...IMF medicine almost always includes demands to privatize state
industries, to slash public spending even on health and education,
devalue the national currency against the dollar, and open the
country to free flow of international capital-both in and,
especially, out.
First the IMF demands the government in question sign a secret
Memorandum of Understanding with the IMF, in which it agrees to a
list of "conditionalities", the pre-condition for getting any penny
of IMF aid.
Under today's globalized free capital markets, banks do not invest
in a country that does not have the IMF seal of approval. So the
IMF role is far more than giving some emergency loan. It determines
if a country gets any money from any source at all-World Bank,
private banks and other.
The conditions of an IMF deal are always the same. Privatization of
state industries is top on the list. The effect of privatization
with a cheap Peso or Rouble currency is that foreign dollar
investors are able to buy up the prime assets of a country dirt
cheap.
Often the politicians involved in the country get corrupted by the
lure of under-the-table deals in privatizing their national assets.
Foreign multinationals can grab profitable mining, oil, or other
national treasures with their dollars.
The case of the Yeltsin government in Russia is classic, with
dollar billionaires emerging overnight on the looting of national
assets via IMF-dictated privatization. The Clinton Administration
backed the process fully. They knew it turned Russia into a dollar
zone, and that was the intent.
The second demand of the IMF is that a country liberalize, that is
open, its financial and banking markets to foreign investors. This
allows high-profile speculators like George Soros or Citibank or
Credit Suisse to come into a country, run up asset prices in a
speculation, take huge profits, as in Thailand in the mid-1990s,
and quickly sell, then exit with huge gains, as the local economy
collapses behind them. Then Western multinationals can come in
after, and take prime assets at very low cost.
This is what happened to Asia in the 1990s. The IMF and US
Treasury, which actually determines US IMF policy, began strong
pressure on the fast-growing East Asia "Tiger" economies in 1993,
to remove national controls on capital flows. They argued it would
help Asia get large sums of money to invest.
What it did was give US pension funds and big banks a huge new
market for speculation.
Too much money flowed in, and an unhealthy real estate bubble grew.
It burst when Soros and other US speculators deliberately pulled
the plug in 1997, triggering the Asia crisis. The end result was
that for the first time, Asian economies were forced to turn to the
IMF to be rescued.
But the IMF did not "rescue" any Asian economy in 1998. It rescued
international banks and hedge fund speculators. In Indonesia, the
IMF demanded the government raise interest rates to 80%, on the
argument that would keep foreign investors from leaving, and
stabilize the situation.
In fact, as critics like Joseph Stiglitz charged at the time, the
IMF interest rate demands guaranteed a full-blown collapse of the
Indonesian and other Asian banking systems.
Once the IMF got control of South Korea, one of the strongest
industrial economies in the world, it demanded breakup of large
industry conglomerates, charging "corruption" and "crony
capitalism."
In fact, Washington hoped to weaken a growing competitor and open
the door for US companies like GM or Ford to take over. In part it
worked, until Korea and other regional economies were strong enough
to re-impose national controls.
Malaysia openly defied the IMF demands and imposed currency
controls during the crisis. The damage to Malaysia was minimal as a
result, a great embarrassment to the IMF...
http://www.serendipity.li/hr/imf
Thank you poh for your wall of text instead of your own original
thoughts. At least better than the moronic ex-citizen living US who
offers nothing except provocative insults.
I only ask you these in the hope that you will learn to
differentiate between slaving to others' opinions but instead
develope your own critical analytic skill:-
1. Is it fair that msians can invest and withdraw funds anytime
anywhere, but others investing in msia cannot withdraw their funds
anytime?
I more or less can guess your answer, either way which will only
support the view that protectionism is an unnecessary evil.
2. If capital controls are so good, why isn't Msia still using
it?
3. Did capital control actually work? or was it a general recovery in asia that
worked instead, because other asian states did not adopt msian
measures and did no worse.
