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Imperialism's new neo-liberal initiatives: from APEC to IMF interventions
By Edwin Gozal
[This talk was presented to the Asia Pacific Solidarity Conference, April 10-13, 1998 by Edwin Gozal, Asia Pacific representative for the Peoples Democratic Party, Indonesia.]
Professor Noam Chomsky said that, ``You have to recognise that when the US government speaks of democracy, it is talking about `market democracy' and that market is, in particular, the market for the benefit of US corporations''.
The recent revelations by Allan Nairn, that the US military has been evading a Congressional ban on IMET training for the Indonesian armed forces, is nothing new. The US military has been evading Congressional laws of this kind for years. Anyone who knows anything about US politics would simply laugh at the idea that the military would automatically abide by a Congressional ban on military aid.
Immediately after IMET was cancelled by Congress, the Clinton cabinet announced that Congress did not block the training that was funded by Indonesia itself. The Clinton administration has never really opposed the training Indonesian troops in the US. Quite the contrary, it has consistently done its best to find a ways to continue such training outside the IMET program.
Suharto understands the US government well. Consequently, it's not hard to understand why would Suharto risk jeopardising the so-called IMF rescue package by threatening to walk out of negotiations if the IMF does not relax some parts of the agreement. He knows that if the financial crisis turns into a serious political crisis, his old allies in the state department and the Pentagon will prevail over the US Treasury Department and the IMF.
Other Asian countries are also concerned. Singapore and Japan have recently explored the idea of extending their own aid directly to Indonesia to prevent a regional cataclysm. In the battle of Suharto verses the world, the world worries the old man may not be bluffing.
Turning up the nationalist rhetoric to full blast, Suharto wants to give the image that IMF-US intervention in the Indonesian economy is something new, foreign and at odds with Indonesian cultural values. In reality, the US and the IMF have been backing him for the last 30 years. On the other hand, imperialist institutions such as the IMF are no a stranger these kind of dynamics.
Until recently, little was heard about the IMF in countries such Australia, Thailand and the Philippines. I noticed that one teenager even thought that the IMF was some kind of UFO.
Even before the end of World War II, the US and Britain had drawn up an agreement which sought to create a more stable basis for the post war capitalist economies. They tried to develop a world market through trans-frontier trade and capital movement. This kind of economic ``liberalisation'' offers large capital considerable advantages: a bigger market on the one hand and the possibility of playing national authorities off against each other on the other.
Wartime negotiations in 1944 at Bretton Woods New Hampshire led to the establishment of the World Bank and the International Monetary Fund, as well as a system of fixed exchange rates. By the late '60s however, the system had come under considerable pressure and the IMF began to work to establish a global system of unrestricted trade and capital flow.
Under the leadership of the US, the industrialised nations have been working since the beginning of the '70s towards the greater liberalisation of world trade. As a result, international competition is intensifying and any country that could reduce labour costs would have an advantage in the world market.
IMF
Ajay Kapur, a regional strategist at UBS Securities (East Asia), said what the IMF wants is all very good but added, ``Saying break down your cartels and open up the financial system is like telling a road accident victim that exercise is good for you and you need a jogging regime''.
A study by the conservative Washington-based Heritage Foundation, found that of the 90 less developed countries that received money from the IMF between 1965 and 1995, 48 are no better off than they had been and 32 of them are poorer.
Those who opposed the much celebrated IMF bail-out of Mexico in 1995, point out that the real income of ordinary Mexicans is now the same as it was in the early 1970s, while the country's debt burden has increased significantly. The IMF has also gradually taken control of the Mexican economy. Between 1976 and 1995, Mexico signed seven agreements with the IMF, pledging to reduce its federal budget, while adopting structural changes to its economy such as privatisation and permitting an increased role for foreign investors.
Today Mexico's public debt amounts to $98 billion while the public and private debt combined is around $165 billion. While Mexico's manufacturing industry and exports have experienced a boom, for most people things have gone from bad to worse as health and education spending has been cut in order to keep the banks afloat. It has also meant keeping workers' wages low and preventing any growth in other benefits.
Meanwhile, Indonesia and the IMF are eyeing grim forecasts as they discuss how to lift Indonesia out of its worst economic crisis in 30 years. The Dow Jones News service quoted a senior Indonesian official as saying the two sides had already reached a new agreement, in principle, on revised economic and monetary targets for the current fiscal year budget.
The new figures are the result of a review between Indonesia and the IMF over the terms and implementation of the $43 billion rescue package. Under the revised targets, Indonesia's gross domestic product is predicted to contract by five percent this year. In January, when the package was last reviewed, the estimates were for zero growth. GDP is also expected to contract by 3.9 percent in the current fiscal year, which ends March 31, 1999.
