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Imperialism and the Asian crisis

Green Left Weekly - April 29, 1998

[This is the abridged text of a paper distributed by the Democratic Socialist Party at the Asia Pacific Solidarity Conference held in Sydney at Easter.]

The economic crisis in Asia has exposed the myth that the so-called new industrialising countries (NICs) provided a model for a capitalist road out of neo-colonial subjugation. The division of the world into exploiter and exploited nations has been underlined (and reinforced) as a handful of nations which were said to be escaping underdevelopment have been stopped.

Both big and small economies in the South Pacific have already been affected. Once the currency and banking crises work their way through Asian economies, the world economy could be seriously affected.

Nature of the crisis

Imperialist propaganda that seeks to blame the crisis on corruption and cronyism begs the question: Why were the imperialists so keen to lend to and invest in these economies for the last three decades?

Another myth is that the Asian crisis is a result of too much government interference. On the contrary, the Asian NICs and "tiger" economies have some of the most pro-capitalist and foreign investor-friendly governments in the world. Government intervention in these economies has been to help capitalists make a bigger profit.

Those like Malaysian PM Mahathir, who blamed international foreign exchange speculators for the crisis, are also wrong. Speculative capital contributed to the rapidity of the growth of foreign debt and also to the timing of the panic in 1997, but it was not the fundamental cause.

The crisis arose because even the partial industrialisation of a few nations from the Third World has now produced more than world markets can absorb.

The Asian financial crisis is the latest expression of a protracted world capitalist crisis of overproduction, which began to manifest itself in the mid-1970s. This resulted in increasing competition between the imperialist economies and a ruthless neo-liberal drive to lower costs.

A number of Asian economies initially benefited from the neo-liberal drive in the imperialist countries as large firms transferred some of their more labour-intensive operations to the region and a handful of other countries in the Third World, in an attempt to reduce their costs.

The place of the original four NICs (South Korea, Taiwan, Hong Kong and Singapore), which were allowed to industrialise to help "contain Communism" in Asia, was increasingly filled by Malaysia, Thailand, Indonesia and the Philippines as the NICs tried to replace their labour-intensive industries with higher technology industries. Their larger capitalists even began to export some capital to less developed countries.

'NIC model'

While the "Asian miracle" was hailed, the rest of the Third World suffered a serious setback. The 1980s Third World debt crisis resulted in most of the debtor nations coming under the direct supervision of the International Monetary Fund.

The IMF dispensed severe austerity and facilitated greater imperialist domination of these economies, supposedly as "medicine". This resulted in the "lost decade" for most of Latin America and Africa. The reluctant "patients" were told to imitate the NICs and hope to join their ranks some day.

This intensified exploitation of the Third World (accompanied by intensified exploitation of workers in the imperialist countries) accumulated even greater surpluses, fuelling a growing mass of speculative capital roaming the world in search of quick profits. After the 1980s debt crisis, Asian economies became even more attractive to imperialist investors and in the early 1990s accounted for more than 50% of real world GDP growth.

However, by the mid-1990s, the NICs and ASEAN "tiger" economies became victims of the global cost-cutting drive as imperialist companies looked to even cheaper (and larger) sources of labour in China and Vietnam. In addition, in the wake of the end of the Cold War, the imperialist governments - particularly the US and Japan - began to wind back the NICs' preferential access to their domestic markets and technology.

The "tiger" economies' response was to try to reposition themselves on a higher level in the international industrial division of labour, following the example of the NICs. But this required large investment in infrastructure. This fuelled south-east Asia's growing foreign borrowing and enticed speculation by both domestic and imperialist capital.

The very same western economists and governments which today piously posture about speculation and "grandiose national projects" in south-east Asia were, only a year ago, egging on these countries to borrow big to develop their infrastructure. In 1995 the World Bank estimated that the basic infrastructure needs of Indonesia, South Korea, Malaysia, the Philippines and Thailand required US$704 billion of investment, a projection which set imperialist investors salivating. Australian imperialism, for example, banked on major infrastructure developments for its drive into Asia.

The growth of Asia's (mainly private) foreign debts would not necessarily have led to a financial crisis if these economies had not been facing difficulties keeping up their high rates of export growth. After an average of 15% between 1988 and 1995, the original four NICs' export growth fell to 4.8% in 1996. ASEAN's export growth slowed to 5.6% from 22.8%. Correspondingly, there was a huge overcapacity in cars, steel, chemicals and computer chips in Asia, reflecting global overproduction.

When imperialist investors panicked and triggered severe currency crises in south-east Asia, this served to make these countries' large foreign debts even bigger. The currency crises revealed the broader Asian economic crisis, one that now engulfs three tiers of Asian economies: Japan, the original NICs and the south-east Asian "tigers".

