Chaos in the markets basic of moral and human rights pre- detention laws. [Suaram/BS] *
* world economy It has been great fun watching capitalists squirming with nervousness as thel markets rise and tall, writes Andy Kilmister The annual meeting of the World Bank and IMF was disrupted by a vicious argument in the mass media between currency speculator George Soros and Malaysian premier Mahathir Mohammed
What is the significance of these developments? Are they the beginnings of a lurch into instability for the world economy or are they just the result of stock exchange gambling with few effects elsewhere?
The current currency and stock market turmoil has both short and long term causes. In the short run two things are important.
Firstly, there are problems in the financial sector in a number of Asian countries. Risky property lending in Malaysia, Thailand and Indonesia and a growing Thai trade deficit sparked off the initial selling of currencies.
Unsustainability
This has now spread to Hong Kong property market has also been booming in an unsustainable way. There are growing worries about the future ability of countries like Thailand to break into the higher value export markets in Europe and the US in areas like electronics.
The second short term issue is that there is a huge amount of speculative money now circulating in the global financial markets. This is because there has been a sustained shift throughout the last decade in the balance between profits and wages throughout much of the capitalist
Yet higher profits have largely not gone into productive investment, except in the USA, but have been placed in the financial markets. These markets have been expecting a slowing down of economic activity for more than a year now and are increasingly worried.
As a result speculative activity in both shares and currencies is becoming more frenzied as traders jockey for position, trying to spot the areas which will fall least when the bubble bursts and avoid the others.
Asian economies are not the only ones which have been abandoned in this process. In May and June there was a speculative demand for, and then selling of, the Czech koruna which led to a massive devaluation. The Czech government won the subsequent vote of confidence by just one vote!
We can expect to see share prices everywhere become increasingly volatile as the markets prepare for the inevitable realisation that the boom market of the last few years cannot last for ever.
But there are some longer term influences which have played a more important role in the crisis in South East Asia. Four in particular seem especially important.
Firstly, there is the long running recession in Japan. Much of the development of the Asian economies has rested on Japanese investment. While this is continuing to some degree, the weakness of Japanese banks and the economy more generally has fed through to other Asian countries.
Secondly, there is uncertainty about the future role of China in the Asian
Malaysia Protesting the Internal Security Act
A rare public protest against Malaysia's notorious Internal Security Act (ISA) took place outside Kamunting Detention Centre on October 26th. It marked the tenth anniversary of Operation Lalang (Weeds) when 119 individuals were arrested and detained without tria
The picket called for the repeal of the ISA and other repressive laws and for the release of those currently imprisoned under those laws. According to the 36 sponsoring organisations, these laws "are obnoxious and oppressive instruments of state maintained by the ruling government as instruments of control over our public life and civil society."
Introduced in 1960, three years after Malaysia won its independence, the Internal Security Act consolidates legislation used by the British against the anti-colonial and anti-imperialist movements. In the 1960s and 1970s the new regime's main dissidents were trade unionists, political and student activists. Since the 1980s, the legislation has been increasingly used against social and environmental activists.
Under the ISA, people have been detained for up to 16 years without any evidence of wrong-doing. Their cases are subject to review only by the Minister for Home Affairs. According to the protesters, these laws "violate the most 26 International Viewpoint #295 cepts: that no one should be punished without clear public proof in a court."
Operation Lalang (Weeds) in 1987 led to the detention without trial of 119 people, including the Leader of the Opposition and a wide range of political, religious, social and environmental activists. None were charged. They were arrested simply to intimidate and crush the extra-parliamentary opposition to the ruling coalition and to deflect attention away from political infighting within the main party and the economic situation.
Although it is the most infamous, the ISA is unfortunately not the only law in Malaysia that allows the government to detain people without trial. Thousands have been incarcerated under the 1969 Emergency (Public Order and Prevention of Crime) Ordinance, and the 1985 Dangerous Drugs (Special Preventive Measures) Act. Detentions are under the complete control of the police and the Ministry of Home Affairs. Since there is no public scrutiny of the detentions by the courts, the detainees and their families suffer considerable abuse
The organisers, including opposition political parties, labour and consumer groups and social and environmental activists, called on the government to follow the example of South Africa, by reforming the constitution and repealing region, both politically and economically. Competition from China will have major implications for countries like Thailand, Indonesia and Malaysia.
Thirdly, questions have been raised about the future interest of the US in Asia. The USA is the fastest growing economy among the major capitalist powers. Increasingly it appears centred on its own regional economic bloc based on the NAFTA treaty and relations with Latin America.
There are deep divisions within the Asian countries about how to respond to this. Malaysian leader Mahathir Mohammed is gesturing towards an economic break with the US and the formation of an East Asian Economic Community. Other Asian leaders are opposed to this strategy.
