By most accounts, the global economy has entered its worst tailspin since the Great Depression of the 1930s.
The World Bank and IMF have played major roles in fanning the flames of the crisis by helping to turn the world economy into a giant financial casino. Over the past decade, they have pressed governments around the globe to open stock markets and financial markets to footloose, short-term investments from the west. Quick injections of capital from mutual funds, pension funds, and other sources did propel growth in the 1990s, but it also encouraged bad lending and bad investing.
When western investors got spooked in Thailand, Indonesia, and elsewhere in mid-1997, the “hot money” panicked and left much faster than it had arrived. Big-time currency speculators and hedge funds like the ailing Long-Term Capital Management deepened the crisis by betting against the currencies of the crisis nations.
Currencies and stock markets from South Korea to Brazil nose-dived, and as these nations stopped buying everything from oil to wheat, prices of these products have likewise plummeted. The spreading fires finally engulfed Wall Street on August 31, when the Dow Jones dived more than 500 points after a particularly bad day of news from Russia; since then, the US stock market has gyrated wildly in reaction to economic developments elsewhere. Likewise, Asian nations are both exporting more and importing less, provoking large layoffs in US manufacturing.
Bold new measures are long overdue. Instead, IMF Managing Director Michel Camdessus has insisted that the Asian crisis is “a blessing in disguise” as it forces countries to “modernize” their economies. The “blessing” is clearly for western corporations who are purchasing Asian and other Third World assets at fire sale prices.
During their annual meetings in early October, the Bank and Fund suggested timid proposals to increase information flows and openness in today's lightning quick financial markets. The US Treasury Department, under the leadership of free market cheerleader Robert Rubin, supported these inadequate steps.
To douse the flames of the international crisis, growing numbers are calling on the IMF, World Bank, and the US government to rethink the development models they promote and to set new rules to govern the global economy. These critics now extend far beyond environmentalists, farmers, workers, women, indigenous peoples, and others who have long hammered these institutions for hurting the environment, the quantity and quality of work, and equality. Conservative, free market Republicans and think tanks now criticize the IMF for bailing out banks after bad lending decisions. And former high government officials like Henry Kissinger and William Simon have published damning critiques of the IMF.
The following are some of the more prominent new proposals:
1. Encourage national regulation of the casino – Critics of the Bank and Fund point to the countries that are not getting destroyed in the crisis: India, China, Chile. Each has capital controls that discourage short-term “hot investment” while encouraging long-term productive investment. Other countries have begun to follow suit. In recent months, the Malaysian government imposed strong controls on short-term investments and made speculation on their currency more difficult. Russia defaulted on a number of its international financial obligations. MIT's Paul Krugman and the World Bank's chief economist, Joseph Stiglitz, are the most prominent mainstream economists to back limited capital controls.
2. Put some global controls on the casino – Two decades ago, Nobel Prize winning economist James Tobin proposed a small global tax on international currency transactions. Tobin's proposal would both discourage harmful speculation and generate revenues that could help the nations in crisis. The US government, the Bank, and the Fund remain in opposition.
3. Rethink the development model – Critics from north and south say that the problem is not one simply of short-term financial flows. The so-called “Washington Consensus” development model of the past two decades has directed poorer nations to open their economies indiscriminately to freer trade and investment. Asia has suffered the consequences of this approach as forest and other resources were plundered for export, sweatshop factories spread, and real estate bubbles were encouraged. It is time for the backers of that consensus -- including the World Bank, the IMF, and Treasury -- to admit failure. Instead, economies and financial markets around the world should be re-centered on economic activity that generates good jobs at home while sustaining the environment.
4. Transform the IMF back to the lender of last resort – As global economic activity exploded over the past two decades, the IMF recast itself into a hated global financial policeman enforcing economic austerity. The Fund did well at ensuring that western banks got repaid by poorer nations, but it crippled economies in the process with cuts in government budgets and interest rate hikes. The dangers of this approach were exposed in Indonesia and Russia this year as IMF prescriptions precipitated riots, banking collapses, and panic. A humbled IMF should be returned to its far narrower, original mandate as “lender of last resort.” The US Congress missed an opportunity for such a reduction in Fund roles at the end of October, when it passed new funds for the IMF. Still, under leader-ship from several Democrats, Congress denied the IMF the expanded powers it seeks to further deregulate financial markets, and it insisted on an end to some of the IMF's legendary secrecy.
Fundamental change rarely comes without crisis. Just as current global economic rules were crafted out of the ashes of the Great Depression, today's crisis is open-ing the debate on reform of global economic rules that have long failed to serve the needs of the planet or the majority of its inhabitants.
– Robin Broad & John Cavanaugh
Broad is a professor at the School of International Service at American
University. John Cavanagh is director of the Institute for Policy
Studies and a board member of the International Forum on Globalization.
Swedish Ad Ban
The Swedish government is pushing for a ban on children's television advertising across the European Union.
