Translated from Gegenstandpunkt: Politische Vierteljahreszeitschrift 4-1997, Gegenstandpunkt Verlag, Munich

Stock market crash and currency turbulence in East Asia: Thailand
The ups and downs of an "emerging market" and their basis in a worldwide over-accumulation

Editor's note: The financial crisis of the world economy began more than a year ago in Southeast Asia. At that time the governments of the countries concerned got all the blame for the breakdown of credit experienced by their economies. Responsibility for the crisis was attributed to wrong policies, nepotism, sleaze, and easy borrowing in order to contain locally both the reasons for the currency turmoil and the turmoil itself. By blaming the victims, the crisis was considered to be an avoidable and limited threat to an ever-growing worldwide capitalism. The article on Thailand, first published in November, 1997 shows that this view was erroneous and biased from the very beginning.

One caution. Just because capitalism has crises doesn't mean we are complaining about it. Just because it functions in a manner that wreaks havoc with the world's population doesn't mean it doesn't "work." The following article on the global economic crisis shows exactly just how it "works." So, it is definitely not a matter of "fixing" it or wishing it could be "fixed," or "improved," nor of blaming some party or other for screwing up a perfectly fine economic system.

For years Thailand has been the subject of international admiration. "Sensational growth rates," a building boom sending Bangkok into the ranks of the great metropolises in the shortest period of time, a never-ending rise on the stock-market, the baht as one of the most stable currencies in Southeast Asia, and annual capital inflows of billions of dollars were taken as a proof of trust in the country. It was unanimously held that the success of this "emerging market" was owed to a government that had carried out all the correct policies demanded by the G7 countries and the IMF, namely, "liberalization," "free capital movements" and a market economy. Thailand was considered a "model" that not only other "developing countries" but even Germany could learn from, especially when it came to cheap labor ; so said German president Herzog during an Asian trip. During the spring of 1997, though, "worries in the kingdom of growth" suddenly grew. Foreign investors withdrew money, the stock market slid, and speculators bet on the depreciation of the national currency. The government tried to stop the trend by wasting some billions of dollars defending the baht's peg to the American currency. After surrendering to the money market, the Thai currency lost more than 35 percent of its value within three months. Internal demand collapsed, business and banks went bankrupt, foreign producers closed plants. Moreover, the worst was still to come, as the government had to face losses of 14 billion dollars from foreign currency exchange contracts expiring at the end of the year.

Since that time, investors have turned their back on the Bangkok stock market. Thailand's economic success now counts for nothing but an "illusory boom." According to Western press experts, the economy had grown "too much, too quickly." Thailand should have put its stake in "capital-intensive and technology-oriented" production, instead of squandering "simple, labor-intensive goods" on foreign markets. "Unsound, gigantic building projects" had been promoted and too much short-term capital was attracted. It does not really matter whether the investments had been too few or too many or the wrong ones. Suddenly everybody knows that Thailand has been living on borrowed money the whole time, the government has erred in its "craving for status" by pegging the baht to the dollar for "too long," by not decisively fighting "corruption, cronyism and mismanagement."

That is the way commentators interpret international competition. They read the economy and politics from the point of view of capitalistic success or failure. That is why they know it all so much better with hindsight.

As long as money capital is heaping trust on Thailand, the country's economic life deserves respect and its "sensational growth rates" are gazed at in wonder. As soon as investors begin to withdraw their money, the country's growth reveals itself to be phony. The moves of speculators are taken for the definitive judgment of economic wisdom. Experts on the global economy find nothing wrong in the fact that the economic fate of countries like Thailand depends entirely on such a judgment. This dependency is only too well confirmed by Malaysian premier Mahathir, when he accuses "international speculators" of "cheating Asia out of the fruits of growth it had worked hard for." Obviously he hasn't the slightest idea that the growth so admired in his region must have been the deed of these disgusting guys as well. The easy ruination of the region by the withdrawal of money capital shows that the region's previous success must have been based on this same capital. If so, the governments there have done neither right nor wrong, but have simply made their countries a subject of international speculation.


