Vol. III, Bulletin No. 18. October 1, 1998
Rushing to Rescue Reckless Speculators
Year after year they pocketed spectacular returns from their global investments--17% last year, 41% in 1996, and 43% in 1995. But this summer the bottom fell out of their investment fund, Long-Term Capital Management, with a huge portfolio of $1.25 trillion. Panic gripped the large banks and brokerage houses involved in the fund's shaky investments. But not for long.
A U.S. government agency, the Federal Reserve Bank, soon rode to the rescue. Under the Fed's guidance, a consortium of banks and brokerage firms ponied up a $3.5 billion rescue package to salvage the highflying fund. The size of the bailout for a speculative operation shocked even some insiders. Paul Volcker, the former chairman of the Federal Reserve, was puzzled: "Why should the weight of the federal government be brought to bear to help a private investor?"
Assistance to investors is a bad habit of the U.S. government. Take the activities of the U.S. government agency called the Overseas Private Investment Corp., OPIC for short. Under the title "Spreading Global Risk To American Taxpayers," a New York Times report reveals that if the far-flung investment funds sponsored by OPIC were to fail, "taxpayers would be on the hook for $3.3 billion in interest and principal on the notes." Among OPIC's 26 funds is one that put $6 million into bonds of a financially troubled maker of Nike and Converse shoes in Argentina.
James K. Glassman, a fellow at the American Enterprise Institute, has it right:
"In America today, there's a double standard. A rule that applies to welfare mothers doesn't apply to politically connected corporations, rich speculators, and irresponsible nations. Over and over, when powerful people and institutions get into trouble, the government bails them out."Globalization on Trial as Never Before
At long last, a consensus is growing that the global economy is in urgent need of repair. In the expression made popular by U.S. Treasury Secretary Robert Rubin, globalization needs a "new architecture." But what kind of architecture?
For years now, unions and other worker-rights advocacy groups have warned that the world economy has serious flaws and that the global framework provided by institutions like the International Monetary badly need reform. Their core complaint: that the rules are biased in favor of financiers and against workers. That complaint is being voiced with increasing intensity, in hopes that policymakers like Rubin will take heed.
"The most vulnerable in society, who bear no responsibility for the crisis, are carrying the heaviest burden of policy failures." So said a Brussels-based organization, the International Confederation of Free Trade Unions, in a report titled "Globalization on Trial." The report was prepared for delegates, all governmental officials, attending the annual meetings of the board of governors of the International Monetary Fund and the World Bank October 6 to 8 in Washington, D.C.
"Stopping globalization is both unrealistic and undesirable," the ICFTU states. "The real question before the international community is can we create the international policies and institutions to manage the process of globalization in the service of the needs and aspirations of people." The document with proposals to meet that challenge can be found on the ICFTU's Web site (http://www.icftu.org).
Asia-Pacific Meeting to 'Reassert People's Rights'
Meanwhile, more than 300 participants from non-governmental organizations in the Asia-Pacific region are preparing to meet November 10-15 in Kuala Lumpur, Malaysia, as the "Asia-Pacific People's Assembly." They will call for "Reasserting People's Rights" in the era of globalization, hoping to put pressure on high-level officials attending a parallel meeting, that of the Asia Pacific Economic Cooperation (APEC) forum.
A document circulated in advance by the Assembly's organizers condemns the hardships suffered by Asian workers under the ups and downs of the global economy. For example:
"Women suffer most from globalization. In Asia, where the economic crisis has brought massive unemployment, 60% of those retrenched have been women. Increasing poverty and a growing lack of resources have forced women to migrate across borders only to work in harsh and exploitative conditions without the right to organize."Background information on the Assembly can be obtained from its Website (http://www.geocities.com/CapitolHill/Senate/8340).
Ending the Cover-up About China's Economy
Talk about a scandal. Is there any modern scandal worse than how the U.S. government, the World Bank, and most of the media have deceived the American people about the true state of China's economy?This truth is slowly emerging from China itself: Deng Xiaoping's highly touted economic "reforms" are largely phony. That indictment is made by a Chinese economist, He Qinglian, in a book-length study first published in Hong Kong under the title "China's Pitfall" and then in Beijing (with deletions) under the title "A Pitfall of Modernization."
