[Marxism] ADB initiative "neuters IMF in Asia"

[Marv Gandall]

Artesian writes:

> Wasn't talking about them-- they're salesman, paid to say what they say
> about the latest formula of the snakeoil.  Was talking about those who
> reproduce the bullshit, uncritically, and buy the snakeoil.
==================================
Ah, I see. How does the following text which I reproduced constitute
bullshit and snakeoil?

*    *    *

"Even prior to the Asian financial crisis of 1997, the Japanese had begun to
sell the idea of creating an Asian monetary fund to provide regional
liquidity. Almost as soon as the trial balloon was launched, Washington shot
it down with great force, sending Lawrence Summers, then Deputy Secretary of
the Treasury to the region to make sure the message was not misunderstood.
In spite of the subsequent travails experienced by the region, the idea
apparently died a quick death.

"Or did it? When Haruhiko Kuroda, former Japanese Deputy Minister of Finance
for International Affairs, took over the helm of the ADB on February
1st of this year, he quietly began to promote the idea again. Kuroda has
long been a strong advocate of an Asian Monetary Fund, an idea whose time
may have come, given the increasingly low esteem with which the
International Monetary Fund is held, particularly in emerging Asia, which
has long been the world’s major savings repository.

"It’s worthwhile looking again at the history of this venture: in the spring
of 1997, before the onset of the Asian financial crisis, Japan and Taiwan
had offered to put up $100 billion to help their fellow Asians cope with any
potential fallout which might arise in the event of a precipitous withdrawal
of short-term portfolio capital from their respective economies. The idea
was killed by then-Treasury Secretary Robert Rubin and Deputy Secretary
Summers, both of whom saw the idea as a threat to the monopoly of the IMF
over international financial crises. The US Treasury in particular did not
want Japan taking the lead in this area because Japan would not have imposed
the IMF’s conditions on the Asian recipients, and as a policy objective for
Washington, this almost superseded the importance of restoring the region to
full economic health.

"We all know what happened subsequently. Instead of forestalling global
economic instability, the Treasury/IMF proposals helped make further
instability inevitable.

"By killing off the idea of a competing Asian Monetary Fund, Rubin/Summers
enabled the IMF to continue in its guise as an ostensibly “neutral” agency,
thereby facilitating the implementation of the Treasury’s agenda whenever a
financial crisis which required the IMF’s intervention arose. Of course, the
“medicine” the IMF proffered had the ultimate effect of weakening
pre-existing financial structures by imposing Western measures of financial
restructuring, thereby giving Wall Street a huge stake in the subsequent
“reform” agenda introduced: Basle capital adequacy ratios were to be
applied. Highly indebted banks and firms were to be closed. Labour laws were
to be changed to make it easier to fire workers, facilitating the closures.
Regulations on foreign ownership were to be lifted in order to allow foreign
banks and firms to buy domestic banks and firms, injecting needed capital
and skills. All of which required lots of western style restructuring and
“reform”, and who better to offer this than America’s finest investment
bankers?

[...]


"It is understandable why Washington would continue to resist the notion of
an Asian Monetary Fund.

"As things stand right now, in spite of the significant contraction in bond
yields since the late 1990s, western investors continue to extract huge risk
premiums from the entire emerging markets universe as a quid pro quo for the
provision of their capital. This is manifestly perverse, especially when one
considers that the ultimate source of much of that liquidity is Asia. All of
the nations of Asia continue to run large current account surpluses, the
proceeds of which are funnelled back into the US Treasury market, where the
savers obtain a yield of less than 5 per cent, in a country which is now the
world’s largest debtor nation, suffering the twin diseases of a declining
currency and higher inflation (both of which are eroding the real value of
the Asian creditors’ respective investments).

"By contrast, even leading Asian conglomerates (whose products are readily
gobbled up by the American consumer) are forced to pay several hundred basis
points above the yield of Treasuries. The Western investor or banker is
extracting a wholly unmerited premium, whilst the US continues to trade on
its reserve currency and safe haven status to subsidise its over-consumption
and perpetuate the country’s growing financial imbalances.

"It’s a great deal for Washington and readily explains the Treasury’s
violent opposition to an Asian Monetary Fund (or anything else that would
disrupt the existing status quo, such as restrictions on capital account
mobility). But must the world’s largest creditor bloc continue to act from
such a position of weakness, which is more apparent than real? The aggregate
net creditor position of Asia dwarfs its indebtedness. The domestic markets
are rapidly maturing and will soon be in a position to replace the American
consumer (who must surely retrench if the US is ultimately to come to grips
with its own debt disease).

"The actions by Asia’s leading policy makers suggest an implicit (albeit
belated) recognition that they have been getting a raw deal from the
existing global financial architecture and are taking incremental steps to
redress the current imbalance. To be sure, historic rivalries, notably
between China and Japan (manifesting themselves most recently over Taiwan)
may slow the development of an AMF. It is also probable that the Bush
administration will likely go out of its way to exacerbate this rivalry and
thereby frustrate the development of competing multilateral agencies, which
would invariably weaken Washington’s influence in the region.

"But in spite of these periodic setbacks, the trend appears clear. The day
is moving closer where an Asian Monetary Fund will become a reality. It is
particularly noteworthy that the idea continues to be pushed by Japan,
America’s staunchest ally in the region. Tokyo’s embrace of Washington only
goes so far. Ironically, if...America ultimately repudiates existing
obligations to its (largely) Asian foreign creditors, it will simply
catalyse this process and likely ensure the AMF’s swift arrival, in spite of
ongoing efforts to render this idea stillborn since 1997. The inexorable
logic of current economic policy making may yet introduce outcomes – such as
the introduction of an Asian Monetary Fund – completely at variance with
Washington’s oft-expressed preferences to the contrary. In any event, time
is definitely not on the side of the existing status quo."