That is exactly what Thailand wanted to be, an investment locale for money capital. Nowadays, this is taken to be the only reasonable and challenging road to success a former "third world" state can take. The "opening for offshore capital" ("Bangkok International Banking Facility") which Thailand carried out by allowing its banks to limitlessly take on foreign credits has not, however, been a matter of course. The requisite abolition of restrictions and prohibitions testifies to the deep reservation against the free flow of money and capital across borders which had been widely held in the world of "developing countries". This kind of reservation in no way had its reason in the desire to spare the people the hardships of a money economy. To the contrary, for a long time now all traditional means of subsistence in Thailand or elsewhere have been made dependent on whether or not money can be acquired. Nor did the reservation stem from a dislike of world trade, in which Thailand has taken its part as a "country producing raw materials" by exporting rice, tin, orchids and jewelry. Long before, Thai politicians had appreciated cooperation with foreign capitalists as a means for developing the capacity to produce exports suitable for the world market. The country and its inhabitants have been offered to Japanese capitalists as a sphere of exploitation since the beginning of the 1980s. Using credits for building up an industrial base was hardly a recent innovation; rather, they have been amply given and taken for years.

The reservation had its rationale in the economic sovereignty of the government itself. It wanted to keep the country's external indebtedness under control and remain politically capable of handling the availability and allocation of credit within the country. At this period of time the chiefs of state were aware that this was absolutely required for a country such as Thailand if it was to preserve its national sovereignty, a country that still had to grab its share of global business against superior competition from the established economic powers. Still lacking profitable commodity production as well as stable and globally demanded money, it could not simply hand itself over to be tested by international money investors who compare the entire world by the yardstick of return on employed capital. Instead, it had to take the building up of national firms into its own hands, bring them into being by state credit, protect them against the comparison with already successful competitors and maintain them against comparatively negative results by further subsidies, even if no profit were to show up for a long time. All successful locales for capital handle their future industries in just this way. International money capital does not bow to national ambitions for development; instead it gets into conflict with them very quickly by its claims for interests and dividends.[1]

This phase of Thailand's developing efforts had its geopolitical precondition and its forced end. The precondition, which had to be utilized in order to construct a competitive economy, was the role the country had played in America's Vietnam War.[2] With the help of war dollars the country attempted to emancipate itself from poor returns on raw materials, from the usual trade deficits and needs for foreign exchange. As Thailand, unlike Malaysia or Indonesia, possesses no oil revenues to attract foreign credits, the fruits of these new departures came to nothing but a national airline, some state firms in the steel, communications, energy and transport sectors and a few banks. That is why Thailand had already decided at the beginning of the 1980s to expand its economic basis by opening the country up to foreign productive capital.

The necessary conditions for foreign investment were provided by Thailand, namely, the cheapest workers and well supervised at that, harbors and roads, tax freedom for years to come, exemption from import fees, a guarantee of unimpeded transfer of profits, and a stable money. The baht was pegged first to the dollar and later on to a currency basket consisting of eighty percent in dollars, the rest in yen and marks. The peg would guard the profits of international investors against unavoidable uncertainties concerning the currency, to promote their capital turnover. Japanese capitalists who used the country first as a market, then as a locale for capital, have taken special advantage of these business conditions. They shifted entire lines of production to Bangkok as well as to two other places in the south because of cheap wages there. The rest of the country had and has nothing to do with their ambitions except for supplying the workforce on demand. In the wake of all that, Thailand experienced growth rates above eleven percent in the 1980s (eight percent on average later on) and exports soaring by twenty percent each year. Despite these rates, the calculations of the Thai State did not work out. Foreign currency receipts from capital inflows and the proceeds of exports were met by an ever-increasing demand for foreign currencies to be expended on infrastructure and especially on growing imports. Each production facility, as well as raw materials and intermediate products, had to be bought abroad, particularly since only some isolated labor-intensive steps in the production process were actually carried out in Thailand itself.

