KEYNOTE PRESENTATION

Globalization, Economic Crisis in Asia and Its impact on Higher Education

Dr. Nieola Bullard

The main argument is that the so-called Asian crisis is not an 'Asian' crisis at all, but rather a crisis of the 'globalization' of free-market capitalism. That is, the extensive and rapid liberalization of international capital flows, in the context of export-driven growth oriented growth, has lead to the economic crisis.

In human terms, the current situation is grim: in Korea, workers are struggling to merely maintain tights gained by past years of bloody struggle. In Thailand, unemployment is burgeoning and social unrest is on the rise as workers, farmers and the poor - for years excluded from the boom cycle of Thailand's growth- again suffer the indifference of their government. Indonesia, long help-up by the World Bank as the example par excellence of development success, has been plunged back to third world status, with inflation verging on hyper inflation, untold millions of unemployed and fast-rising poverty and distress. What seems from the outside to be chaotic and violent is, in many cases, simply a logical response to thirty years of repression and containment.

The international response to the crisis in Asia has been interesting. If one were looking for a word to describe the overall reaction, it would be 'containment'. Containing the spread of the Asian contagion, containing the impact on trade, growth, export markets, and profits.

The international response has also been to contain the social unrest unleashed by the economic crisis: everyone fears that the situation will get out of hand, so 'social safety nets' are proposed in the name of providing welfare, food and training for the unemployed and hungry. Certainly this is no more than ensuring people's rights as citizens, but more importantly, no-one wants the unemployed and hungry to march through the streets of Bangkok or Jakarta: it would scare away the investors.

Also, the policy has been to contain Asian government and their capacity to respond independently to the crisis. In November last year, Japan proposed an Asian Monetary Fund to assist its neighbors with Balance of Payments crises, but this idea was shot-down in flames by the US Treasury and the International Monetary Fund. Not only did they want to ensure a dominant role for the IMF and the US and the economic and political agenda they promote, but in doing so they also shackled the future of Japan's banking system (heavily exposed in Asia) to their policies. That is, Japan, who had a strong self-interest in propping up Asian currencies under attack because their own banks are among the largest lenders to the region, was effectively, sidelined from any say in the solution to the problem.

The IMF solutions have not solved the crisis in Asia, and the pressure is now on Japan to 'do its bit' to boost the region by promoting domestic consumption and growth. This has its own perversity, given that the majority of the world's environmental and social problems are caused by over-consumption in industrialized countries. Why encourage consumption in a society, which appears to have sated its desire to consume?

Domestically, governments have also adopted a 'containment' policy: in Thailand and South Korea, the governments' over-eagerness to please the IMF has left legitimate social concerns unheard.

Governments - in the name of economic recovery - have failed to deliver on earlier promises of land reform, community access and rights to natural resources, more and better education, more accountable and transparent government. All of these issues have been left on the sidelines and the governments are cutting their suits to fit the IMF's measurements.

The role of the IMF and the effectiveness of its policies have come under intensive scrutiny in the past year. The IMF was established about 50 years ago, with the main purpose of assisting countries experiencing balance of payments problems that effected their ability to trade. More recently, since the debt crisis of the 1980s, the IMF has taken a far more interventionist and directive role, promoting a regime of neo-liberal economic policies aimed, in their view, to promote growth and trade. These measures include the liberalization of capital controls, privatization of state enterprises, reducing the role of government and cutting government expenditure, opening markets and businesses to foreign goods and capital, and 'liberalizing' or ,’restructuring' the labour market.

In effect, the IMF, along with the World Bank and due World Trade Organization, has been used as a battering rain to open up the markets of developing countries to transnational corporations and foreign investors, to promote a race to the bottom on labour and environment standards, forcing countries to compete against each other for investment, fully aware that transnational corporations have not only fully mobile capital, but also mobile plant and management.

However, the standard IMF package has come under intense criticism in Thailand, Indonesia and South Korea for many reasons and from many quarters. These will be elaborated in detail in the presentation.

It is extremely difficult to draw general conclusion about where and why these economies went wrong: they are very different from each other, with different industrial and agricultural bases, different political and economic histories, and different development patterns.

However, there are several common elements: first they each tried to achieve rapid economic growth (as measured by year-on-year growth of GNP) through exporting agricultural and manufactured products. As the steam ran out of the export locomotive, each country was able to re-stoke the engine using foreign capital to finance growth and to bridge the balance of payments gap.

Much of this money was in search of quick turnaround high profits, and the only way to achieve that is through speculative investment in activities such as property development and consumer credit. In Thailand, the first bubble to burst, the property glut was the catalyst for a chain reaction of bad debts leading to failed finance companies, leading to speculators eyeing perceived weaknesses in the economy, leading to a general loss of confidence in the currency, leading to rapid capital flight which in turn triggered a further plunge in currency values and the stock index. Throughout this tailspin, the government tried to defend the currency, but in the meantime used more than $30 billion of its $39 billion in reserves leaving the economy bankrupt and vulnerable, and at the mercy of the IMF.

The ‘contagion' then spread to the rest of the region, destabilizing all the economics, and plunging Indonesia, South Korea and to some extent the Philippines into a recessionary cycle of contraction, devaluation and unemployment. In Indonesia, the economic crisis was both a product of and reaction to the political turmoil. The events in May which finally forced Suharto to resign were equally a measure of economic and political despair. The regime was no longer able to deliver die basic economic security necessary to keep a lid on the aspirations of millions of Indonesians.

What are the alternatives to the growth-oriented, capital dependent model promoted by the US and the Bretton Woods Institutions, and seized with alacrity by tae Asian elite whose own interests were well served.

If we look more closely at the apparently chaotic and anarchic protests and actions of groups throughout the region, we can get some idea of what an alternative might look like. Small scale fishers pirating commercial fishing trawlers, landless farmers seizing palm oil plantations, hungry peasants planting banana trees and crops on golf courses, villagers raiding shrimp farms. These people are expressing class struggle in the most straightforward way, a gut-reaction to the profound inequality they see all around them. People are landless, hungry, their fish stocks are shrinking, the best farm land has been sold to argi-business, and their local industry is being sold to foreigners. People know what the problem is - they do not need to be told. There is a fundamental lack of economic and political democracy which can only be remedied through deliberate redistribution of wealth and benefits, significant public expenditure in hand reform, health and education, attention to the importance of local control and political participation so that people and communities can be part of the decisions that effect their lives.

In addition, there needs to be greater reliance and mobilization of local, national and regional resources, to break this cycle of dependency on an inherently unequal global economic system.