International Worker No 239, Saturday, September 13, 1997 Asian Tiger economies crash The huge growth rates over the last three decades in the South East Asian countries were routinely used to prove the viability of capitalism and to provide lessons for the ailing economies of Britain and Western Europe. The argument was used that whilst criticisms could be made of the repressive regimes in the so-called Asian Tigers, their huge growth rates over the last three decades was an economic miracle in which the population as a whole would benefit. In his book, The State We're In, Will Hutton advocated the Asian model of "co-operation as well as competition" as an alternative to "Anglo-American free market capitalism": "these corporate structures interact with high savings rates and huge investment in education, and have produced the most dynamic period of capitalist growth in history." (The State We're In, Jonathan Cape, 1995, p 275) Over the last few months the appearance of an economic miracle in the South East Asian economies has been shattered. Since June, the Thai currency has fallen by 20% against the dollar, the Indonesian and the Philippine by 12%, the Malaysian by 9% and the Singaporean by 5%. In the last week of August stock prices plunged in these countries -- in Malaysia by 11%, Thailand by 10%, Indonesia by 4% and the Philippines by 17%. In an attempt to prevent financial collapse in the region, the International Monetary Fund (IMF) provided the Thai government with up to $16.7bn in loans in an operation led by Japan. In return the government headed by General Chavalit Yongchaiyudh accepted austerity measures. The IMF have demanded a 100 billion baht ($3.1bn) cut in the government's 1998 budget, increasing utility charges and putting up VAT to 10%. This will destroy jobs, hike up prices and result in cuts in the country's already limited welfare state. Because the Thai currency was fixed to the dollar, private companies have built up huge short-term foreign debts of about $50bn. The situation is especially serious in the financial sector where 58 of the country's 91 finance companies have been forced to cease trading this year. The IMF have demanded drastic restructuring of these failing corporations and a speeding up of privatisation of state-owned enterprises, but the crisis is by no means over. The Financial Times quote financial experts' predicting further currency falls, stating that the IMF package looks "insufficient to meet Thailand's foreign exchange needs" and that the government "is too weak to implement the reforms mandated by the IMF." The crisis of the Asian "Tiger" economies makes clear that the growing instability of the world's financial markets leaves no region, no country and no big business corporation unscathed. Their collapses are likely to surpass that of the Mexican economy after December 1994, when its currency plummeted by 40% after a sudden withdrawal of foreign capital precipitated by concerns over the government's ability to repay loans. Forced to accept a US "rescue" package, the Mexican economy contracted by 7%, at least one million jobs were lost and wage incomes fell in value by nearly one third. Mexico was only one in a series of financial disasters that have dominated the capitalist system over the last few years. Commentators are now pointing to Brazil as the next likely candidate for a collapse. Others have warned of a possible crash on the New York and London stock markets. Impact of globalisation What has happened to the South East Asian economies confirms the analysis made by the Socialist Equality Party. There has been a huge change over the last two decades as production has become globally integrated. Dominated by the transnational corporations and financial institutions, the world economy has completely undermined all nationally based national economic policies. The level of wages and welfare provisions are now set by the world market. As all forms of national protection are swept away, transnational corporations move their production sites to wherever reduces their costs, choosing the wage rates and tax regime which suites their purpose. The South East Asian economies were based on cheap labour industries that exported mainly to the United States and attracted foreign investment, especially from Japan. Their currencies were tied to the dollar which kept export prices low and discouraged imports. Industries were protected and subsidised as part of a national strategy. As the dollar has moved up against the Japanese yen, their currencies have come under increasing strain. But fundamentally it is the growing competition with the even lower wage economy of China which has created the present crisis. As the US magazine Business Week in its August 11 issue comments: "Throughout the region, there is a glut in capacity in everything from automobiles to chemicals. The heat is only getting more intense as China continues to come on strong. Having already displaced many of its neighbours in garments, toys, and watches, China is a rising power in such sectors as consumer appliances, auto parts, and telecommunications equipment. While its neighbours' exports were flat, China's soared by 26% in the first half of 1996. And that happened despite capacity utilisation of just 60%." Malaysia's Prime Minister Dr Mahathir railed against foreign speculators for the collapse of the region's currency, blaming the multi-billionaire George Soros and a politically motivated Western "conspiracy". He vowed to continue with large state-financed infrastructure projects such as the Bakun Dam and the construction of two new cities. He also ordered a curb on the selling of shares. Within days he had to back down, lifting the restriction on share trading and delaying the projects indefinitely. Top companies which would have carried out the projects are now facing demands from the banks for repayment of loans triggered by the collapse of their share values. The markets have dictated their terms. Globalised production in the control of the profit system can only lead to further crises and give rise to the attacks on jobs and welfare conditions now being imposed on the workers of Thailand and South East Asia. No national political programmes can answer these attacks. World-wide production and the huge developments in technology which go with it must be taken out of the hands of billionaire private owners and form the basis of a planned socialist society. To fight for this means the construction of a genuinely international socialist party, the Fourth International.

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