With its deficits in the balance of trade growing year after year, Thailand had to notice that high growth rates can be a shortcoming, so long as they do not reflect a comprehensive internal accumulation but rather only the expansion of isolated foreign investments. Earnings accumulated less in Thai coffers than in the pockets of Japanese companies which had no intention of keeping their earnings in the national Thai currency for reinvestment. The growing economy was nothing but an appendage to capital accumulation elsewhere. It therefore did not enjoy the technological progress and rationalization which set the terms in the world market and guarantee extraordinary profits. Instead, it remained dependent on the narrow calculations of foreign capital counting on especially cheap labor. The success of these businesses consequently did not lead to a growing international demand for the local currency nor to an automatically soaring hoard of foreign currencies by which Thailand could defend its fixed exchange rate. On the contrary, the efforts to provide the necessary business conditions, from roads to the supply of foreign currencies, soon became a question of foreign credit granted to Thailand. About thirty billion dollars of foreign indebtedness have come about in the wake of all that.

Despite this outcome, all could have gone on in this way as long as credit flowed. From 1989 to 1991 Thailand felt the consequences of the "world debt crisis" and the changes in global political conditions for the so-called "developing countries." Doubts as to the creditworthiness of South American countries were generalized, affecting Thailand, a country not among the biggest headaches in this crisis. Direct investments went down, access to foreign loans became more difficult. The Thai national budget was jeopardized as well as the convertibility of the baht. In order to avert these perils the Thai government turned to a peculiar means of national self-assertion. It expressly changed its "development doctrine," dismantled all barriers to the flow of capital and liberalized the banking sector, as mentioned above.[3]

This correction is all about the national effort to control credit. A state wants to be the master of credit as the vital means for its various projects, all the more so in a country without any considerable productive capital which would have its own credit. In such a country, political sovereignty over the credit system requires separating the internal usage of money from foreign money and its usage, requires political control of the banking system which organizes that usage, as well as control of the foreign indebtedness of local borrowers. The latter is needed because a state has to be able to stand for foreign debts if it wants to defend its sovereignty over the credit system within the country, and its own credit altogether.

The effort to create national growth by means of a nationally controlled credit failed insofar as the expenditure on political development did not result in as many capitalistic transactions and export earnings as would have been necessary to cover foreign debts, nor guarantee the parity of the national money on the basis of the country's economic strength. As the government could not count on any support by the leading world powers for new credit in order to maintain the country's creditworthiness, it gave in to the conditions laid down for all such states concerning their continued partnership in the world market and their future access to money capital. To find investors and get access to credit Thailand had only to revoke its own authority to decide "how much and for what." This means that it not only had to do without making use of credit for its own development projects, but had to refrain altogether from using a nationally promoted and controlled business life as the basis for a national credit of its own.

Access to money capital available on the world market could be provided (such was the calculation born out of defeat) if the state would no longer try to get control over it and use it for "unprofitable" projects. Better to leave it up to investors to comb the country in search of profitable investments. From that standpoint, all instruments of state regulation and control appear as nothing but barriers in favor of Thailand and against the comparisons investors have to make, as nothing but costs which damage investment yields. As long as foreign indebtedness is politically limited, the inflow of capital willing to invest is cut off; as long as maximum interest rates are fixed, international creditors who would offer money at higher yields are rejected. As long as banks have to keep minimum reserves with the national bank, the cost of credit increases, and so on. Without the intervention of the national authority, the banks, their national creditors, and their clients would discover and set for themselves the appropriate interest rates, collateral, etc. Abolishing all barriers and regulations would guarantee, firstly, that conditions were attractive for international investors, and, secondly, that money would be invested in and only in truly profitable projects. The state no longer would need to be the decisive authority and guarantor for foreign borrowing, which it would have been unable to do anyway. Instead, a national stock exchange would be set up, where foreigners could directly and on the basis of their own calculations spot the firms in which to invest their money.

This kind of "development doctrine" has its price; and the Thai government accepted it. Thanks to it any local transaction is directly comparable to worldwide standards of profitability, as the entire internal economy is made dependent on private foreign investments; the comparison no longer affects exports alone. Meeting this standard becomes the country's condition for survival. Unprofitable (or not yet profitable) economic development projects are called off by the state in favor of maintaining a sound budget. After all, its international credit, financial stability and its currency reserves (or what is left of them) are as decisive as ever, but now for a new task.

