Focus on Trade #34, Part 1 of 2 (fwd)

[Robert Weissman <rob@essential.org>]

FOCUS ON TRADE
Number 34, April 1999
Part 1 of 2

Focus-on-Trade is a regular electronic bulletin providing updates and 
analysis on  regional and global trade and finance.  Although initially 
concerned with APEC, the scope of the bulletin now extends to 
include the World Trade Organisation (WTO), the ASEAN Free 
Trade Area (AFTA), the Multilateral Agreement on Investment 
(MAI), the International Monetary Fund (IMF) and any other 
acronyms that require critical attention. Focus-on-Trade contains 
updates on trends in world trade, with an emphasis on analysis of 
these trends from an integrative, interdisciplinary viewpoint that is 
sensitive not only to economic issues, but also to ecological, political, 
gender and social issues related to developments in world trade.

Your contributions and comments are welcome. Please contact us c/o 
CUSRI, Wisit Prachuabmoh Building, Chulalongkorn University, 
Bangkok 10330 Thailand. Tel: (66 2) 218 7363/7364/7365,  Fax: 
(66 2) 255 9976, E-Mail: admin@focusweb.org, Website: 
http://focusweb.org

Focus on the Global South is an autonomous programme of policy 
research and action of the Chulalongkorn University Social Research 
Institute (CUSRI) based in Bangkok.
*****************************************************

CONFERENCE CALLES FOR RADICAL REFORM OF 
INTERNATIONAL FINANCE

ON March 23, more than 320 people from 40 countries converged in 
Bangkok for the international conference 'Economic Sovereignty in a 
Globalising World: Creating People Centred Economics for the 21st 
Century.'

The conference, organised by Focus on the Global South, and co-
sponsored by DAWN and SAPRIN, was a benchmark meeting, 
bringing together activists and academics working on everything from 
debt, financial regulation, trade policy, investment agreements and 
institutional reform to local currencies and community banks, regional 
alternatives for trade and investment, food security, speculation taxes 
and foreign direct investment. 

The depth and breadth of participation brought new dimensions to the 
debate about global financial architecture --  especially from the 
'South' and development perspective -  inspiring new possibilities for 
alliance building and international action. 

Strong consensus was clear on several key issues: immediate and 
radical reform of the IMF, debt cancellation and abolition of HIPC, 
no new round of the WTO, and total opposition to any variation of 
the Multilateral Agreement on investment. In addition, the rights and 
responsibilities of national governments to set economic policies 
determined through domestic democratic processes was upheld. The 
urgent need to quell the power and volatility of finance was repeated 
throughout the conference as was the  importance of supporting a job-
creating, equitable and environmentally sustainable real economy. 

Many participants commented that the IMF stands as one of the main 
obstacles to reform of the international economic system. In the lead 
up to the IMF and World Bank Annual Meetings, Focus on the 
Global South will work with other organisations and networks to 
launch a campaign for immediate and radical reform of the Fund. 

In the next months, there will be a number of follow-up activities and 
projects. As a start Focus has created a list-serve for all conference 
participants to share ideas and information and posted all conference 
papers to the Focus website (http://focusweb.org). Reports of the 
four working groups - market reform, institutional reform, national 
policies and people-centred alternatives - will be posted by the end of 
the month. In addition, Focus is preparing an edited selection of 
conference papers for publication. 

THIS ISSUE of Focus on Trade includes the conference's final press 
communique which reflects the overwhelming mood of the meeting, 
one of the keynote speeches and an interview with Hazel Henderson 
and Walden Bello which appeared in Thailand's leading English daily 
paper The Bangkok Post following the conference. 

As preparations for the end of year WTO ministerial are building 
hundreds of organisations are mounting a all-out offensive opposing a 
new round of the WTO. In this issues, we have included Tomoko 
Sakuma's report on the unprecedented meeting between Japanese 
government officials and civil society groups to discuss trade and the 
final last article is Aileen Kwa's clear and incisive analysis of why the 
WTO is not good for developing countries.