Both Norway and Sweden have prohibited TV advertising aimed at children, saying that kids under 12 do not fully comprehend the effect of advertising, cannot assess products advertised, and do not properly value money, according to the London Independent.
Further studies conducted by the Swedes have shown that children under six are even more vulnerable as they often cannot tell what is a TV program and what is an advertisement – they simply react to the attractiveness of the slogans, pictures, colors, and songs.
Sweden's own regulations ban all advertising on domestic TV channels during and immediately before and after children's programming. The country also prohibits all ads targeted specifically for children under 12.
Ann-Christin Nykvist, Sweden's Under-Secretary for Culture, told BBC Radio that the country wants the EU to adopt their restrictions partly to avoid satellite broadcasters dodging their laws. However, Nykvist said the Swedes also believe that the measure would be popular with parents in other countries.
“TV adverts make children big consumers at an early age, and we should protect children who are vulnerable to this,” says Nykvist.
– Tracy Rysavy
France Goes Auto Free
This September, 35 French cities created auto-free zones as part of an effort to reduce vehicle pollution. Emergency vehicles and those powered by electricity were exempt from the campaign, which also included special fares on public transportation.
In Paris, officials established 28 auto-free zones, freeing up 60 kilometers of road for pedestrians and cyclists. The mayor reported an overall decrease in city traffic by 20 percent and an increase of 65 percent in bicycle use on two of Paris's major thoroughfares during the 14-hour period.
The campaign is a follow up to last year's successful experiment; on October 1, 1997, vehicles with license plates ending in even numbers were prohibited from driving in Paris. Public transportation was free for the day, and the city's air pollution fell from Level 3 to Level 1 by noon.
This year's “In Town, Without my Car” campaign was marked not only by cleaner air, but by a nationwide information campaign about the effects of smog and noise pollution on humans and plants. The Ministry of the Environment describes the campaign as an effort to inform citizens, reclaim the rightful place of bicyclists and pedestrians on the roads, expand public transport use, and rediscover local culture.
Next year, they plan to include even more French cities and hope to expand the campaign to bring clean air to most of Europe in celebration of the new millennium.
– Shannon Service
More Than Med School
Alternative medicine is making inroads into America's medical schools. According to a recent study, 64 percent of medical schools now offer courses on acupuncture, homeopathy, herbal therapies, and other forms of holistic treatment.
This represents a dramatic increase from over two years ago when only 46 percent of the schools offered similar courses. The rise is due in part to the strong consumer demand for physicians who can weave alternative and conventional medicines into a more comprehensive healthcare program.
The change is also indicative of a broader trend toward greater patient participation in the healing process. Stanford medical professor William Haskell told Business Week that “people generally want to take control of their own health, using those services they find most effective.”
Today, as many as half of all Americans use some form of holistic or preventative medicine as part of their personal recipe for well-being.
– Shannon Service
France Quits MAI Talks
France has pulled out of the next round of MAI negotiations within the Organization for Economic Cooperation and Development (OECD), Prime Minister Lionel Jospin announced on October 14. France believes the current draft of the treaty threatens national sovereignty and cannot serve as a basis for an agreement, said Jospin.
The prime minister is calling for the MAI talks to be restarted within a new framework that includes developing countries.
The MAI, or Multilateral Agreement on Investment, would liberalize global investment by facilitating the movement of capital across international borders. The MAI has been under fire from various groups since negotiations began in 1995. MAI critics say that the treaty does not protect cultural, environmental, and labor interests, and reduces the sovereignty of states in favor of private investors.
While the US is urging OECD member countries to move forward with negotiations, many believe that France's departure will seriously hinder efforts to gain approval for the MAI.
“Clearly this is a disaster for the OECD,” a source close to the agency said of France's decision.
– Tracy Rysavy
Unocal Charter Challenge
On September 10, a coalition of 30 environmental, human rights, and women's groups petitioned California Attorney General Dan Lungren to revoke the corporate charter of Union Oil Company of California (Unocal). The 127-page petition charges Unocal with environmental devastation, unfair and unethical treatment of workers, enslavement and forced labor, and engaging in business with oppressive foreign governments.
Unocal is part of a consortium of oil companies in Burma; the Burmese military, which has been implicated in human rights abuses, protects a Unocal pipeline project cutting through a civil war zone.
Attorney General Lungren rejected the petition without explanation. However, those challenging Unocal's charter say the company's dealings with governments that commit human rights violations is a breach of international law, and the coalition is pressing forward with a lawsuit to force Mr. Lungren to reconsider their petition.
An October 2nd report prepared by the US Department of Labor in consultation with the State Department “may trigger a legal duty by Lungren to initiate judicial proceedings to revoke Unocal's charter,” says Professor Robert Benson of Loyola Law School in Los Angeles. The report corroborates the coalition's accusation that forced labor has been used on the Unocal pipeline project.
The report also states that Unocal has profited from the large-scale, forced relocation of Burmese villages and villagers without compensation as part of the pipeline project, a charge that was also brought forth by the coalition.