Financial resources are no longer the lever for developing a national economy but are used to provide the indispensable preconditions for the capitalists' willingness to invest. As the nation relies on foreign capital, it does anything it can to relieve investors from currency risks. Therefore it keeps pegging its currency to the dollar. Potential investors can at any time reliably sell off the currency when in doubt as to its usefulness. Then and only then might they finally be willing to consider comparing Thai yields to global ones. It is, however, quite a strange guarantee the government has taken on. After all, the stability it wants to provide for the local currency does not stem from a successful foreign trade and positive trade balances, which would result in a reliable currency as well as foreign reserves to defend it if need be. Rather, a politically ensured exchangeability at a fixed rate is supposed to replace the lack of stability and thus to provide the currency with a quality it does not have. This guarantee costs foreign reserves and lasts as long as they do.

Simply inviting investors to compare the country's profitability with global yields and to consider investing in Thailand doesn't mean that the comparison comes out in favor of the country, however. The state may permit unhindered in- and outflow of money, may guarantee an exchange at fixed rates, but this permission is nothing more than a precondition. The country's existing businesses hardly make for an especially impressive argument in the eyes of the makers and shakers of the world market. If they had been profitable enough in scale and scope to obtain a positive trade balance in the first place, the government would not have felt the urge to revise its former "development doctrine". How could just the desire for profitability and the readiness to open up the country to international money capital unconditionally change all that?


International investors accepted the Thai offer all the same. First they lent to local borrowers, then supplied Thai firms with capital via the stock exchange. The comparison of investment spheres carried out by the owners of yen, dollars and marks turned out favorably for Thailand, but not because profits there were up to expectations nor because the chances for growth were so brilliant. Rather, things were simply not better elsewhere. After all, Southeast Asia is not exactly the next address on the block for investors. The first choices are the three to five countries with "hard currencies" which offer a relatively stable environment for investment despite all fluctuations. The financial resources roving around the globe start from there and retire there in case of turmoil elsewhere in the markets. Investors have known perfectly well the "special risk" of an investment in Thailand. They complained about the volatility of the local stock exchange and found questionable "fundamentals" such as "high balance of payments deficits" and a "bad debt-to-export-ratio." These did not deter them from investing there, of course.

The acknowledged shortcomings of this sphere of investment have not been taken as an obstacle but as a "special risk" to be repaid by higher interest rates. This kind of valuation of countries like Thailand is something new and exists because of a problem the financial world has with itself. Money capital has been accumulated for years and has piled up higher and higher in all sorts of accounts. It has to go on accumulating (it is capital after all!) but the rate of accumulation made possible by taking advantage of the credit needs of first class states and their entrepreneurs is much too low. What we have these days is on the one hand an overabundant money capital searching for investment opportunities, and on the other a capitalistic commodity production in which too much capital is invested anyway, as shown by complaints about "sales problems." This disparity is the reason why money capital looking for investments has not avoided the risks of countries like Thailand, but rather has created there by itself new investment opportunities, building up what is called an "emerging market."[4]

The first new credits were carefully appraised but soon taken as a "guarantee" for further ones to come. The massive inflows that followed were taken as a sign that money could be earned in Thailand. And so it could. Profit was made above all on rate-of-return increases coming about in the wake of an ever-growing interest in investing. The managers of various emerging market funds realized very well that the increasing rates they were earning and on which they were betting were their own creation. They expressed as much by claims that the Thai capital market was much too "limited in size," was "lacking in liquidity" and suffered from far too few issues being traded there, so that even small fluctuations in supply and demand could escalate into "unbridled up and down movements in the market." Thus they noticed that there was an insufficient local foundation of creditworthy firms and money owners, that their investments did not have a share in any local business boom, but rather that the boom was produced by their own financial investments, it did not amount to anything more than that. Of course this vicious circle of speculative investments did not disturb anybody as long as everything went well. And it went on as long as they could trust in the future of business in Thailand eventually justifying the money advanced sometime or other. Caution was advisable of course. They made the most of the politically fixed currency peg while at the same time being wary of its "artificial" stability. They knew the power of their own speculative movements and their effects on exchange rates, but criticized a "remaining dependency of these countries on speculative inflows." The authors of these inflows blamed the objects of their speculation for its speculative character.


