Oleh/By : DATO' SERI DR. MAHATHIR BIN MOHAMAD
Tempat/Venue : TOKYO, JAPAN
Tarikh/Date : 04/06/98
Tajuk/Title : THE NIHON KEIZEI SHIMBUN
INTERNATIONAL CONFERENCE ON " THE
FUTURE OF ASIA "
FUTURE OF ASIA IN A GLOBALISED
AND DEREGULATED WORLD
One year ago it was so easy to talk about the Future
of Asia. One needs only to trot out figures regarding
growth, the areas of growth, the relative growth rates of
the different countries of Asia, when the countries would
qualify to join the OECD countries and when they will
graduate and become developed countries.
2. Today predicting the future of Asia is more difficult
because in the space of a few months, the Asian countries
in the East have shown that they have clay feet, that
under pressure they can all collapse and become beggars,
appealing for aid from International Institutions,
promising to discard their evil ways, which had lead to
high growth and low inflation. If they fail to do this,
worse still if they dared to argue that their economic
turmoil is not caused by them and them alone, then their
economies would suffer a worse degree of economic
recession. This is because such recalcitrance will cause
a greater loss of confidence among the market forces and
when their confidence is lost, then the economies of the
recalcitrants must suffer.
3. This is perhaps strange in a world which talks
incessantly about the freedom of speech, about human
rights. It is even more strange that millions of people
being made jobless and destitute does not arouse the
sympathy of the exponents of human rights. Their response
this time is simply to point at the Governments of these
countries and accuse them of a variety of social crimes.
That for 40 years these self-same Governments had
developed their countries and created millions of jobs for
their people was dismissed as the ill-gotten gains of
their corruption.
4. Now that they have been made aware that their ways
and past performance were bad and unacceptable and that
they had lead to a loss of confidence on the part of
market forces, they are expected to carry out reforms
quickly.
5. The reforms are spelt out by International agencies
and the media and their implementation is crucial for
confidence to return and the economy to be rehabilitated.
Backing these institutions are the major economic powers
who had contributed to the funds for the rescue of these
countries. The G-7 at its recent meeting in Birmingham,
England clearly express their expectation that the
Governments of the distressed economies of East Asia would
heed the IMF's directives if they want their countries'
economy to be restored.
6. What are these directives that are expected to
restore the economies of Asian countries to their former
levels of prosperity?
7. The first directive is to increase interest rates.
Then there should be a credit squeeze. There should also
be an increase in taxes.
8. In addition all subsidies and monopolies must be
withdrawn and the Government should not control exports.
9. Finally the countries receiving IMF's aid must open
up their economies so that foreign companies could operate
without any restrictions on ownership or areas of economic
activity.
10. Even when a country's economy is strong and doing
well, these directives are likely to slow down economic
growth, especially the part contributed by locals. But
these countries are under stress economically as their
currencies have been devalued by from 50 percent to 600
percent. Additionally the share prices have collapsed due
to massive withdrawal of capital by foreign investors.
Effectively this devaluation of the currency and the share
prices would result in the collapse of practically all the
business. Foreign loans would require more local
currency, between 50 percent to 400 percent more, in order
to repay. Local bank loans based on the share prices
would also require more money as the value of the shares
as collaterals fall below the amount of loan taken. The
economic turmoil into which the country had plunged makes
it difficult to do business and make profits. But if the
loans are to be paid the profits must be extraordinary.
11. But when the interest rate is increased and credit is
pulled back, the task of making additional profit is made
quite impossible. Eventually the banks must take action
to foreclose. Between the currency and share devaluation
and the interest rate increase and credit squeeze most of
the nations' companies will go bankrupt.
12. The bankruptcies of so many companies must affect the
banks as well as the Government. Banks will accumulate
non-performing loans while losing valuable clients and
there will be no new clients due to the recession.
Governments of countries which depend on corporate taxes
to fill their coffers will suffer gross reduction in the
revenue and the capacity to sustain operational and
development expenditures.
13. There is of course one possible avenue for escape and
resuscitation of the economy. The devaluation of the
currency and the fall in share prices render the local
companies and banks attractive for takeovers by foreign
companies. Since one of the conditions for aid is to open
the country to unrestricted foreign investments, it would
be easy and extremely cheap for foreign companies to
acquire the distressed local companies including the huge
utilities like telecommunications and power. It is also
possible for foreign investors to set up 100 percent
foreign owned banks, utility companies, land and sea
transport etc.