*****************************************************
 
NEW RELEASE:  THE SIAMESE TRAGEDY
Walden Bello's major book on development in Thailand 'The Siamese 
Tragedy: Development and Disintegration in Modern Thailand' is now 
available. In The Siamese Tragedy, Walden Bello and co-authors 
Shea Cunningham and Li Kheng Poh, argue that, even before the 
collapse, the Thai economy had feet of clay and that vested interests, 
both local and international, propelled the Thailand down a  path 
which is economically, socially and environmentally unsustainable. If 
you would like a copy contact:  Food First in the US, 398 60th 
Street, Oakland, CA, 94618;  Zed Books for the UK and Europe, 7 
Cynthia Street, London, N1 9JF;  White Lotus for Thailand and Asia 
at GPO Box 1141, Bangkok, Thailand 10501. A Thai language 
edition is also available. 

*****************************************************

IN THIS ISSUE

IMF chief must resign, conference demands

Architectural blueprints, development models, and political strategies
by Walden Bello

A meeting of minds: interview with Hazel Henderson 
and Walden Bello
by Sanitsuda Ekachai and Atiya Achakulwisut

Japanese officials try to woo civil society reps
by Tomoko Sakuma

The WTO and Developing Countries: Will Vietnam 
Benefit from Being a WTO Member? 
by Aileen Kwa

*****************************************************

IMF chief must resign

BANGKOK, 26 March: The resignation of the Managing Director of 
the International Monetary Fund, Michel Camdessus, is just one of 
the demands issued today by the growing "people's movement" for 
international financial reform.

Over 300 activists, parliamentarians, economists and academics from 
throughout the world have spent the past three days in Bangkok, 
drawing up concrete steps to change the current system, which 
favours the rich, at the expense of the poor.

The overwhelming majority of the participants at the "Economic 
Sovereignty in a Globalising World" Conference say Michel 
Camdessus must take responsibility for the failures of the institution.

In a final communique, participants demanded that Camdessus and all 
senior IMF staff immediately resign, and that Camdessus' successor 
be elected through a democratic process.

The participants also demanded debt cancellation for all countries and 
an end to linkages between structural adjustment and "debt relief" 
(HIPC)..  The Fund must also cease all efforts to push capital account 
liberalisation. The conference also called for the establishment of 
regional stabilisation funds that would act in the interests of peoples 
throughout the world.

The conference supports the right of countries to impose capital 
controls in the interests of economic sovereignty and the betterment of 
their citizens.

The conference has also called for a two year review of the World 
Trade Organisation's (WTO) impact on jobs, the environment, human 
rights and the poor, and there should be no new negotiations until this 
review is completed.

The conference participants strongly opposed and denounced efforts 
to bring the Multilateral Agreement on Investment into the WTO.

The increasing power of civil society to effect change was noted by 
Carlos Fortin, the Deputy Secretary-General of the United Nations 
Conference on Trade and Development (UNCTAD), when he 
warned that 'people power' should not be underestimated.

"Sustained campaigning by NGOs led to the abandonment of the 
controversial Multilateral Agreement on Investment.  These groups 
were also instrumental in the creation of the international convention 
banning landmines.  They can also play an important role in reforming 
global financial systems," said Mr Fortin.

Participants lent their support to various expressions of ressistance 
and denounced corporate economic globalisation led by the United 
States and the G7.

"We strongly believe our fate cannot be left in the hands of the G7 and 
that creating a just international financial system cannot succeed unless 
this is undertaken within the framework of democratic participation by 
citizens and social movements," stated participants.

Dr Walden Bello, Co-director of Focus on the Global South - the 
organisation hosting the event - says the conference has succeeded in 
generating a global movement aimed at reforming the current global 
economic system.

"This conference has been a tremendous success in bringing together 
so many sectors of society from all over the world. We are seeing the 
emergence of a coordinated and organised global movement against 
speculative capital and the IMF," he says.

"We shall work towards a world not of globalisation but of true 
internationalism based on mutual respect and democratic interaction 
between free and diverse peoples."