All that had not prevented investors from granting the Bangkok stock exchange a meteoric rise, and Thailand its anointment as an "emerging market," as well as foreign debts amounting to 140 billion dollars. With all the money flowing in, Thai banks could increase their borrowing since interest rates on foreign denominated debt was markedly lower (by 20 to 30%) than those payable in baht, this in turn due to the national bank's "stabilization policy" to ensure parity. The banks raised dollars, converted them into baht and passed this liquidity on to borrowers, state and private firms, and funds for real-estate projects for a hefty fee. In this way all the circumstances came about which investors consider signs of a "brilliant future" for their money. Thailand's internal purchasing power grew rapidly, branch offices of every sort settled in Bangkok, building boomed as an object of property speculation like everywhere else in this world; in fact, quite an "economic miracle."

The crash of 1997 revealed that this growth was founded on credit, on an anticipation of future wealth. But that is certainly not due to any special quality of Thailand, even if all the pundits charge that its growth has been financed with "paper." Successful capitalistic nations also use credits at their disposal as a means to form businesses and to expand them. There as well, credit is an anticipation of future earnings, is used to expand business transactions notwithstanding the limits imposed by the existing purchasing power of society, which however really counts in the end, so that businesses fail when claims for repayment of credit from debtors are not met. In all the main centers of capitalism, however, credit is used by manufacturers which are not only successful in world markets but set the standards of price and quality, using credit over and over again to redefine these standards against competitors.

Thailand however differs. There, as well as everywhere else, credit and its use would be the means to develop national capitalism from scratch. Accumulation of capital (and a primitive one at that!) only works by massive use of credit. But it does not work with the conditions under which the inflow of money to Thailand had come about. There was hardly any capital which could have used credit for its own need to expand. Sufficient opportunities for productively using all the money invested in the boom years did not exist. Most of the money was invested into real-estate projects and used for stock-market speculation. The productive transactions were insufficient to lay a foundation for a national economy, which would have brought about the necessary international demand for the local currency.

The cause is the same for this as it was for the glut of money flowing in in the first place, namely, an abundance of credit and a dearth of its profitable uses. The billions totaling up in the rapid Thai boom did not result in masses of capital capable of competing at the highest levels in a relatively undeveloped region, which would have been necessary, however, for pushing the entrenched competitors of other nations out of overstocked world markets. The situation described does not allow for new investments creating additional productive capital on a scale so massive that it could have enabled countries like Thailand to succeed as a world-class business locale. Capital inflows spring from a disparity between already-accumulated financial capital and the opportunities for productive capital to increase in value. Why should an inflow of credit change all that, especially when invested into a country which on the one hand provided few such opportunities, and on the other hand had not been at all prepared for a forced competition against already established world market nations setting the standards with their combination of the most modern technology and cheap labor?

The cabal of money capitalists uses the "development efforts" of Thailand to earn interest and profit from increased rates of return corresponding to the risk involved. Speculation on the success of future markets does not fill the gap between the growth of money capital and the opportunities to make more out of it in the productive branches of capitalistic business. The same gap that had been the starting point of all the commitments sets the two sections of capital still further apart. The money capitalists themselves do not worry about the limited foundation for growth. They are concerned with the growth of their assets, with signs as to where interest and currency rates could possibly move. That is why they so indiscriminately gather such a motley mixture of data. They observe growth and trade levels, pay attention to election results as well as the directions of warm ocean-currents and listen to rumors spreading among themselves which define the latest trend. Everything is taken into consideration that has only the remotest connection with successful transactions (and successful state power as well) that could eventually promise a good business future. Interested and indifferent as they are, such was their concern with Thailand. They did not want to infer from the high growth rates typical of capitalistically backward countries that the actual business opportunities there would be quite limited for a while. Instead they took the data to imply huge development opportunities for future business. As if Thailand would have been able to vouch for the loftiest claims of this monstrous financial superstructure by its sweatshops, several assembly plants for Japanese cars and a few suppliers for foreign electronic firms. The capitalists ensured in that way that billions in money capital were thrown on this financial market, granting the Bangkok stock exchange a world-class boom, all the while indifferent to the comparatively slender basis for world-class business.