14. Since the foreign companies moving in are all sound
companies with good capital backing, market confidence
would be regained, resulting in the appreciation of the
currency as well as recovery of the stock market. In
other words the takeover of the economy by foreign
companies would result in economic recovery.
15. In a globalised borderless world people should not
mind their economies being controlled by foreigners as
long as they can get the services of the most efficient
and financially powerful companies of the world. Banks
and corporations should allow themselves to be absorbed by
the big foreign banks and corporations. People should be
happy to work for foreign companies since they are likely
to receive better pay.
16. Unfortunately some countries are resisting
globalisation and are trying to overcome the problems
caused by currency devaluations and the dive in share
prices on their own. They are trying to help their
companies and banks by restructuring and making credit
available. This is considered as carrying out bailouts
and this will cause a loss of confidence on the part of
market forces. The result will be further devaluation of
the currency and falls in share prices. Eventually these
countries must give in and accept the inevitable.
17. Before we can guess what the future is going to be
like, we have to look at the past and the present,
including of course the immediate present which is more
likely to develop and become a part of the future.
18. In the heyday of blatant capitalism i.e. in the
second half of the 19th Century and the beginning of the
20th Century, exploitation of the poor workers was
considered as a matter of right. The vote was expected to
be confined to the property owners and workers should
consider themselves lucky if they could find jobs with low
pay. The rich took everything for themselves.
19. Karl Marx argued that the wealth produced was the
result of the labour of the working class. It was an
injustice to deny them the full benefits of their labour.
In fact he felt that the workers should own the means of
production. Thus began the Socialist and Communist
revolutions which resulted in millions of lives being lost
and properties destroyed. In many countries the
viciousness of the revolution was unprecedented, with all
the capitalists being massacred, their properties
confiscated. Dictatorships of the proletariat, the
working classes, were established with all the means of
production taken over by the Communist State. The
socialist were less violent but they too deprived the
capitalists of their wealth and pushed for greater rights
and privileges for the working classes.
20. Awakening to the danger of workers' revolutions and
violent takeovers of the Governments, the Western
capitalists decided to show a friendlier face to their
workers. The rights of the workers to form unions, to
have higher wages and bonuses, to shorter working hours
and holidays, to good housing and medical treatment were
recognised and granted. Oppressive work and dirty work
conditions were eliminated. In some countries the workers
even sit on the management boards of companies. Many
socialistic practices were adopted in order to placate the
workers.
21. The term capitalism was gradually displaced by the
free market. Ownership of companies was spread to the
middle class and working class through the public limited
companies. Altogether businesses became more democratic.
The ugly capitalist image of private corporations was
replaced by a much more friendly profesionally managed
public listed companies.
22. The new capitalists successfully contributed to the
growth of their countries' economies. In the war against
the National Socialists, the capitalists actually
collaborated with the communists in order to defeat the
dictatorships of the fascists. Through a series of astute
capital management including a stable exchange rate system
crafted by economists at Bretton Woods, the Western neo-
capitalists or free marketeers were able to rebuild their
economies using a combination of capitalist and socialist
approach. But the underlying greed of the capitalist
never really disappeared.
23. The communists on the other hand did not do so well
economically. The idea that with everyone receiving the
same pay and subsidies they would work just as hard and be
equally happy did not prove right. Productivity and
wealth decreased and the working classes no more
appreciate their own dictatorship as they would capitalist
dictatorship.
24. Eventually the Communist system collapsed. While
they were around they provided a counter-balance to the
capitalists of the West and made available the option to
defect to the small countries. Without them the
capitalists felt free to do as they pleased and small
countries had no choice but to accept the domination of
the big and the powerful.
25. Accordingly the capitalist no longer feel the need to
show a friendlier face. With the ease of communication
their field has become enlarged. Instead of just aiming
for acquisition of the national wealth they can now go for
the wealth of the world. But to do this certain concepts
and values that they had preached in the past had to be
reversed.
26. The concept of the nation states and their
independence had to be debunked. Non-interference in the
internal affairs of nations must give way to the right of
the powerful nations to intervene in order to ensure that
the right things are done. Even democracy has to be
sacrificed in favour of market forces in determining
policies and Government leadership.
27. President Carter was the first to claim the right to
intervene in any country where human rights are alleged to
have been violated. This was followed by the attempt to
use the GATT and the WTO to link trade with human rights
records, workers' rights (specifically low wages in
countries competing with the developed countries), the
environment etc.