*****************************************************

Architectural blueprints, development models, and political strategies
by Walden Bello*

Today, the world media are awash with talk about reform of the 
global financial architecture.  However, the published reports focus 
mainly on discussions taking place within the Group of Seven or the 
larger Group of 22, particularly on the debate between the finance 
authorities of the United States and those of Europe and Japan.  
Sometimes, there are some reports that come out on proposals from 
the United Nations Conference on Trade and Development 
(UNCTAD) or from some government in the South.  But little weight 
is attached to the latter by media commentators, even when 
substantively these views merit consideration.

Of course, if one is a Jeffrey Sachs or a Paul Krugman, of course, 
one's views are given some currency.  If you are not a neoclassical 
economist, forget it.  And if you come from the world of NGO's, your 
views don't count at all.  

This is, of course, interesting because when it comes to global trade, 
US Trade Representative Charlene Barshefsky, and WTO Director 
General Renato Ruggiero are talking about consulting civil society and 
about actively and democratically involving all of us in the globalization 
process.  But when it comes to the world of high finance, these are 
matters of allegedly great complexity that are best left to the experts 
and the managers of the world economy like Alan Greenspan, Robert 
Rubin, and Larry Summers, whom Time has anointed as 'The 
Committee to Save the World."  Or to the much-broader Group of 
22 countries handpicked by the US, whose three reports released in 
October 1998 have been anointed as "the international community's 
definitive statement on reforming the international architecture…"(1)
Why Are We Here?

The overriding purpose of this conference is to get the rest of us to 
crash this exclusive party talking about the financial order of the 
world.  We need to do this for several reasons.    
 
First, because those who are actively debating this issue are, for the 
most part, still arguing within a paradigm of neoliberal economics that 
has been central to generating this crisis. 

Second, because devising a global financial order is not simply a 
matter of technical economics but one that must be informed by 
values, and the main values and priorities of those who are managing 
this process are different from those of you and me.  

Third, because this process is, first and foremost, a question of 
power, and unless we do out best to gatecrash this gathering, what 
will emerge will simply be a global architecture that will benefit a very 
small global elite and continue to marginalise the vast majority of the 
world's peoples.

Considerations on Finance Capital

Before discussing strategies being proposed for global financial 
reform, let me advance some propositions.

First of all, I think we need to put to rest once and for all the idea that 
the Asian crisis is not a product of "crony capitalism."  What brought 
about the crash of 1997 was not crony capitalism but "casino 
capitalism."  Even at the height of the Asian financial collapse in 
September of that year, Stanley Fischer, the American deputy 
managing director of the IMF, was blaming the crisis on the fact that 
"markets are not always right.  Sometimes inflows are excessive, and 
sometimes they may be sustained too long.  Markets tend to act fast, 
sometimes excessively."(2)  And even the Economist, one of the 
premier organs of market fundamentalism, had to admit that "the 
economic pain being imposed [by global capital markets] on the ex-
tigers is out of all proportion to the policy errors of their 
governments."(3)    

The Fund and the US Treasury, of course, continue to uphold the 
rightness of their obsession with "reforming" domestic economic and 
financial arrangements, but the credibility of this approach is eroded 
daily by the spectacular fashion that IMF straitjackets are suffocating 
economies in Thailand, Malaysia, and Indonesia.

Second, finance has been the cutting edge of the globalization 
process.  The integration of commodity markets via free trade and 
that of production systems via TNC subsidiarization have proceeded 
apace, but both processes have been outstripped by the integration of 
global capital markets under the aegis of London and Wall Street.  

Third, finance, which was liberated from the confines of the Keynesian 
state by the Thatcherite and Reaganite ideological revolution, has 
steadily gained "ascendancy over industry" and  other sectors of the 
economy, to borrow the prescient characterisation of the 1991 
UNCTAD Trade and Development Report.(4)   This pre-eminence 
of the 
financial sector is related to the crisis of dwindling growth or deflation that deflation which 
has increasingly overtaken the real sectors of the global economy.  This crisis has its 
roots in overcapacity or under-consumption, which today marks global industries from 
automobile to energy to capital goods.(5)  Diminishing, if not vanishing, returns in 
industry has led to capital being shifted from the real economy to squeezing "value" out of 
already created value in the financial sector.