That works out as long as this same financial capital believes in its own confidence. This confidence came with question marks even before Thailand's export rates decreased in the spring of 1997. The flashy speculation had been accompanied by warnings that the "rally in the emerging markets" was "overrated." Money investors, the very incarnation of courageous venturesome entrepreneurship, turn out to be a very timid riffraff when worrying about the security of their investment, especially when it concerns investments in "high risk" spheres. As soon as the dollar overcame its low against the yen in 1995, the first doubts were raised as to whether Thailand would be able to keep pegging its currency to a soaring dollar. Parts of its export trade, investments and credit inflows were invoiced in yen. To service dollar denominated debts, Thai banks therefore had to borrow on "offshore markets" for dollars which could otherwise not be acquired so easily. Declining speculative money inflows resulted in a depreciation of the baht. Defending the exchange rate cost the country four billion dollars but limited the fall for the time being. When growth rates slid down to a scale normal capitalistic nations would be proud of (seven or eight percent) events could no longer be stopped. A crisis with European and Japanese customers, a shift in production to even cheaper cheap labor markets such as China and Vietnam, as well as speculation on an overstocked Bangkok real estate market, had made building projects unmarketable and had caused financial troubles for the banks... All of a sudden investors shifted their portfolios, watched the effects of their own doubts on further crumbling rates and carefully noted the effects of defending the currency parity on like-minded people. As soon as the Thai state used its foreign reserves to do exactly what foreign reserves are for, they quickly concluded that the country could not keep it up, and converted the doubts they had cast on the success of all these measures into a fact. By withdrawing money they doomed the supporting measures to failure and "proved" what they had been supposing, namely that this currency was "overvalued." Thus the moneybags exposed the "bubble" they had blown up themselves. Very quickly, they reduced the wealth measured in baht to a level at which it possibly could, but anyway certainly will have to stand the comparison with real wealth measured in dollars.

In that way, they not only made sure that a great deal of assets were depreciated but also executed a devastating judgment on an entire sphere of investment, on one which had up to now ranked as one of the markets of the future, to wit: since Thailand now lacked a foundation for all credit operations, there was all of a sudden nothing of any worth in the entire economy. What it means to be an "emerging market" is now clear. For a time, Thailand may have had the illusion of having successfully started on the path to national growth. In fact, its economy has resulted solely from a speculative valuation, not derived from the internal market but entirely from somewhere else. The country's growth has been brought to life by international speculation, consists of nothing else but a stock market boom and is more or less killed off as soon as the international stock market Mafia retracts its confidence. States like Thailand may complain that they have been unjustly victimized by international large-scale speculation, but they had to pay somehow for the character of their new "development doctrine". They had offered themselves to speculation and given it a chance to go about accumulating fictitious capital.


The ups and downs of speculation do not follow from the special circumstances of Thailand but from the precarious condition of international credit in general. Thailand just has the dubious distinction to have been the starting point for movements in world financial markets, in which the general over-accumulation has been realized as an extensive devaluation of international financial capital and, as a consequence, of productive capital as well. How little Thailand's particular "data" matter to investors is revealed by the fact that the stock exchange crash enmeshed the entire Southeast region. All of a sudden, countries such as the Philippines, South Korea,[5], Indonesia, Malaysia, and even Hong Kong had to face pressures for currency devaluation, although they had no share of Thailand's "massive" export slumps and virulent real property crisis. They had tried to go on following the same pattern of supportive measures, currency depreciation, and widening of the currency fluctuation band with the dollar. But as soon as investors had forced the Thai government to devalue, the financial brokers more or less had the proof that none of the rates of the other currencies pegged to the dollar could be maintained against a speculation on their depreciation.

