Japanese minister disses IMF & US; Asia effects worsening (fwd)

[Robert Weissman <rob@essential.org>]

Japan's Sakakibara hits out at IMF, US
dominance                            
Date: Sat Jan 23 22:45:18 CST 1999

   TOKYO, Jan 24 (AFP) - Japan's influential vice finance minister
Eisuke Sakakibara has pitted himself against the International Monetary
Fund and what he calls its "market fundamentalism" and "American
dominance."
   Sakakibara, known as "Mr Yen" for his influence on currency markets,
is putting forward the "intellectual background" to the policies
followed by Finance Minister Kiichi Miyazawa.
   Citing US financier George Soros, Sakakibara has criticised the role
of the IMF during the crises in Asia, Russia and now Brazil.    He
described the philosophy of the Fund, which he called the "Washington
consensus," as "free markets and sound money."
   It amounts to the "blind application of the universal model on
emerging economies," he said at the Foreign Correspondents' Club in
Tokyo on Friday.
   The handling of the Asian crisis by the world's leading nations was,
at least at first, seriously at fault, he said. 
   "Since I was personally involved in the process and agreed, although
reluctantly, in the end to what was recommended I am in no position to
criticise others for what has happened," he said.
   "But unlike the (IMF's) managing director Michel Camdessus I can only
say that if I am confronted with similar situations in the future I will
probably handle them differently."
   A senior official at the Fund has told AFP there was no sign of
reticence from Japan at key IMF meetings during the crisis, even though
Japan has the second largest stake in the organisation.
   The Fund has admitted it underestimated the severity of the crisis
when it put forward its rescue programmes in Thailand, Indonesia and
South Korea but insisted it was right to impose tough economic reforms.
   Sakakibara said he felt closer to Jeffrey Sachs, the Harvard academic
critical of the IMF, than Stanley Fischer, the Fund's deputy head.
   Behind Sakakibara's attack on "market fundamentalism" there is also a
defence of Japanese bureaucracy.
   "The financial bubbles in Japan or Asia were not necessarily created
by mistakes in macroeconomic policy alone but were natural consequences
of markets where fallible market participants interacted with each other
with less than perfect foresight," he said.
   Will a triumphalist and totally unfettered free market survive?
Sakakibara thinks not.
   "First, American dominance which seemed assured for some time after
the demise of socialism seems to be declining both on political and
economic grounds -- partly because of the unification of Europe and
partly because of potential anti-American sentiment in
various parts of the world that has arisen in recent years," he said.
   In the early 1990s "it may have looked as if the US would come close
to having a financial empire but that is certainly not the reality we
face at the end of the 20th century."
   The Japanese official, who has publicly backed the foreign exchange
controls which Premier Mahathir Mohamad put in place in Malaysia,
insisted: "Global capitalism needs to be restrained in its cross-border
transactions be it through disclosure, supervisory and prudential
regulations or outright controls."
   "The need for coordination is absolutely essential but coordination
should remain coordination and not coercion," concluded "Mr Yen."
-=-=-

 
Social cost of crisis will outlast return to
growth                         
Date: Sun Jan 24 01:51:43 CST 1999

   BANGKOK, Jan 24 (AFP) - A modest return to growth forecast for some
of Asia's pulverised economies will have little immediate impact on the
crushing social problems inflicted by the financial crisis, the World
Bank says
   As the currency volatility of 1997 in Thailand, South Korea and
Indonesia blossomed into a full-blown economic crisis it triggered a
devastating wave of social ills.
   Rising unemployment meant a sharp drop in standards of living for
many people and hit health care, education and social services,
according to a recent report by the Manila-based Asian Development Bank
(ADB).
   That suffering wi ll not simply evaporate when hammered economies
struggle back to their feet, World Bank Vice-President Jean-Michel
Severino told AFP.
   "There is a lag between the moment at which growth starts to resume
and the moment at which it starts to show in the real lives of people,"
he said.
   "Especially as even with additional growth in the coming months and
next year, we'll see the impact of the layoffs created by the
unavoidable restructuring of the corporate sector," said Severino in
Bangkok Friday after a World Bank conference on the social impact of
the crisis.
   "This is something that the economies of Asia have to go through and
it is virtually impossible to get around that.
   "So we expect that the coming months, even if we see growth again it
will still be difficult."
   South Korea said Friday that Gross Domestic Product was expected to
grow two percent this year. Thailand's latest agreement with the IMF
predicts growth will return in the second quarter of 1998. 
   And Indonesia, where the economy crashed 13.68 percent in the last
year according to official figures, says GDP growth may grow 1.5 percent
in 1999, even though some private think-tanks have disputed the figure.
   But an improvement in social conditions will take time, as all three
nations have suffered from all or some of a devastating combination of
mass layoffs, rising wages, falling standards of living and a chafing of
social cohesion.
   Other heavyweight economies like Hong Kong, Malaysia and the
Philippines have also been affected while Myanmar, Vietnam and Laos have
seen living standards hit as investment from crisis-hit nations has
plunged.
   Thailand's Prime Minister Chuan Leekpai has warned that corporate
failures have doubled unemployment here.
   The result is that children were dropping out of school at alarming
rates, mental illnesses are rising and crime is flourishing, he said.
   As jobs are lost, the ADB says, people are unable to meet the costs
of health care which simultaneously increase due to rising inflation.
   At the same time, as governments are forced to submit to the
straightjackets of International Monetary Fund (IMF) bailouts, public
spending on health and education drops, shutting more people out of the
safety net.
   Increasing deprivation in turn, leads to rising crime, a temptation
to trade drugs and rising domestic violence, the ADB said in a report on
the Social Impact of Asia's crisis released in
November.
   While the IMF has addressed structural weaknesses, the World Bank and
other agencies have tackled social destruction. 
   Twenty million dollars of a 47 million dollar World Bank trust fund
set up to alleviate the worst social costs of the crisis have already
been invested in 36 projects around the region.
   But Severino said that despite progress the recovery is fragile and
internal shocks could throw it off course.
   Solving social problems is not simply a humanitarian necessity but
vital for sustainable growth, he said.
   "It is very clear that if the social situation continues to worsen it
may reach a point at which social unrest might rise and social unrest
might itself jeopardise the recovery."