The result is essentially a game of "global arbitrage," where capital moves 
from one capital market to another, seeking to turn profits from the 
exploitation of the imperfections of globalised markets by taking advantage 
of interest-rate differentials, targeting gaps between nominal currency values 
and "real" currency values, and short-selling in stocks, that is, borrowing 
shares to artificially inflate share values then selling.  Not surprisingly, 
volatility, being central to global finance, has become as well the driving 
force of the global capitalist system as a whole.

Third, since differences in exchange rates, interest rates, and stock prices 
are much less among the more integrated Northern markets, movements of 
capital have been much more volatile between the capital markets of the 
North than the so-called "Big Emerging Markets" of the South and Asia.  Thus 
while crises are endemic to the finance-driven global capitalist system, the 
crises of the last few years have been concentrated in the emerging 
markets.(6)  Since late 1994, we have had Mexican financial crisis, the 
"Tequila Effect" of this crisis in Latin America, the Asian crash, the Russian 
collapse, the unravelling of the Brazilian real, and the spinoff of the Brazilian 
crisis on the rest of Latin America.

Fourth, despite the global financial system's proneness to crises, finance 
capital operates, as Robert Kroszner describes it, "in a realm close to 
anarchy."(7)  That deregulation at the national level has not been replaced by 
reregulation at the international level is because finance capital has 
accumulated tremendous political power over the last two decades.  While 
finance capital was liberated from the straitjacket of the Keynesian economy 
by the Republican administrations of Ronald Reagan and George Bush, it 
has been under the Democratic administration of Bill Clinton that financial 
interests became paramount in the foreign economic policy of the US 
government.  Represented in the inner sanctum of Washington by Treasury 
Secretary Robert Rubin, a former arbitrage artist, and Federal Reserve 
Chairman Alan Greenspan, a former Street consultant, the so-called Wall 
Street-Treasury Complex stands foursquare against any serious financial 
regulation.  The power of this lobby stems partly from the strength of the 
interests it represents, but even more from its ideology of market freedom, 
which it markets as applying not only to trade in goods but also to the 
mobility of capital.

Fifth, the crisis of the developing countries of the South is not simply one of 
exposure to unregulated financial flows-one can easily be fixed with capital 
controls at both the global and national level.  The financial deregulation of 
their economies that has proven so devastating is simply the latest phase of 
a development model that they have internalised over the last two decades 
under the aegis of IMF-World Bank structural adjustment programs-one that 
makes foreign markets and foreign capital the twin engines of development.  
In other words, the Mexican Crisis on 1995, the Asian Collapse of 1997, and 
the Latin American unravelling of 1999 were events waiting to happen to 
economies where liberalization of trade and investment had become 
equated development, and where import substitution, trade policy, and 
industrial policy had been vilified as anti-development.

The Three Schools of Global Financial Reform

There are now a thousand and one proposals for world financial reform, 
ranging from proposals for preemptive crisis mechanisms to reform of the 
International Monetary Fund to establishment of a "World Financial 
Authority."(8)  Rather than take them up one by one in technical fashion, let 
me instead go into the heart of the matter, power and interests, and group 
the most important proposals into three different strategies.  I will call the first 
the "It's the wiring, not the architecture" approach.  The second might be 
termed the "Back to Bretton Woods" school.  And we might christen the third 
strategy as the "Change the development model" strategy."  

"It's the Wiring, not the Architecture"(9)

One might say that this is basically the US position-though it is shared to 
some degree by many of the G-7 members, with probably the notable 
exception of Japan.

This school assigns primacy to "reforming" the financial sectors of the crisis 
economies along the lines of more transparency, tougher bankruptcy laws to 
eliminate moral hazard, prudential regulation using the "Core Principles" 
drafted by the Basle Committee on Banking Supervision, and greater inflow 
of foreign capital not only to recapitalize shattered banks but also to 
"stabilise" the local financial system by making foreign interests integral to it.  