That was especially so because these countries' trade transactions with Thailand were massively affected by its currency depreciation. At first investors took a glance at each of these countries and saw differences from the bankrupt Thais. The Philippines were praised for a week or so for their better "instruments to regulate banks," Indonesia got a break by some remarks to the effect that credits could not be put into real properties there as limitlessly as had been the case in Thailand, and so on…

By searching for differences that could have prevented a timid heart from speculating against the country, the entire Mafia took the standpoint of testing their investments there. For fear of rate losses they all turned to letting everyone there down. Southeast Asia as a whole had sinned against the efficiency criteria of money capital. It had done so by "politically overvalued currencies" and "high balance of payment deficits," even if that sin comes to nothing more than the actual dependency of these countries on "speculative inflows" from exactly the same international financial capital.

All the "emerging markets" were affected because investors had sorted out the world's regions according to the political credit by which stock exchanges are backed. Despite some losses in Sao Paulo, their "final" judgment was limited to the Asian region. That is why currency turmoil did not spread further during the first days. Southeast Asia was taken as a sphere of the already strained Japanese credit, whereas Latin America was favored because of the dollar, for the next two months at least. Then rate slides occurred not only in Southeast Asia, but in the wake of that in Japan, on Wall Street. The European stock-exchanges saw severe losses too…


The turn in Southeast Asia consequently challenged all the leading world powers, those whose credit is globally engaged, and who are in charge of it. They were challenged to a joint action to localizing the problem as well as to a competition for regulating it. They came out with the assumption that first, Japan, as the main creditor, would suffer most of the damage when debtors next door went bankrupt. Japan would be urged to answer for the failures "because of the country's economic interests in that region." So in the beginning, all of Japan's attempts to give the United States and the Europeans a direct share in the burdens for maintaining the credits were refused. So was its attempt to monopolize the IMF for rescuing Southeast Asia in a manner similar to the American success in the case of the 1995 Mexican crisis. As a consequence, Japan took the standpoint of claiming exclusive means and rights for being in charge of resuscitating all national credits since it would bear most of the burden. An "Asian Monetary Fund" was proposed, which it promised to fund with 100 billion dollars. The yen would be explicitly made the basis of all Southeast Asian national credits. That would extend its currency zone and regain trust in the currency with the speculators who in the meantime were casting some doubts on Japanese credit.

The yen would become the "leading currency" for an entire region and represent a larger mass of credit with an extended political guarantee. But founding a currency zone, which would have excluded other powers and their money, especially America and its dollar, was refused. The argument offered was transparent, namely, the Southeast Asian "tigers" would need nothing less than fresh money, given without any IMF conditions, which would bring the countries back to "economic reason." As if that was something only the United States and the Europeans could guarantee! A compromise was found to distribute the burdens, particularly as the damage was becoming more and more a worldwide affair. IMF credits were permitted, to which the Japanese would contribute the most.

The conditions under which IMF credits were granted once again inform the crisis states of their true economic status. They are nothing else but an investment sphere for money capital whose trust has to be regained at any price. They will also have to forget about any ideals of development in connection with their latest "strategy." They have to take the consequences the speculative turn has produced for them, and viewing them exactly as a kind of economic rehabilitation. The causes of the crisis are ignored; the proven inability of these countries to justify the speculative expectations is met with cynicism. As if the loss of trust were really a fault of the governments involved and as if its re-establishment were really up to a committed national will alone, the countries are urged by the IMF to apply themselves to balancing their budgets. State expenditure has to be reduced once again, national projects have to be given up, deficits in the balance of payments must be reduced, a minimum of foreign reserves should be held and some kind of growth should come about all the same. Restoring economic competence is tantamount to giving up most of the transactions which had come about by foreign money. The IMF urges them to cancel what they cannot economically "afford" and to reduce their national ambitions to the economic position they find themselves in. They are restricted once again to doing without anything that will not bring about instant profit, to bowing to their role as an object of speculation, however clearly reduced that all may be, and to regaining trust with money capital all the same by becoming cheaper. That suits the money interests anyway. Whether or not trust will be revived has apparently nothing to do with all the possible appropriate efforts these countries may start to make, now that the currency slides in Southeast Asia have generalized to global turmoil on the stock markets.