28. The targets of these sudden concern for the people's
well-being seem to be those developing countries which
clawed their way into becoming industrialised nations
producing goods which compete successfully with those of
developed countries. The results of linking trade with
human rights etc would be to make the cost of production
of these countries increase so much that they would not be
able to compete at all or they may not be able to export
their products at all. It is not unreasonable to assume
that this concern for the well-being of the peoples of
these countries was more because of the desire to make
their goods less competitive against the goods of the
developed countries.
29. Ugly capitalism seems to be at the back of this
humanitarian concern. It is not humane at all as the
consequence of this demand is to make the peoples of these
countries poorer, not richer. Obviously they stand to
lose the market if they comply and to be shut out of the
market if they don't.
30. The developing countries saw through this scheme and
opposed it in the GATT and the subsequent WTO. The
opposition was muted however as the poorest countries with
probably even worse records of human rights violation were
not involved as they were not producing anything to
compete with the goods of the developed countries. Besides
most of these countries are under obligation to the
developed countries from whom they had obtained aid or
loans.
31. Nevertheless the attempt to eliminate competition by
low-cost countries failed.
32. The advent of the Information Age and instant
communication brought forth the idea of the world without
borders, a world in which not only information but
capital, goods and people could move freely and exploit
business potential without regard for citizenship or
loyalties.
33. The exploitation of business opportunities by the
people with the capital and the know-how in most countries
has always been restricted by national laws which favour
the citizens of a country. But because the citizens are
poor and do not have the necessary know-how these
opportunities have not been fully exploited. If the
opportunities and potentials are to bring the maximum
benefit to the people, then laws and regulation which
favour locals must be done away with. In other words
there should be massive deregulation.
34. With such deregulation there would be, businesswise,
no more borders to hinder the activities of those with the
capital and the know-how from the most advanced and
richest countries. The whole world would be just one
country, open to everyone who knows and can exploit the
business potential to the maximum. Thus as a corollary to
deregulation there should be globalisation.
35. The developing countries were told that deregulation
and globalisation would be good for their people. Without
these they would forever be saddled with incompetent and
poorly capitalised local business people usually the
cronies of the leaders, who would provide inferior goods
and services at exorbitant prices.
36. Paralleled with the propaganda on deregulation and
globalisation came exposures of the misdeeds, the
corruption and the cronyism of the leaders of countries
which incidently had managed to industrialise themselves
and produce goods to compete with those from
industrialised countries. Inundated with these propaganda
material from the capitalist-controlled world press, the
peoples of these countries soon turned against their
Governments. They joined the chorus not only to demand
the overthrow of their Governments but to open up their
countries to foreign exploitation.
37. Obviously only the biggest corporations can dominate
the world. In preparation for this global domination the
big corporations and banks in certain countries are
already taking steps through mergers and acquisitions to
grow bigger. It is felt that in any one field of business
there needs to be only a few giant corporations -- three
or four for the whole world would be enough. The small
national corporations must allow themselves to be acquired
or to perish in the one-sided competition.
38. Unfortunately for the powerful advocates of globalism
and deregulation, the most highly developed of the
developing countries did not take too kindly to these
ideas of deregulation and globalisation. They did not
reject them completely but begged to be given time to
strengthen their companies and banks. Their delaying
tactics merely made the giant countries and their
corporations impatient. Somehow they must be forced to
speed up.
39. It is to the credit of the powerful economies of the
West and their giant corporations that they did not
conspire. But the opportunity was thrown into their laps
when the currency traders attacked and devalued the
currencies of all those developing countries which were
delaying globalisation. The short term investors in the
share markets of the countries attacked by the currency
trader then pulled out their capital causing a drastic
fall in the share prices and aggravating the economic
situation.
40. Faced with this unprecedented financial crisis in
which the national wealth was at least halved the
Governments of these developing countries had to ask for
the help of the International Monetary Fund. As the IMF
believed that recovery could only be brought about by
foreign companies taking over partially or completely the
local companies distressed by the falls in the currency
and shares, one of the conditions insisted upon by the
Fund was the removal of the restrictions on ownership of
local banks and companies by foreign investors. As a
result of the countries accepting this condition foreign
companies could acquire all the big and profitable
companies or hold controlling interest in them. These
foreign companies would be giants which operate globally.
Their funds would be huge and they would dominate the
world.