When it comes to the supply-side actors in the North, this perspective is to 
leave them to voluntarily comply with the Basle Principles, though 
government intervention might be needed periodically to catch freefalling 
casino players whose collapse might bring down the whole global financial 
structure, as was the case last year when the US Federal Reserve had to 
organise a rescue of the hedge fund Long Term Capital Management after 
the latter was unravelled by Russia's financial crisis. the Russian crisis 
unravelled the hedge fund Long Term Capital Management.(10)    The 
farthest the Group of Seven has gone in terms of dealing with the 
controversial hedge fund question was to issue a declaration in October 
1998 commenting on the need to examine "the implications arising from the 
operations of leveraged international financial organizations including 
hedge funds and offshore institutions" and "to encourage off-shore centers to 
comply with internationally agreed standards."(11)

Finally, when it comes to the existing multilateral structure, this view supports 
the expansion of the powers of the IMF, proposing not only greater funding 
but also new credit lines, such as the "precautionary credit line" that would 
be made available to countries that are about to be subjected to speculative 
attack.  Access to these funds would, however, be dependent on a country's 
track record in terms of observing good macroeconomic fundamentals, as 
defined traditionally by the Fund.

While much has been made of the conflict between the US and the other 
members of the G-7 countries in the world press, in fact, the articulated 
differences appear to be marginal.  France and Germany (at least before the 
resignation of Oskar Lafontaine), with some support from Japan, have 
proposed the establishment of "target zones" that would reduce the 
fluctuations among the yen, dollar, and euro.  There are no virtually no 
suggestions from the European Union on controlling capital flows on the 
supply side.

Japan has made additional proposals on the IMF, but these are variants of 
the position of either the US government or some US think-tanks:  more IMF 
monitoring of hedge funds, getting the IMF to push private creditors and 
investors to participate in a rescue program instead of bailing them out, and 
providing a "certified" line of credit to countries that follow good economic 
policies which are under speculative attack, something similar to Clinton's 
precautionary credit line.(12)

"Back to the Bretton Woods System"

The second school of thought would put tougher controls at the global level, 
in the form the Tobin Tax or variants of it.(13)  The Tobin tax is transactions 
tax on capital inflows and outflows at all key points of the world economy that 
would "throw sand in the wheels" of global capital movements.  Controls at 
the international level may be supplemented by national-level controls on 
capital inflows or outflows.  A model of such a measure is the Chilean inflow 
measure that requires portfolio investors to deposit up to 30 per cent in an 
interest-free account at the Central Bank for a year, which has been said to 
be successful in discouraging massive capital portfolio inflows.  For some 
people, there is an ill-concealed admiration for Prime Minister Mohamad 
Mahathir's tough set of outflow measures, which included the fixing of the 
exchange rate, the withdrawal of the local currency from international 
circulation, and a one-year lock-in period for capital already in the 
country.(14)

In addition to controls at the national and international level, regional controls 
are also seen by proponents of this view as desirable and feasible.  The 
Asian Monetary Fund is regarded as an attractive, workable proposal that 
must be revived.  The AMF was proposed by Japan at the height of the Asian 
financial crisis to serve as a pool of the foreign exchange reserves of the 
reserve-rich Asian countries that would repel speculative attacks on Asian 
currencies.  It was, not surprisingly, vetoed by Washington.

The thrust of these international, national, and regional controls is partly to 
prevent destabilising waves of capital entry and exit and to move investment 
inflow from short-term portfolio investment and short-term loans to long-term 
direct investment and long-term loans.  For some, capital controls are not 
simply stabilising measures but are, like tariffs and quotas, strategic tools 
that may justifiably be employed to influence a country's degree and mode 
of integration into the global economy.  In other words, capital and trade 
controls are legitimate instruments for the pursuit of trade and industrial 
policies aimed at national industrial development.