IMF interventions

Since July 1997, Thailand, South Korea and Indonesia have gone to the IMF for emergency loans and help in renegotiating their foreign debts. Malaysia may yet have to seek IMF help. The Philippines was already under IMF supervision.

IMF "solutions" - all of which involve accelerated neo-liberal "reform" - do not address the real problem: the crisis of overproduction and overcapacity. Indeed, the Asian economic crisis was probably brought on all the sooner and in such a sudden way as a result of economic deregulation.

The IMF, a body controlled by the imperialist states, will place the most troubled NIC economies under austerity regimes similar to those imposed on all other Third World countries in the wake of the 1980s debt crisis. This is despite the fact that the NICs and the ASEAN "tigers" have been following the very policies advocated for other Third World countries by the IMF in the 1980s.

Ultimately it is the imperialist creditors with bad loans to Asia who are being rescued. A former very senior official at the World Bank admitted: "For the most part, the pressures on the IMF to continue to lend money are driven by the fact that the absence of lending could jeopardise institutions in the industrial countries. For the IMF, the need to protect Western banks is the driving force." (Sydney Morning Herald, March 21, 1998)

The IMF seeks to contain the crisis and stop it from sending the imperialist countries into recession. Thus it addresses the main point of potential contagion by underwriting the bad loans made by the imperialists.

To service these billions of dollars of emergency loans and their pre-existing debt, the IMF demands that the governments of debtor countries practise severe austerity and deregulate and privatise their economies.

The largely private nature of the big surge in the ASEAN economies' overseas borrowing excludes the traditional neo-liberal argument which blames "governments trying to pick winners" as the cause of bad investment. However, ultimately much of this private debt is going to be socialised. The IMF austerity regime will then make sure that the workers and small farmers of Asia pay for these private debts.

The IMF is also demanding the dismantling of local monopolies and conglomerates like South Korea's chaebols and part of Suharto's crony empires in Indonesia, opening them up to imperialist competition and ownership. But while the imperialists want to be able to pick the eyes out of Asia's most developed economies, they also need to preserve political stability in the region.

Like other IMF-supervised countries, the troubled NICs are expected to pay off their foreign debt through prioritising exports (which they have been doing for three decades anyway); their lower exchange rates will give their exports a competitive edge - in theory. But there are two major problems:

1. The imperialist countries are already protecting their markets against "excessive" Asian exports.
2. Only a few countries can expect to play this game and keep winning, and since China joined the game, it has become all the harder.

The IMF packages won't tackle the systemic problem of overproduction (except to the extent that austerity destroys productive assets in Asia) or the inability of "markets" to direct capital to where it is really needed.

This is a global capitalist problem. That is why the gap between rich and poor nations is widening and why the great majority of nations are condemned to "underdevelopment" despite all the technological advances that have been made.

A real solution to these problems would require the radical redistribution of productive wealth and income on a world scale - something that cannot be carried out under capitalism. Only then could real social need be met, and in a way that doesn't destroy the global environment.

Capitalism's "solution" to the Asian economic crisis will simply shift the burden onto the backs of the ordinary people of Asia while opening up the most lucrative parts of these economies to being bought up at bargain prices by imperialist capital. Thus the western financial press boasts about the great opportunities in Asia even while worrying openly about the possibility of the crisis developing into a worldwide recession.

Even when Asia emerges from the current crisis, the region's economies will be more owned, dominated and exploited by the imperialist powers.

To justify the intensified, IMF-supervised robbery of Asia, we are now sold the image of Asia as the corrupt bad debtor. Western "experts" have resorted to racist hypocrisy, claiming good management styles, "good governance" and prudent banking practices as traditional western or even Anglo-Saxon values. Their audiences are expected to have forgotten the western financial scandals of the late 1980s.

All the pious statements about "transparency" and "accountability" will be dropped once choice parts of Asia's economies are integrated into various multinational empires. Then the only real accountability will be to the biggest shareholders.

We are expected to accept the IMF's moral authority as global administrator of bankrupt states when the IMF's main "shareholder", the US, is the world's biggest debtor. Indonesia has a foreign debt of about US$120 billion and is supposed to do what the IMF says. The US owes US$1 trillion, but it gets to dictate IMF terms to Indonesia and other debtor countries.

APEC

The irrelevance of APEC in the current crisis in Asia reveals its real nature. It is part of the problem, not part of the solution.

APEC is not a trade bloc like the North American Free Trade Agreement. It currently does not formally offer any preferential trade or investment access to member states.

The presence of the US, Australia, New Zealand and Canada in APEC is to ensure that it doesn't become a bloc against NAFTA. However, in 1997, the US made unsuccessful moves to have APEC grant preferential access to members - an attempt to use APEC against its European rivals.

