♠ Posted by Emmanuel in Credit Crisis,Southeast Asia
at 2/10/2012 07:49:00 AM
To say that I am ambivalent about still-controversial former Malaysian Prime Minister Mahathir bin Mohamad is an understatement. On one hand, his time in office was accompanied by economic gains that were among the best in our region of Southeast Asia. On the other hand, he has had a penchant for vanity projects that are a big drain on the public purse alike the ill-starred Proton national car project. And don't get me started with his party UMNO playing along with if not leading the persecution of his former protege Anwar Ibrahim on dubious grounds. If you think your country's politics are rough, then I don't know what you'll make of Malaysia's where folks play the hardest brand of hardball.For all that, I must give Dr Mahathir additional props for two things. First is his continued espousal of regional economic integration among nations that are truly within our sphere. Instead of entertaining the United States' various endeavours to style itself as a "Pacific" nation through various APEC-based initiatives of which the Trans-Pacific Partnership is but the latest gimmick, he originally proposed the East Asian Economic Caucus (EAEC). The EAEC was famously dubbed the "caucus without Caucasians" by the wags, but the notion remains of Western interests trying to introduce WTO plus measures in their favoured areas where they seek to consolidate existing advantages alike intellectual property, government procurement and so forth. Kicking away the ladder sounds about right. After all, why should Asians let outsiders dictate economic terms of engagement among ourselves?
Second and along similar lines, it remains the case that Malaysia was among the quickest of Southeast Asians to recover from the Asian financial crisis. This was done through the use of things the World Bank/IMF were discouraging such as capital controls and the use of other measures to protect domestic industries from capital flight and destabilizing economic conditions.
For a recap, here is Dr Mohamad being interviewed for The Commanding Heights on the crisis and what it meant:
In the old days you needed to conquer a country with military force, and then you could control that country. Today it's not necessary at all. You can destabilize a country, make it poor, and then make it request [IMF] help. And [in exchange] for the help that is given, you gain control over the policies of the country, and when you gain control over the policies of a country, effectively you have colonized that country.Given his demonization of arbitrageurs and financial sleight of hand way back when, I still refer to him as Mahathir "Death to Speculators" Mohamad:
Because we have no say in controlling currency speculation. They can speculate with any currency, and their speculation is so designed that they can either revalue a currency or devalue a currency to any level. They hold this power, and they can literally make or break you by just by doing that. It has nothing to do with bad government or corruption or not being transparent, because if we were a bad government, then long ago our currency would have collapsed...In addition to imposing capital controls, he also tried fixing the Malaysian ringgit (MYR) against the tide of World Bank/IMF advice:
I think the [Bretton Woods institutions'] perception is all wrong, and the reasoning behind it is also wrong. Just because you control the exchange rate of your country doesn't mean we are closing off our country from outside participation. As you can see, they are still here. They are still investing in this country, despite the fixed exchange rate. In fact, they find it very comfortable knowing exactly what they would earn, whether they would get back their budget or not, go according to their budget. You can actually plan for the future. That is what a fixed exchange rate means.This trip down memory lane brings us to the present time. We can debate whether the IMF in particular has indeed taken a softer stance on rich nation borrowers in light of the Asian financial crisis or because they belong to the club of developed nations. However, what you cannot really dispute is that Western nations' own responses to suffering from homegrown crises have been to reregulate, nationalize and deliberalize--precisely the opposite prescription to what the IMF was prescribing during the high neoliberal era. Say one thing, do another.
It is thus no surprise that this sort of hypocritical behaviour has not been lost on Dr Mahathir. Ladies and gentlemen, I bring you a recent FT op-ed by the man on "Asian Values 2012":
The world is still Eurocentric: how Europe handles the financial crisis is of universal importance. But I have serious doubts about Europeans’ “infallibility”. I particularly dislike their double standards. Centuries of hegemony have convinced them they know best what is good for the world: their values are to be accepted as universal; Asian values are deemed irrelevant.I believe that Mahathir's spoken record as well as his efforts to resuscitate Malaysia in the face of stiff Western opposition at the height of the crisis speak for themselves. If there is anyone who has a right to criticize the mess the West has made, it's him:
This explains the simplistic solutions offered to east Asian countries when currency traders impoverished them. Malaysia was told to raise interest rates, have a surplus budget, allow distressed banks and businesses to go bankrupt, etc. This was the formula for all. Yet when America and Europe faced their financial crisis, they did everything they told Malaysia and east Asia not to do. While these measures worked for Asia, they are not going to work for the west.
In Hong Kong in 1997 I spoke at the meeting of the International Monetary Fund and the World Bank and I blamed the financial crisis in east Asia on currency trading. I told them currencies were not commodities and should not be traded. But the World Bank and IMF did not care. They even accorded currency traders such rights as not having to be transparent and not paying taxes. They gave these exemptions in the name of free trade, and yet others had to be transparent and to be subjected to regulations. We concluded that their recommendation would bankrupt us and make us dependent on their loans.Again, it's double standards:
I was condemned for my criticism of currency trading. But the exploitation and abuses of the financial market could not last forever. In 2008 the bubble burst. Banks, insurance companies, investment funds and even countries went bankrupt. But for its position as the currency for trade settlements, the dollar would be worth almost nothing.
Just as in the east Asian countries earlier, America and Europe became poor. The refusal to accept their impoverishment has resulted in their refusal to accept austerity measures. Their people demonstrate and go on strike against the measures. This simply aggravates matters.It fits with what he's said before. While mainstream Western economists pointing out that Western finance is rather corrupt now constitutes conventional wisdom about "moral hazard," Mahathir grasped this long ago. Who's to say that kind of corruption is necessarily worse than what goes on in Asia? Back to The Commanding Heights:
Asian countries behaved differently. When they became poor because of the devaluation of their currencies they lived within their means. Some countries went to the World Bank and the IMF but Malaysia fixed the exchange rate and prevented the currency traders from accessing the ringgit. We were told our economy could collapse, that no one would lend us money, and we were warned of dire consequences. But nothing like that happened. Malaysia recovered faster than the rest.
In the rich countries, as you know, the top businesspeople and the financiers, they are very close with the government. They have a big influence over the government because the government knows that what they do is going to affect the economy of the country. That is why when the LTCM [Long Term Capital Management] collapsed, they were able to get the government to take action to have the banks support the LTCM. If the government had done nothing, then the LTCM would have collapsed, and the whole financial system would have collapsed. But then they know that they have to get political action to help them out. So that is collusion. That is very definite linkage between the top businesspeople and the government.Like Mahathir, I believe that I am not an "anti-Western" blogger, but merely point out serial hypocrisies and patent falsehoods certain dirty white boys have tried to foist on others time and again:
I would like to say this: There is a tendency among the people in the West that when you criticize an idea coming from the West, it is because you are anti-Western and, therefore, Western people should not have anything to do with us. Their businesses shouldn't invest in our countries because we are being anti-Western. But we criticize ideas. If the ideas are good and they come from the West, we will support them, because it's not a question of being anti-Western but a question of being against certain ideas coming out of the West. It should not be assumed that it is because we are anti-Western. Anybody at all who criticizes the West is considered anti-Western. But we are criticizing the ideas, not the West.For all his faults, Dr Mahathir doesn't mince words. Certainly us Asians could use more folks who can speak their mind? I believe that the respective economic trajectories of Malaysia post-Asian financial crisis and that of American post-subprime crisis say a lot.
His right to criticize the West has been hard-earned and well-deserved; that you cannot take away from the good doctor.