When it comes to the World Bank, the IMF, and the WTO, the thrust of this 
school is to reform these institutions along the lines of greater accountability, 
less doctrinal push for free trade and capital account liberalization, and 
greater voting power for developing countries.  Like the G-7, advocates of 
this approach view the IMF as a mechanism to infuse greater liquidity into 
economies in crisis, but unlike the G-7, they would have the Fund do this 
without the tight conditionalities that now accompany its emergency lending. 
 Some people in this school accompany their proposals to reform the Bank 
and the Fund with a recommendation to establish a "World Financial 
Authority," whose main task, in one formulation, would be to develop and 
impose regulations on global capital flows and serve as "a forum within 
which the rules of international financial cooperation are developed and 
implemented…by effective coordination of the activities of national monetary 
authorities."(15)   

In other words, the Fund, World Bank, and WTO continue to be seen as 
central institutions of a world regulatory regime, but they must be made to 
move away from imposing one common model of trade and investment on 
all countries.  Instead, they must provide a framework for more discriminate 
global integration, that would allow greater trade and investment flows but 
also allow some space for national differences in the organisation of 
capitalism.  

In the vision of Dani Rodrik, the current chief economic adviser to the G-22, a 
grouping of developing countries. the ideal multilateral system appears to 
be substantially a throwback to the original Bretton Woods system devised 
by Keynes that reigned from 1945 to the mid-seventies, where "rules left 
enough space for national development efforts to proceed along successful 
but divergent paths."(16)  In other words,  a "regime of peaceful coexistence 
among national capitalisms."(17)

Not surprisingly, this perspective has resonated well with economists and 
technocrats from developing countries, the devastated Asian economies, 
and the UN system-which is said to the refuge of Keynesians who fled the 
neoliberal revolution at the World Bank and academic institutions.

"Change the Development Model"

Those that we classify as belonging to this school regard the IMF and WTO, 
in particular, as Jurassic institutions that would be impossible to reform both 
owing to both their deep neoliberal indoctrination and the hegemonic 
influence within them of the United States.  The world would be better off 
without them since they serve merely to order the global system in favour of 
the North.

The same scepticism marks their view on the possibility of imposing global 
capital controls or prudential regulations on hedge funds and other big 
casino players, again because of the strength of neoliberal ideology and 
financial interests.

National capital controls are seen as much more promising, and the 
experiences of China and India in avoiding the financial crisis, of Chile in 
regulating capital flows, and Malaysia in stabilising its economy have 
convinced proponents of this view that this is the way to go.  Like the "global 
Keynesians," this school would also see regional arrangements such as the 
Asian Monetary Fund as feasible and workable.

Where the proponents of this view differ from the global Keynesians is that 
their advocacy of capital controls is accompanied by more fundamental and 
thorough critique of the process of globalization that goes beyond its 
blasting away legitimate differences among national capitalisms.  Buffering 
an economy from the volatility of speculative capital is an important rationale 
for capital controls, but even more critical is the consideration that such 
measures would be a sine qua non for a fundamental reorientation of an 
economy toward a more inner-directed pattern of growth that would entail, in 
many ways, a reversal, though limited of the globalisation process.  

The main problem, from this viewpoint, is not the volatility of speculative 
capital, but the problem lies in the way that the export sector and foreign 
capital have been institutionalised as the engines of these economies.  The 
problem is the indiscriminate integration into the global economy and the 
over-reliance on foreign investment, whether direct investment or portfolio 
investment, for development.  Thus while the current crisis is wreaking havoc 
on peoples' lives throughout the South, it also gives us the best opportunity in 
years to fundamentally revise our model and strategy of development.

Changing the Development Model

What are some of the priorities of this alternative model of development?  
What makes it different not only from the neoliberal model but also from the 
national capitalisms stoutly defended by Dani Rodrik?

Comprehensive, integrated formulations are few and far between in our 
region today, but the following ideas, proposals, or visions are being actively 
discussed throughout East Asia today:

While foreign investment of the right kind is important, growth must be 
financed principally from domestic savings and investment.  This means 
good, progressive taxation systems.  One of the key reasons for the reliance 
on foreign credit and foreign investment was  the elites of East Asia did not 
want to tax themselves to produce the needed investment capital to pursue 
their fast-track development strategies.  Even in the depths of today's crisis, 
conspicuous consumption continues to mark the behaviour of Asia's elites, 
who also send so much of their wealth abroad to safe havens in Geneva, 
Tokyo, or New York.  Regressive taxation systems are the norm in the region, 
where income taxpayers are but a handful and indirect taxes that cut into the 
resources of lower-income groups are the principal source of government 
expenditures.