The challenging of a corporate charter is a new strategy in efforts to hold multinational corporations accountable for the human and environmental effects of their activities, and it is certain to be closely watched.
– Sara Prout
Climate Change Coalition
Thirteen Fortune 500 companies have announced their support for efforts to reduce greenhouse gas emissions.
The companies include the Sun Company, British Petroleum, Toyota, Boeing, Lockheed, Enron, United Technologies, American Electric Power, Whirlpool, Maytag, 3M (Minnesota Mining & Manufacturing), US Generating Co., and the Intercontinental Energy Group.
The coalition released a statement on May 7 “accepting the views” of scientists that enough is known about the impacts of climate change to warrant action on reducing emissions. The statement also said that US businesses can do more to reduce emissions without hurting the economy.
The group plans to conduct studies, educate the public on climate change, and assist businesses in developing market-based ways to reduce greenhouse gas emissions.
– Tracy Rysavy
A Boost for Independents
According to The Christian Science Monitor, this November's list of independent and third-party candidates is the largest in almost 50 years. And political support for alternative candidates is growing; a recent Times-Mirror poll showed that over two-thirds of Americans favor the creation of a third major political party.
An outside voice is especially critical today, stresses Joel Kovel, the Green Party's candidate for US senator of New York, because both Republicans and Democrats “are candidates of Wall Street.”
Political analysts Pat Choate and Michele Mitchell told CNN that they believe this anti-institutional sentiment will spread, and they predict that in the year 2000 elections, Democratic and Republican candidates will scramble to appear “independent.” They also believe that people won't be fooled by such political cross-dressing and will usher in real independent and third-party change for the new millennium.
Does radical change have to come from third party/independent candidates? The Natural Law Party, which promotes creating harmony between society and nature through increased sustainability, says it usually does. Natural Law Party literature points out that 90 percent of the revolutionary ideas that have changed the nation, from women's suffrage to the abolition of slavery, have come from outside the two dominant parties.
Dr. Harold Bloomfield, the Natural Law Party's candidate for California governor in the November 1998 election, says the Clinton scandal “lays bare the shameful flaws of ... bipartisan political thrashing. This crisis is not only an opportunity to break down [the system], but to break through to a positive future based on a new political culture.”
– Shannon Service
A June 18 ruling by the Louisiana Supreme Court has severely restricted the ability of state law school clinics to represent nonprofit organizations and the poor.
The ruling came after a powerful lobbying group called the Louisiana Association of Business and Industry (LABI) and two Louisiana Chamber of Commerce organizations asked the state Supreme Court to review the rules under which student law clinics operate. The groups claimed that the Tulane Environmental Clinic had exceeded its mandate when it blocked construction of a $700 million polyvinyl chloride (PVC) plastics plant by Shintech Inc. The plant was to be sited in low-income St. James Parish, which is located in an area of Louisiana known as “Cancer Alley,” a stretch of toxic factories and chemical plants that has been linked to health problems for the mostly African-American residents. Sixty percent of the nation's vinyl chloride is currently produced in this area.
While the new ruling does not mention Shintech or the Tulane Environmental Law Clinic by name, it contains provisions that will curtail representation of the poor by law clinics at Tulane, Loyola, and Southern universities.
The ruling prohibits law clinics from representing groups that are affiliated with national organizations and groups that cannot prove that at least 75 percent of their membership have incomes of less than $10,000 a year. The clinics are also prohibited from taking such proactive measures as helping poor people to organize or providing legal information to potential clients without first being asked.
“Local chapters of veterans, consumer, civil rights, and environmental organizations that cannot afford to pay for litigation against well-funded business or governments will find it much more difficult to obtain access to the courts in Louisiana,” the Tulane and Loyola law clinics warned in a joint statement released after the ruling.
The Baton Rouge Advocate says the new regulations will most likely end representation of longtime clinic clients such as the Coalition to Restore Coastal Louisiana, the Delta chapter of the Sierra Club, and the local League of Women Voters.
Many of the business groups whose complaints spurred the investigation said they felt vindicated by the court's decision. Sam LeBlanc, chair of the New Orleans Chamber of Commerce, told the New Orleans Times-Picayune, “The intention was basically to bring all law clinics, but particularly the Tulane Environmental Law Clinic, down to what they are supposed to be doing. In the view of many people, they have harmed Louisiana's economy. They have stopped our people from getting jobs. ... Under the guise of alleging to help indigent people, we think they have hurt them.”
Louisiana Governor Mike Foster publicly denounced the Tulane law clinic following the ruling: “The court is finally tightening up on that bunch of outlaws trying to shut everything down,” he said.
Environmental groups say the ruling is a harsh blow to the environmental justice movement in Louisiana, which has the greatest concentration of high-risk cancer facilities in the nation and ranks 49th out of 50 states for overall environmental quality.
“We were absolutely powerless until the Tulane clinic came along,” said Mary Lee Orr, executive director of the Louisiana Environmental Action Network. “This ruling sounds like a very dangerous threat to the rights of ordinary citizens.”
– Tracy Rysavy