Fourth, questions have been raised about the underlying basis of the so-called "economic miracle" in East and South East Asia. In 1995, influential US economist Paul Krugman argued that growth in Asia has depended not on increased efficiency but on the mobilisation of more and more resources. Writing in the journal Foreign Affairs, widely read in US policy making circles, Krugman argued that Asian growth is bound to slow down dramatically in the future as the scope for such mobilisation decreases. He drew an explicit comparison between East Asia now and the USSR and Eastern Europe in the 1950s. While Krugman's theses are controversial they point to an important change of mood amongst governments and businesses in the US and elsewhere. The Asian economies are seen less and less as
a model among such people in the way they were a decade ago.
All these factors have come together in the case of South Korea. Widely trumpeted as a major success story in recent years, SELL? including by some on the left, the South Korean economy has experienced two major bankruptcies this year, with a third, the motor company Kia, only averted by taking the company into state ownership The economy is plainly racked by bad debts and rampant corruption.
Even worse for the markets, the South Korean workers in January refused to pay for the crisis by accepting worse conditions and wage restrictions. The South Korean example increasingly stands as a warning of what might happen elsewhere Repercussions
These tremors are unlikely to be restricted to Asia alone. US and British companies in particular are now sufficiently involved in the regions to ensure that any widespread crisis in the Asian financial markets will have repercussions elsewhere.
What are the implications of this for the system as a whole? Does it mean the onset of a more generalised crisis?
Here we have to distinguish between the currency markets and the stock market.
Currency crises under capitalism are essentially redistributive. If some traders (either private or government) lose then others must gain. If the markets lose confidence in the currency of one country they move on to another.
The events of the last few months do not mean that traders have lost confidence in the system as a whole, but that one particular region is viewed less favourably as compared to others.
Stock market crashes are quite different. In these cases the signal is that the capitalist class no longer believes that profits will be as high in the future as they did before. As a result they are prepared to pay less for a share of such profits.
Such a feeling need not be restricted to one region and it may lead to lower investment and spending in the present and contribute to the onset of a full scale crisis.
However, it is not inevitable that changes in financial markets have such an effect. A whole range of other factors interact with them and influence their effect on the economy as a whole. In particular the build up of debt in the economy
The reason why the 1987 stock market crash and the fall in shares in Japan in the
1990s led to recession was largely the mass of bad debts held by the banking system at the time. This factor is not nearly so prevalent now and outside specific countries a collapse in the financial markets is not so likely to lead to a general capitalist crisis on its own.
But that does not mean it is of no significance for socialists. The turmoil in East and South East Asia provides two important lessons.
EXCEL? REALLY EXCEL? SELL! SELL! ELG SELL!) ByE?
GooD ByE? MADNESS! THIS IS I CAN'T TAKE ANYMORE GOO SVE
Firstly, it disproves the view that capitalism can find a 'miraculous' way of organising the economy which can eliminate the possibility of crisis. The Asian economies like all others cannot escape the tendencies to disorder and stagnation which are endemic in the system. Warning
Secondly, it is a warning to those who believe the view which is increasingly commonly expressed in the media that
Sri Lanka
Port privatisation
One of Sri Lanka's major labor unions has warned that the government will face strong international action if it goes ahead with plans to lease part of the
Colombo port to an overseas investor. In an interview with Dow Jones on 17
October, Bala Tampoe, president of the
Ceylon Mercantile Union (CMU), said that the International Transport Workers
Federation (ITS) has begun mobilizing to pressurize the Sri Lankan government against its privatization plans.
The government, eager to invite foreign capital, plans to lease the Queen
Elizabeth Quay to the Australian arm of
Britain's Peninsular & Oriental Steam
Navigation Co. (P&O).
In June, several junior and senior executives carrying CMU membership cards were transferred to another port in the southern district of Galle, away from
Colombo. This effectively crippled the
SELL!
BUY! Buy!
Buy?
Buy! somehow the 1990s are different'; that because of globalisation, or information technology, or some such development, we are now living in a boom that can continue without end.
The underlying features of the system in which we live have not changed in that way. On the contrary, developments of the last few months can only speed the long run trend indicated by the South Korean strikes at the begining of this year. Asia is the continent to watch. * CMUt, according to Tampoe
The union leader said that the ITS, which has a membership of around 3.2 million worldwide, will blacklist all foreign ships serving the Colombo Port Members of the ITS will refuse to provide services to such ships, he added "There will be commercial repercussions for the government if they refuse to take appropriate action," he said. Colombo port has 16,000 employees, and nearly one third are members of the CMU
Government officials say that P&O will invest $600 million to develop the quay, which is expected to take 10 years, and an additional $350 million to finish it.
In February, Colombo port started operating a modern oil berth at a cost of 2.22 bn. rupees ($1= 60 rupees) with Japanese assistance via the Overseas Economic Cooperation Fund. The Colombo port has a throughput capacity of 1.65 million containers a year, and in 1996 the port handled a record 1.4 million containers. *
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