While export markets are important, they are too volatile to serve as reliable 
engines of growth.  Development must be reoriented around the domestic 
market as the principal locomotive of growth.  Together with the pitfalls of 
excessive reliance on foreign capital, the lessons of the crisis include the 
tremendous dependence of the region's economies on export markets.  
This has led to extreme vulnerability to the vagaries of the global market and 
sparked the current self-defeating race to "export one's way out of the crisis" 
through competitive devaluation of the currency.  This move is but the latest 
and most desperate manifestation of the panacea of export-oriented 
development.

Making the domestic market the engine of development, to use a distinctly 
unfashionable but unavoidable term, brings up the linkage between 
sustained growth and equity, for a "Keynesian" strategy of enlarging the local 
market to stimulate growth means increasing effective demand or bringing 
more consumers (hopefully discriminating ones, that is) into the market via a 
comprehensive program of asset and income distribution, including land 
reform.   There is in this, of course, the unfinished social justice agenda of 
the progressive movement in Asia-an agenda that has been marginalised by 
the regnant ideology of growth during the "miracle years."  Vast numbers of 
people remain marginalised because of grinding poverty, particularly in the 
countryside.  Land and asset reform would simultaneously bring them into 
the market, empower them economically and politically, and create the 
conditions for social and political stability.  Achieving economic 
sustainability based on a dynamic domestic market can no longer be 
divorced from issues of equity.

Regionalism can become an invaluable adjunct to such a process of 
domestic market-driven growth, but only if both processes are guided not by 
a perspective of neo-liberal integration that will only serve to swamp the 
region's industries and agriculture by so-called "more efficient" third party 
producers, but by a vision of regional import-substitution and protected 
market-integration that gives the region's producers the first opportunity to 
serving the region's consumers.

While there are other elements in the alternative development thinking taking 
place in the region, one universal theme is "sustainable development."  The 
centrality of ecological sustainability is said to be one of the hard lessons of 
the crisis.  For the model of foreign-capital fuelled high-speed growth for 
foreign markets is leaving behind little that is of positive value.  In the case of 
Thailand, at least, it is hard to dispute this contention.  As many of you visiting 
this once lovely city can testify, 12 years of fast-track capitalism is leaving 
behind few traces except industrial plant that will be antiquated in a few 
years, hundreds of unoccupied high-rises, a horrendous traffic problem that 
is only slightly mitigated by the repossession of thousands of late-model cars 
from bankrupt owners, a rapid rundown of the country's natural capital and 
an environment that has been irreversibly, if not mortally, impaired, to the 
detriment of future generations.

In place of 8-10 per cent growth rates, many environmentalists are now 
talking of rates of three to four per cent or even lower.  This links the social 
agenda with the environmental agenda, for one reason for the push for high 
growth rates was so that the elites could corner a significant part of the 
growth while still allowing some growth to trickle down to the lower classes 
for the sake of social peace.  The alternative-redistribution of social wealth-is 
clearly less acceptable to the ruling groups, but it is the key to a pattern of 
development that will eventually combine economic growth, political 
stability, and ecological sustainability.

These and similar ideas are already being discussed actively throughout the 
region.  What is still unclear, though, is how these elements will hang 
together.  The new political economy may be embedded in religious or 
secular discourse and language.  And its coherence is likely to rest less on 
considerations of narrow efficiency than on a stated ethical priority given to 
community solidarity and security.

Moreover, the new economic order is unlikely to be imposed from above in 
Keynesian technocratic style, but is likely to be forged in social and political 
struggles.  This fire down below is likely to upset the best laid plans of the 
tiny elite that are trying to salvage an increasingly unstable free-market order 
by tinkering at the margins of the global financial order and calling it reform.

* This paper was prepared for the Conference on "Economic Sovereignty in 
a Globalised World," Bangkok, March 23-26, 1999. Walden Bello, PhD, is 
professor of sociology and public administration at the University of the 
Philippines and co-director of Focus on the Global South, a research, 
analysis, and advocacy program of the Chulalongkorn University Social 
Research Institute in Bangkok.  He is the author or co-author of ten books, 
including the recently published A Siamese Tragedy: Development and 
Disintegration in Modern Thailand  (London: Zed Press, 1998).