A proposal by the Malaysian government to set up an Asian trade bloc centred on Japan, the East Asian Economic Caucus, did not take off primarily because the Japanese government wasn't interested. While Japan has become the biggest imperialist investor in Asia, it remains highly dependent on US markets for its exports.

There is an embryonic trade bloc among ASEAN countries, AFTA. But intra-ASEAN trade is only about 22% of that region's total trade, and ASEAN countries depend heavily on access to US markets.

At present APEC's primary function is to fast-track trade and investment deregulation negotiations. This process does not promote "free trade" in general but seeks to break down protective measures by the Third World. Imperialist states continue to engage in protection, and the US does not hesitate to use its military might to get its way.

APEC has also become the focus of US economic manoeuvring against Japan. Smaller imperialist powers, like Canada, Australia and New Zealand, hope to profit in the wake of the US. All four are major agricultural exporters, so while they are competitors they share an interest in the removal of protection in Asia.

Australian imperialism's role

Australian imperialism hitched its wagon to Suharto, and by cultivating a special relationship with this repressive regime still hopes to gain economic advantages in Indonesia over other imperialists. The Australian government is prepared to commit $1.5 billion to keep the Suharto regime afloat.

The Australian government has pleaded with the IMF and the US to help prop up the Suharto regime and the crony capitalist empire, fearing a popular movement to overthrow this dictatorship. In this it has the full support of the Labor Party. Former Prime Minister Paul Keating has joined the Australian Liberal-National government in begging for more "flexibility" in the IMF program for Indonesia.

Australia's support for the Suharto dictatorship extends to military and intelligence aid, diplomatic and military support for Indonesia's bloody occupation of East Timor (which has directly benefited Australian corporations through the Timor Gap oil deal with Jakarta) and growing economic collusion with the worst of Indonesia's crony capitalists.

The relationship between the Australian government and the Suharto dictatorship has ugly precedents in its military interventions alongside other imperialist powers in Korea, Malaysia and Vietnam. Australia also hosts key joint military facilities with the US.

Australian governments have also given military and diplomatic support to US imperialism in the Middle East and supported French imperialism in the Pacific.

South Pacific nations have long suffered the racism and paternalism of Australian and New Zealand imperialism. Australia has a shocking record as the former colonial power in Papua New Guinea, and it still plays a reactionary and dominant role: facilitating the pillage of this resource-rich country by Australian and other imperialist corporations, propping up corrupt governments and supplying military aid to repress popular uprisings in Bougainville.

The racist role of Australia in the Asia Pacific region goes hand in hand with its racist treatment of the indigenous inhabitants of Australia. After more than 200 years of genocide, dispossession and discrimination, the Australian government still refuses to accept responsibility for the oppression of the indigenous peoples of this continent. It has encouraged a new wave of racism against indigenous people and recent Asian immigrants, resurrecting aspects of the infamous white Australia policy.

The DSP's response

The DSP opposes the austerity, deregulation and privatisation measures demanded by the imperialist powers because these measures will make the workers and small farmers of Asia suffer for the crisis of the capitalist system and deepen imperialist plunder of Asia. We also oppose those who claim to stand for democratisation but seek to tie this to IMF programs to deepen imperialist exploitation.

We call for unconditional humanitarian aid to be given by the imperialist countries directly to the poor in all countries in the region, instead of public funds being used to bail out the imperialist creditors and prop up dictators like Suharto. We oppose military aid to all repressive regimes.

We call for a cancellation of all Third World debt. The imperialists have already extracted in repayments, interest and super-profits many times more than they have lent to the Third World.

We oppose colonialism and neo-colonialism, and support the struggles for self-determination of all oppressed nations. We recognise that the final elimination of imperialism is not possible without the replacement of the world capitalist economic system.

We support the formation of alliances of all exploited nations in the region to present an economic united front against the imperialist states. The governments of the US, Japan, Australia, Canada and New Zealand should be kept out of any such blocs. However, the capitalist governments of Asia cannot be trusted to build such regional solidarity. Each seeks to cut a deal for itself with the imperialists, as the governments in the ASEAN countries are now showing.

Most importantly, the DSP builds solidarity between the working class in imperialist Australia and the workers and small farmers in Asia. This is why we strongly support the Asia Pacific Solidarity Conference and seek to build links and work together in struggle with left parties and national liberation forces in the region.

In Australia and other imperialist countries, the biggest challenge is to win the working class away from the racist, nationalist ideology that still binds many workers to their imperialist bosses. Workers in the imperialist countries won't be able to offer real solidarity until they realise that they have more in common with the workers and small farmers of Asia than they have with Australian bosses and their government.