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The Great Global Asset Swindle


 

Is it any surprise that the least noticed effect of the global economic crisis among Western economists is that Western multinational corporations and banks are busy buying up the most attractive economic assets the third world has to offer at bargain basement prices? At their present pace they may undo, in only a couple of years, all progress toward reclaiming their economies made by anti-imperialist third world movements and governments over the past 50 years. They may do it without the cost of occupying armies. They may do it without firing a shot. Just as the painfully slow reduction of inequality and wealth within the advanced economies won by tremendous organizing efforts and personal sacrifices by millions of progressive activists during the first three quarters of the twentieth century have been wiped out in the past 25 years; all of the gains of the great anti-imperialist movements of the twentieth century may soon be wiped out by the policies of neoliberalism and its ensuing global crisis.

What may become the greatest global "asset swindle" of all time works like this: International investors lose confidence in a third world economy dumping its currency, bonds, and stocks. At the insistence of the IMF, the central bank in the third world country tightens the money supply to boost domestic interest rates to prevent further capital outflows in an unsuccessful attempt to protect the currency. Even healthy domestic companies can no longer obtain or afford loans so they join the ranks of bankrupted domestic businesses available for purchase. As a precondition for receiving the IMF bailout the government abolishes any remaining restrictions on foreign ownership of corporations, banks, and land. With a depreciated local currency, and a long list of bankrupt local businesses, the economy is ready for the acquisition experts from Western multinational corporations and banks who come to the fire sale with a thick wad of almighty dollars in their pockets.

In the Washington Post on November 28, 1998 Sandra Sugawara reported from Bangkok:

Hordes of foreign investors are flowing back into Thailand, boosting room rates at top Bangkok hotels despite the recession. Foreign investors have gone on a $6.7 billion shopping spree this year, snapping up bargain-basement steel mills, securities companies, supermarket chains, and other assets. A few pages behind stories about layoffs and bankruptcies are large help-wanted ads run by multinational companies. General Electric Capital Corp., which increased its stake in Thailand this year through three major investments in financing and credit card companies, is seeking hundreds of experts in finance and accounting, according to one ad. General Motors Corp. is recruiting aggressively for its massive new Thai car assembly plant, scheduled to open in two years."

Nicholas Kristof expanded on this theme in the New York Times on February 1, 1999 in an article titled "Asia’s Doors Now Wide Open to American Business."

"This is a crisis, but it is also a tremendous opportunity for the US" said Muthiah Alagappa, a Malaysian scholar at the East-West Center in Honolulu. "This strengthens the position of American companies in Asia." A clear indication that the Asian crisis would further the American agenda came in December, when 102 nations agreed to open their financial markets to foreign companies beginning in 1999. It is unclear how the pact will be carried out, but it marks an important victory for the US, which excels in banking, insurance and securities. Fundamentally that agreement and other changes are coming about because Asian countries, their economies gasping, are now less single-minded in their concern about maintaining control. Desperate for cash, they are less able to pick and choose, less able to withstand American or monetary fund demands that they open up.

In Thailand, under pressure from the monetary fund, the government was forced to scrap a regulation that limited foreign corporations to a 25 percent stake in Thai financial companies. Citibank has signed a memorandum of understanding on the purchase of a major Thai bank, First Bangkok City Bank.

In Indonesia, the government has said foreign banks can take a stake in a major new bank that will be formed from several weaker ones. The national car project is also losing key benefits, which effectively opens up the auto market to greater foreign competition. "All our stocks and companies are dirt-cheap," said Jusuf Wanandi, the head of a research institute in Jakarta, Indonesia. "There may be a tendency for foreigners to take over everything."

As for Japan, it agreed on Friday to a landmark package, resisted for many years, to liberalize air travel links to the United States. The aviation agreement will mean more opportunities for American airlines. In the financial arena, Merrill Lynch is talking about buying part of the branch network of Yamaichi Securities, a giant Japanese firm that collapsed in November. In December, Fidelity Investments opened counters in Japanese banks to sell mutual funds directly to Japanese customers, and foreign companies succeeded last year in doubling the amount of Japanese money that they manage, to a total of more than $20 billion. One consequence… is the "big bang" opening of Japan’s financial markets, beginning April 1…. The big bang is expected to create new opportunities for American and European banks and security firms. "I’m worried that the American banks will come in and take over everything after the big bang," said a Japanese banker. Kristof offers the following summary – amazing for its frankness:

One of the most far-reaching consequences of the Asian financial crisis will be a greatly expanded American business presence in Asia — particularly in markets like banking that have historically been sensitive and often closed. Market pressures — principally desperation for cash — and some arm-twisting by the U.S. and the IMF mean that Western companies are gaining entry to previously closed Asian markets. Among the most important beneficiaries as Asian markets open are the American financial service companies, especially those like Citibank that have already been building their presence in Asia. Opportunities are also expected for industrial companies like General Motors or large retailers like Walmart that operate in sectors where barriers to entry have been common. Asian countries have been steadily opening their economies in recent years, but they have generally been much more willing to admit McDonald’s than Citibank. Governments in the region have sometimes owned banks and almost always controlled them, and leaders frequently regarded pinstriped American bankers as uncontrollable, untrustworthy and unpredictable barbarians at their gates. And now the gates are giving way.

And the timing from the US point of view, is perfect: regulations are being eased just as Asian banks, securities, even airlines are coming on the market at bargain prices…. Stock prices and currencies have now plunged so far that it may cost less than one-fifth last summer’s prices to buy an Indonesian or Thai company. "This is the best time to buy," said Divyang Shah, an economist in Singapore for IDEA a financial consulting company. "It’s like a fire sale."

If land swindles by banks and railroads in the U.S. West caught the eyes of "muckrakers" at the turn of the last century, one can only wonder what a new generation of international muckrakers will have to write about what may be the greatest international asset swindle of all time taking place right now, at the turn of the new millennium.

Robin Hahnel teaches economics at American University and is author of numerous books including Looking Forward with Michael Albert, South End Press.

 

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