China's economy is sick, according to He Qinglian, largely because in the boom of the 1990s, "reform" deteriorated to
"a process in which power-holders and their hangers-on plundered public wealth. The primary target of their plunder was state property that had been accumulated from forty years of the people's sweat, and their primary means of plunder was political power."Deng himself, she writes, gave the green light to this "plunder"--this "new high tide in the carving up of state property by China's power elite"--when he launched his "to-get-rich-is-glorious" campaign. As a result, the net value of China's state enterprises has been declining steadily, and by this year or next their aggregate value may reach zero.
Revealing the Fakery of China's "Market"
He, who did her graduate work in economics at Fudan University in Shanghai, argues that China does not have a true market economy but only a kind of "simulated market" in which "the actual competition is political" and where "power determines the allocation of resources but has no need to see to their efficient use."
The damage of this "marketization of power" (as she calls it) is more than economic. "The championing of money as a value," He writes, "has never before reached the point of holding all moral values in such contempt." Up and down the political ladder, contracts are not kept; debts are ignored; "ripping off" people is the norm. She considers the massive collapse in ethics as the most dramatic change of the Deng Xiaoping era.
The above highlights of He's study are taken from a lengthy book review titled "A Great Leap Backward?" in the October 8 issue of the New York Review of Books. The full text of the review is available on the New York Review of Book's Website at http://www.nybooks.com/nyrev/WWWfeatdisplay.cgi?1998100819R. The article, written by Liu Binyan and Perry Link, also contains the two reviewers' own analysis of China's current economic and political situation, summarized in this concluding sentence:
"Reform was aborted when Deng Xiaoping strangled China's democratic forces in 1989 and when--as He Qinglian shows in detail--he decided in 1992 to buy stability for his regime by pursuing a rapid economic growth whose price was sharply increased corruption, financial deception, and the erosion of the moral basis of society."
Diary: Reflecting on a Story About a Rich Man
It's one of the scariest stories in the Gospels. It's worth recalling for the lessons it might have for these times.A rich man (nameless), dressed in fine clothes and eating well each day, ignores a poor man named Lazarus lying at his front door. Lazarus is so hungry that he would gladly have eaten the left-overs from the rich man's meals. He is so helplessly sick that dogs lick his sores.I have heard and read that parable from Luke many times in the past. I heard it read again from the pulpit on the fourth Sunday of September. Afterward, I reread it in my Bible.They both die. The rich man suffers torment in the netherworld. Lazarus sits at the side of Abraham. So the rich man pleads with Father Abraham again and again, first to "send Lazarus to dip the tip of his finger in water and cool my tongue," then to send Lazarus to forewarn the rich man's five brothers that they should mend their ways, lest they too wind up in eternal torment.
Abraham refuses, repeatedly. He explains that the rich man has earned his fate, and that if his brothers "will not listen to Moses and the prophets, neither will they be persuaded if someone should rise from the dead."
Considered literally, the parable can be quite comforting. I'm not rich. I don't have anyone like Lazarus lying anywhere near my house. And I contribute to the parish's food drives for the needy. I'm off the hook. My future is secure. (Be sure you hold that reservation for me, Father Abraham, okay?)
Fast Forward from the Biblical Era to the Era of Globalization
But what if the parable is read in the light of the human condition not 2,000 years ago, but the world today? After all, nowadays few of us in the Western world--very few of us who browse the Web--live in neighborhoods where a desperately poor man like Lazarus has dogs licking the sores on his body.
Thousands of Lazaruses of our time live farther away, in urban slums. Many millions of them live even farther away, in places like Rwanda and Afghanistan. In today's world, I am among the minority of rich people. Whether I like to admit it or not, I am a beneficiary of the global economy. I'm not in Bill Gates' league, but I have fine clothes and eat well every day, as does my family, and we are set to do so for the rest of our lives.
So what am I doing for the modern likes of Lazarus in Asia and Africa? What am I doing to make sure that my pension fund is not invested in companies that profit from sweatshops? What am I doing to make sure that my government has trade and investment policies that do not contribute to grinding down the poor of the world? And furthermore, given my fortunate situation, what am I doing to....
Stop. Enough, enough. I am no longer feeling quite as secure.
Human Rights for Workers: Bulletin No. III-18, October 1, 1998
http://www.senser.com; email: hrfw@senser.com (send e-mail)
Robert A. Senser, editor
Copyright 1998