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by Ron Forthofer
Originally in the Colorado Daily January 19, 1999
Why should this be of interest to you, a taxpayer? Because it is your money that is being stolen, that's why.
During the last five years, we have seen an enormous transfer of funds from taxpayers to wealthy speculators through the International Monetary Fund (IMF). We recall the then spectacular bailout of the Mexican peso to the tune of about $50 billion. This was not a bailout of Mexico, but of speculators who invested in Mexican companies for their high returns. These investors knew there were risks, but they also were confident that the IMF and foreign governments would come to their rescue if the investments went sour. After receiving huge profits from their investments, these Wall Streeters and others were indeed bailed out when the peso was devalued and the value of their investments plummeted.
In 1997, we saw another bailout of speculators, one which dwarfed even the Mexican bailout. In the Southeast Asian crisis, we saw a transfer of over $110 billion from taxpayers to speculators. Even well-known establishment figures opposed these bailouts as they removed the ‘moral hazard’ of investing. People such as Secretary of the Treasury Robert Rubin and former North Carolina Senator Lauch Faircloth as well as an editorial in Investor’s Business Daily pointed out that speculators could invest without worrying about the quality of the investment because they were confident of being rescued.
Progressives also opposed IMF bailouts because of the IMF’s structural adjustment program (SAP). Through these SAPs, the IMF forces governments to raise taxes, cut education and health services, lower government supports, privatize industries and devalue their currency. These steps drastically lower the quality of life for people in countries that accept IMF loans. The Brazilian Bishops Conference recently characterized the free market or neoliberal reform as a system which "mercilessly discards the weak" and cares more about profits than people. Others call it savage capitalism and a former president of Venezuela said "It’s been a success for the rich and a martyrdom for the poor."
Even George Soros, the billionaire financial trader, recognized that the global economy is out of control. Soros said that financial markets are "inherently unstable. Too much competition and too little cooperation can cause intolerable inequities and instability." According to Soros, "The main enemy of the open (democratic) society, I believe, is no longer the communist but the capitalist threat." Capitalist theory "opposes any form of government intervention aimed at preserving stability." The Senior Vice President of the World Bank, Joseph Stiglitz, was also critical of the role the IMF played in the financial crisis in Southeast Asia. Many leaders now recognize that government regulation of financial markets is necessary. Unfortunately, we cannot include the Clinton administration in this group.
For example, the latest intervention announced by President Clinton last October was the G7 nations’ proposal to create a $90 billion fund "to help protect vulnerable but essentially healthy nations" from currency and stock market speculation. According to Michel Chossudovsky, Professor of Economics, University of Ottawa, this fund will go down in history as the biggest financial scam of the post-war era.
Chossudovsky said that, rather than "taming the speculator" and averting financial instability, the existence of billions of dollars stashed away in a "precautionary fund" is likely to entice speculators to persist in their deadly raids on national currencies. The money is there to be drawn upon and the speculators know it. It is not surprising that this sweetheart deal for speculators resulted from consultations behind closed doors with representatives of the world's largest banks and brokerage houses. In an absurd logic, those who foster financial turbulence are called in to identify policies to attenuate this turbulence.
The recent crisis in Brazil provides evidence that Chossudovsky is correct. Over $40 billion was set aside for Brazil, and Brazil was the first target of the currency speculators. Until and unless there is regulation on the flow of money, we can look forward to more financial crises and more people being driven into poverty. For example, the effect of the Indonesian crisis, in which currency speculators and the IMF played major roles, has been devastating. The number of people in poverty there has risen from 20 million in 1996 to 80 million in 1997 and to 130 million in 1998 out of a population of 206 million.
In December, 1997 the Investor’s Business Daily said, "The old adage that it’s easier to spend someone else’s money holds true for the IMF. Its staff has been spending money recently like drunken sailors on a three-day liberty pass. Except sailors spend their own money." In this case, the IMF was spending your taxes and those of other taxpayers around the world. Don’t you feel good that your taxes further enrich Wall Street instead of being wasted on schools, health care, and paying down the national debt?!