[1] Today, as attraction to international investors has become the one and only yardstick for the soundness of a national economy, previous endeavors to promote business by government credit are disapproved of as "corruption" or "megalomania." The fact, however, that the means by which the government subsidized its state-founded enterprises were in the form of credit, reveals that they were not mere gifts for its minions, but were meant to be, or to become, capital. This is not refuted even when the government doesn't take a chance on whether or not the sponsored firms would really be able to service their debts. Thus, the continued existence of a national business was guaranteed by low interest rates, the remission of debt servicing in extreme cases, and new subsidies. Both the profit and losses of these enterprises often were part of the national budget.

[2] During the Vietnam War, Thailand was a support base and "recreation area" for the Americans. "Counterinsurgency" was the motto for equipping Thailand with weapons, roads and airfields. After the war these were still useful for finishing off the Communist resistance or for engaging in other skirmishes across borders. For instance, the task of supporting Pol Pot for a while, who had been driven off by the Vietnamese marching into Cambodia, fell to Thailand. It was these circumstances alone that provided the government in Bangkok with the material prerequisites to gain sovereignty over the whole of its national territory. Counting on the success of this cooperation, the United States titled its policy "focus on poverty," setting great store on building Thailand up as an anticommunist bulwark. The country had to understand its new imperialistic task as its own raison d'état and to obtain the required means by participating in the world market. The dollars that came into the country with the military stemmed from this role and served it. So did the scanty American development loans aimed at fighting drug cartels later on. This role also was the basis for Thailand's creditworthiness with the banks.

[3] This change in responding to the "debt crisis" is in no way the result of a free choice away from a "statist, developmentalist path" to a "neo-liberal model." First of all, it was not about implementing economic policy "models" of any kind, but rather about real alternatives for the national aim to repatriate part of the global money accumulation to one's own territory. Secondly, the first alternative was no longer available. American president Ronald Reagan had withdrawn it as an option. As part of the escalation of his Cold War against the "evil empire" he had demanded a clear decision from the "developing countries" on behalf of the West and the western "market economy." "Non-alignment" as well as "state intervention" were ideologically fought as kinds of communist machinations. With the end of the Soviet Union any thought for national ambitions by countries striving for progress became superfluous in practice. They had been supported by foreign aid during the Cold War and been acquired politically and economically for the West. Since then, "liberalization," "opening up to the global economy" and "political reforms" have been the dogmas of a policy which is aimed at preventing any endeavors for a separate, competitive national economy. Instead, unconditional subordination to the successes of global business is demanded. Since all the hurdles have been cleared for imperialistic interests to be in force, the speculators and their interpreters behave as if the age of the market economy were just now beginning, not just for the hemisphere dominated by the former Soviet Union but for the whole world. "Reason," they told the world, had finally won and all countries, especially the "developing" ones would profit. These latter could now hope for gigantic "capital inflows" and "growth rates twice as high as the ones in the United States and Europe."

[4] The overabundance of financial capital is the cause for a new evaluation of the "developing countries." The same high growth rates at the end of the 80`s had not at all been taken as a sign for making an exception in the case of Thailand in the wake of the "world credit crisis," nor for giving the country credits on special conditions. The same rates, however, were the cause for rapid and plentiful capital inflows some time later.

[5] South Korea as well as Taiwan is regarded as an "old tiger." These countries, because they are frontier states against North Korea and China, had enough American credit at their disposal and therefore credit of their own. With its help they managed to build up a competitive growth in some protected economic branches, not coincidentally during a time of expanding world markets. The credit crunch due to investors' doubts about the region as a whole drove the famous South Korean "chaebols" into crisis and bankruptcy along with the lofty projects of the "new tigers."

© GegenStandpunkt 1999