Taming the Tigers: The IMF
and the Asian Crisis
Nicola Bullard, with Walden Bello and Kamal Malhotra
The crisis that struck Thailand, Indonesia, South Korea and much of Southeast Asia in the second half of 1997 is far more than an Asian financial crisis.
It is above all a human crisis. Already millions of people have been thrown out of work, and poverty and hunger are on the increase, as decades of social progress have been thrown into reverse. Worse is to come in the rest of 1998, and perhaps beyond. In Indonesia, the long-term viability of the nation is at stake as the economy collapses and food riots and protests spread.
It is a crisis of globalisation, revealing the extent to which governments are unable to cope with the combination of rapid capital account liberalisation and escalating global capital flows. In particular, the high levels of now unserviceable private sector debt show that the capital market is incapable of efficiently allocating resources, that national governments have not developed the necessary levels of transparency, institutional strength and regulation to keep pace with the rapidly changing external environment, and that fast-track liberalisation is incompatible with sustainable and equitable development.
It is a crisis of international institutions, and in particular of the International Monetary Fund. The IMF’s performance in Asia to date has demonstrated serious weaknesses. The Fund has prescribed wrong and socially disastrous medicine for the region’s ills, grossly exceeded its mandate, as laid out in its Articles of Agreement, and has shown itself both arrogant and far too close to the interests of its principle shareholder, the USA. The result of the Fund’s failures has been to exacerbate the human and macroeconomic impact of the crisis.
Before further damage is done, governments should:
Reassert the IMF’s original role as lender of last resort during balance of payments crises
Oppose any changes to the Fund’s Articles of Agreement, such as extending its remit to include capital account liberalisation, pending a full review of the Fund’s role and performance
De-link all trade, investment, democratisation and good governance conditions from IMF funding
Explore new mechanisms for the effective and fair resolution of private sector debt crises and the regulation of international capital flows, especially of short-term speculative capital, to reduce their capacity for economic destabilisation
In order to prevent the Asian crisis from deepening still further, and to avoid similar debt crises occurring in the future, both in Asia and elsewhere, the European and Asian governments present at the Asia Europe Summit in London in April 1998 should use their voting strength at the IMF and in other fora, in favour of the above reforms.
This is the summary of a 40 page report co-published on 2 April 1998 by Focus on the Global South in Bangkok and the Catholic aid agency, CAFOD, in London. For copies or more information contact:
Duncan Green,
CAFOD, Romero Close, Stockwell Road, London, SW9 9TY, United Kingdom
Tel: 44 171 733 7900;
Fax: 44 171 274 9630
[email protected],