41. There was a time when big American companies own huge
banana plantations in some of the poor Latin American
republics. The revenue of the Governments of these
republics came almost exclusively from the banana
plantation companies. If the companies fail the republics
would be in grave trouble. It was in the interest of
these republics to accede to the demands of the companies,
including political adjustments. It is just possible that
the giant corporations which operate in the countries
which have been persuaded to open up will have the same
influence over the Governments.
42. It has been pointed out that currency traders can
devalue any nation's currency at will. Currency trading
is done not by hedge funds alone, but also by the big
banks. One of these banks is capitalised at over 600
billion dollars. It is believable that between these
banks and the currency traders they have almost 30
trillion dollars.
43. They do not work in concert of course. Nor do they
enter into a conspiracy. But they do behave like herds.
Thus when one of the more important members swing in one
direction, the other will follow. The effect is not
unlike acting in concert.
44. The devaluation of the currencies of East Asia is
said to be due to corrupt crony-capitalism. They will
deny that their corruption is the cause of their
currencies devaluation even as the currency traders deny
that they have anything to do with the devaluation. But
whoever may be guilty the fact is that the currencies have
been devalued massively, in one instance by 600 percent.
We can assume that the currencies are intelligent and they
devalue themselves when the Governments which issue them
misbehave.
45. What is a fact however is that the countries whose
currencies have been devalued suffer economically,
socially and politically. If because of their profligate
ways they were unable to pay their foreign debts, after
devaluation they became even less able to pay their debts.
This will awaken them to their poor skills in managing
their companies and they would be more willing to accept
the capital, services and control by foreign companies.
46. The net result of the globalised deregulated world
would be the emergence of huge corporations and banks with
branches in every country in the world. Their numbers
would not be too big as all the small companies and banks
would have been acquired or absorbed in one way or
another.
47. In the old capitalism, the rich controlled the wealth
in one or two countries and exploited the poor workers in
these countries only. Their markets were the empires that
they had acquired. These were captive markets, which not
only bought all the manufactured products at whatever
price that was fixed, but also supplied all the raw
materials at prices which were fixed by the rich
industrialists in the metropolitan countries.
48. This arrangement was neat. Unfortunately in the post-
war years the empires had to be dismantled. Preoccupation
with the Cold War and the need to retain the allegiance of
the newly independent countries kept the capitalists at
bay. But once the challenge posed by the Communist bloc
was overcome the capitalists were let loose.
49. Today it is not the exploitation of local labour that
is the focus of the new capitalists. It is the
exploitation of the poor countries worldwide that promises
unlimited gains. Hence the push for deregulation and
globalisation.
50. These capitalists do not talk of millions of dollars
of profits. They talk of billions of dollars. They
cannot wait to do ordinary businesses involving time -
consuming research, manufacturing and exporting. They
want to make their billions overnight. And currency
trading provides them with this mind-boggling profits.
51. With trillions at their disposal they have become a
force that no Government of developing countries can go
against. Control of the media enables them to shape
public opinion, censor criticism and generally promote the
legitimacy and the wholesomeness of their concept of the
new world order. If they say globalism is good then the
whole apparatus will say so and no one will be allowed to
say otherwise.
52. I have briefly described the past and the present. So
what is going to be the future, the future of Asia.
Actually there is not going to be much of a future for
Asia, at least a future that is distinctly Asian. In the
globalised deregulated world the future of Asia will be so
closely inter-twined and interlinked with that of the rest
of the world that it cannot be distinguished from the
world's future.
53. Asian countries will prosper again but not as Asian
countries. Their economies would be dominated and run by
the huge foreign corporations, practically all owned and
managed by non-Asians. Southeast Asia will provide a base
for the production of low-cost products to compete with
those of certain large Asian economies which refuse to be
controlled. In the end these countries too will give in.
54. Government will submit because they know they are up
against forces which they cannot defeat. But the people
will show their resentment against those outsiders who
will lord it over them once again. Bitter over the
takeover of their national corporations, they will show
their feelings in many ways. Sooner rather than later
they will think of regaining control over their economies.
They will regard this as a new war of liberation. Even if
they want to avoid violence, violence must come as the new
capitalists disregard the signs.
55. There will be no war of independence of course. But
there will be a kind of guerilla war which will not be
good for anyone.
56. Maybe this will not be the future of Asia. Maybe
Asia will extricate itself from the present situation
intact. Maybe the healthy economic competition between
Asia, Europe and America will be restored. But the new
capitalists would not want to miss the opportunity to
dominate the world and make lots of money in the process.
Only if their own countries restrain them will the future
of the world of which Asia is a part be peaceful and
prosperous.
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