan Greenspan, had gone straight to work for the Long-Term Capital
Management fund after he left the Federal Reserve in 1994. Had this not been
the case, it's unlikely that the Federal Reserve Bank of New York would have
arranged a $US3.5 billion ($5.25 billion) rescue for it. The incestuous
relationship between Washington and Wall Street - what the Columbia University
economist Jagdish Bhagwati calls the Wall Street-Treasury complex - made
East Asia's crony capitalism look tame.
The weakened economies of East Asia also could not continue to buy the weapons
the Pentagon wanted to sell them, and some began to have second thoughts
about paying to keep US Marines (aka the Hedge Fund Protective Corps) in
their countries.
Globalisation was discredited as a crooked financier's scam. The Chinese
never looked so clever as they did in keeping out of the World Trade
Organisation, as did the Japanese when they more or less ignored the pleas
for "reform" from Washington.
These issues came to a head in Kuala Lumpur last November when the US trade
representative, Charlene Barshefsky, accused Japan of offering $US30 billion
in aid to the stricken countries of East Asia as a way of buying their votes
against further measures to open markets.
The Japanese foreign ministry responded that the US Government was possessed
by "an evil spirit," a phrase painfully close to the evil empire epithet
that President Reagan used against the Soviet Union.
The Vice-President, Al Gore, then gave a speech in the Malaysian capital
denouncing its head of state for trying to protect his country from international
speculators and calling on the people of Malaysia to overthrow him. After
that, APEC no longer had a future worth speaking of.
The Americans do not seem to understand that their message of free trade
and market economics is in serious disrepute. Wall Street itself now looks
like the ancestral home of crony capitalism.
Chalmers Johnson is president of the Japan Policy Research Institute in
San Diego.- Los Angeles Times