The Clinton administration has also established a system to police implementation of trade reforms in Asia backed by the International Monetary Fund, headed up by trade representative Charlene Barshefsky. Barshefsky's agency, along with the Commerce Department, are jointly monitoring the status of structural and systemic trade reforms that the IMF is promoting in Asia — particularly in Indonesia and South Korea.
During a briefing for a private-sector advisory body, Barshefsky explained that it's designed to make sure that IMF programs aren't being used to create export incentives for Asian nations rather than more open markets as embodied in recent IMF agreements.
She said that Indonesia and South Korea are of particular interest right now because the IMF has secured structural reform commitments from their governments aimed at opening their markets. As the president of General Electric said: ``The free market gives us new opportunities to think through each of those countries and analyse where to specialise our manufacturing, we can occupy the single market by building a single factory for the entire region''.
So austerity programs cut into health, education and any other government services, their assets are snapped up at bargain prices.
APEC liberalisation
As well as advocating a free floating currency, the US has also been pushing for accelerated deregulation, privatisation, and liberalisation of trade in goods and services in a part of the world which many US corporations regard as highly protectionist and having a high level of state intervention in the economy. The economic crisis in Asian resulted in delays to Washington's demands for faster trade liberalisation. Indeed they were able to de-rail Washington's push to transform the Asia Pacific Economic Corporation (APEC) into a free trade body.
But in this new situation, Washington may be able to work via the IMF to complete the liberalisation and structural adjustments it wants.
APEC was founded by Australia in 1989. In 1993, the organisation elevated itself to a leaders' summit and the next year it signed a pledge to achieve free trade within the region by 2010 and no later than 2020. APEC was sold as the vehicle that would resolve tensions in East Asia-US trade. The threat to China's most favoured nation trade status, the danger of Washington invoking Super 301 trade sanctions against Japan, Washington's spasmodic campaigning for insertion of labour and environmental clauses into trade agreements — all were seen as issues that could be ameliorated by APEC.
Two things happened that diminished its effectiveness. Firstly, APEC's membership expanded to the degree that it lost its focus. It now includes Russia, Peru, Mexico, Chile and Papua-New Guinea. Although Russia is too significant to be ignored in any group of which it is a member, it makes no sense to integrate it into the Asia Pacific economy. APEC is now an unwieldy mini-United Nations. These changes were largely pushed through by the US who first insisted on including Mexico and then Russia — apparently in an effort to mollify Moscow over NATO expansion.
The whole episode demonstrates the weaknesses of the Clinton administration's Asia policy, which is marked by episodic bouts of concern and a failure to take the region's institutions seriously. As for Asia, its contribution to APEC's enfeeblement was the insistence that APEC decisions be non-binding, and that it be a forum not for negotiation, but only for consultation. In an attempt to re-create the culture of exhaustive ASEAN consensus, it paralysed the institution.
The struggle in Indonesia
On April 1, the Los Angeles Times said ``The current crisis in Indonesia isn't at all about money. It's also about guns, armies and political power.'' The process of globalisation — the flow of capital across international borders — inevitably affects a country's economy. But in the end, globalisation offers no answers for some of the key questions that determine a country's political future: who commands the troops and how will they be used? The Clinton administration knows these time-honoured truths. That's why it has been fighting quietly but determinedly in recent days to preserve the ties between the Pentagon and the Indonesian armed forces — links that members of Congress mistakenly believed they had cut off several years ago.''
For us the battle is more challenging. We are not only fighting against the Suharto regime, we are also struggling against imperialism and capitalism's exploitation of people around the globe.
The People's Democratic Party has taken the position that the IMF should not be involved at all in the Indonesian economy. This is quite different to the majority of pro-democracy activists who still have illusions that the IMF will introduce democracy (although they claim that they know they understand the real characteristic of the IMF).
Over the next few months, riots will escalate as the austerity program demanded by the IMF starts to bite. Of course these riots are in response to immediate economic issues such as price increases and shortages. Today, when student demonstrations are becoming more political, more radical and militant, we need to work with these people and provide a political perspective on how to fight and propagandise for an alternative political and economic program.
We need to build a strong mass movement that can topple the Suharto dictatorship and carry out pro-people economic reform in order to solve the economic crisis in Indonesia. A central demand of such a program would be the nationalisation of the assets of the Suharto family and his cronies. Although we understand that this alone will not overcome the economic crisis, it would be a good start.