(1) Barry Eichengreen, Toward a New Financial Architecture (Washington, 
DC: Institute for International Economics, 1999), p. 131.
(2) Stanley Fischer, "Capital Account Liberalization and the Role of the IMF," 
Paper presented at the "Asia and the IMF Seminar," Hong Kong, Sept. 19, 
1997.
(3) Economist 
(4) Quoted in UNCTAD, Trade and Development Report 1998 
(Geneva: UNCTAD, 1998), p. i.
(5) See, for instance, "Barbarians at Bavarians' Gates," Economist, 
Feb. 13, 1999, p. 22.
(6) Stanley Fischer, "On the Need for an International Lender of Last 
Resort," Speech delivered at the joint luncheon of the American 
Economic Association and the American Finance Association, New 
York, January 3, 1999.
(7) Randall Kroszner, "The Market as International Regulator," in 
Mastering Finance, p. 399.
(8) A list of the more significant proposals are found in Barry 
Eichengreen,Toward a New Financial Architecture (Washington, DC: 
Institute for International Economics, 1999).
(9) Among the documents that broadly share this view are the 
following:  Group of 22, "Reports on the International Financial 
Architecture, Working Groups on Transparency and Accountability, 
Strengthening the Financial System, and International Financial Crises, 
Oct. 1998; Morris Goldstein, The Asian Financial Crises: Causes, 
Cures, and Systemic Implications (Washington: Institute for 
International Economics, 1998); Robert Rubin, "Strengthening the 
Architecture of the International Financial System," Speech at the 
Brookings Institution, Washington, DC, April 14, 1998 (downloaded 
from Internet); Stanley Fischer, "On the Need for an International 
Lender of Last Resort," Paper prepared for the joint luncheon of the 
American Economic Association and the American Finance 
Association, New York, January 3, 1999; and Barry Eichengreen, 
Toward a New International Financial Archictecture (Washington, 
DC: Institute for International Economics, Feb. 1999).
(10) Federal Reserve Chairman explicitly opposed regulation of 
hedge funds during hearings at the US Congress in October 1998, 
when the LTCM fiasco occurred.  See David Ignatius, "Policing 
Hedge Funds: Who's in Charge Here?," International Herald Tribune, 
Feb. 22, 1999., p. 6.
(11) Quoted in "Towards a New Financial Architecture:  A Report of 
the Task Force of the Executive Committee on Economic and Social 
Affairs of the United Nations," United Nations, New York, January 
21, 1999.
(12) As summarized by David de Rosa, 'Miyazawa's Big Ideas on 
How to Run the IMF," Bloomberg News column, reproduced in 
Manila Times, March 3, 1999, B13. 
(13) Among the documents that might be said to broadly belong to 
this viewpoint are the following:  Task Force of the Executive 
Committee on Economic and Social Affairs, United Nations, 
"Towards a New International Financial Architecture; UNCTAD, 
"The Management and Prevention of Financial Crises," Trade and 
Development Report 1998 (Geneva: United Nations Conference on 
Trade and Development, 1998), pp. 83-110; Dani Rodrik, "The 
Global Fix," New Republic, Nov. 2, 1998 (downloaded from 
Internet); John Eatwell and Lance Taylor, , "International Capital 
Markets and the Future of Economic Policy," CEPA Working Paper, 
No. 9, Center for Economic Policy Analysis (CEPA), New School 
for Social Research, Sept. 1998; Roy Culpeper, , "New Economic 
Architecture: Getting the Right Specs," Remarks at the Conference on 
"The Asian Crisis and Beyond: Prospects for the 21st Century, 
Carleton University, Ottawa, January 29, 1999. 
(14) See, for instance, Roy Culpeper.
(15) John Eatwell and Lance Taylor, p. 14. 
(16) Dani Rodrik.
(17)Ibid.

End Focus on Trade #34, part 1 of 2


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