But they are being told that being poor they will benefit from capital flowing into their countries. In fact for many of the East Asian countries capital inflows have brought about unprecedented economic growth. Even their stock markets have benefited from foreign investments. But what they are not told is that the same capital can flow out and when it does their countries can be bankrupted. It is unfortunate that they learnt about this through experience and they now know how terrible the damage is and how difficult it is to recover. The East Asian financial crisis was precipitated by the free exit of capital. It started of course by the manipulative devaluation of the currencies of East Asian countries. Devaluation caused foreign investment to lose value. To avoid losses from further devaluation foreign capital was pulled out. The market collapsed resulting in rapid increase of non-performing loans, deprivation from bank funding of business operations, numerous bankruptcies and failure of the banking system in the end.
With the economy in tatters the Government had to borrow from the IMF. Loans would only be given if the Government surrenders economic management to the IMF and allow foreign white knights to pick up the devalued local banks and businesses. We are seeing many countries floundering about because the money they borrowed from the IMF had to be used to pay off foreign creditors. Nothing is left for the locals. Of course they still have to pay the IMF money they had borrowed. East Asian countries are actually luckier for some have made a fair degree of recovery. But Argentina is not so lucky. Sovereign loans are not so safe after all as countries can go bankrupt when IMF imposes its policies. Is what happened to the East Asian countries a manifestation of Globalisation or not? Clearly it is. Trading in currencies is only possible if Government abdicates as the authority to determine the value of currency and leaves it to so-called international market forces.
The market is interested only in making profits and cares nothing for the well-being of society. The challenge for Asia is not how to manage the present concept of globalisation, to make it work, to benefit from it. The challenge for Asia is to influence the thinking on globalisation, to reshape it, to reduce the chances of it going awry and destroying economies and countries. There is nothing sacred about the present concept of globalisation that it cannot be changed, radically if necessary, so that it will pose less danger to those accepting and practising it. Free trade is not synonymous with globalisation. If we have to regulate trade in order to benefit from globalisation, why not? People who play golf know that there will never come a time when handicaps will be abolished. In business too, fair competition can only be between entities of fairly equal strength. Level playing fields are not enough. The contestants must be evenly matched. If we cannot match them then give them handicaps.
Prior to 1997 the Asian countries were growing miraculously. Malaysia grew at 8% plus per annum for ten consecutive years. Today everyone of the miracle economies are but shadows of their former selves. The impact of globalisation involving the free flow of capital and the straightjacketing of business has been disastrous. For years now the attempts to resuscitate the economies have not been very successful. There will be permanent scars. And the impact will not be any better, for as long as the present interpretation of globalisation is forced upon Asia. In fact the world is likely to fail to recover if, instead of focusing on resuscitating the economy following Sept 11, we continue to force the globalisation of capital flows on the world.