On 21 Dec 99, at 18:37, Brad De Long wrote:
> >Patrick:
> >Institutionally, JP Morgan
> >was the IMF and Fed rolled into one for a long time, early on this
> >century, but even he couldn't hold the line from 1929-33. So it's not
> >the institution that can or can't prevent the disastrous outflow
> >episodes, it's in the nature of the accumulation process. Perhaps
> >we'd agree to agree on this.
> Brad:
> I think that central banking privately provided by plutocrats is a
> poor second best to government-provided central banking. And I'm more
> skeptical about J.P. Morgan-as-central-banker than many. But you have
> a good point.
That's kind of you. Let me bend the stick some more, then. A revival of the ethic of good National government-provided central banking aimed at distorting financial markets for the benefit of broader socio-economic goods -- shall we then say, not merely following Korea/Taiwan but Che-Guevarra-style -- is absolutely necessary; bad Global central-banking-on-behalf-of-plutocrats should be abolished.
> >Patrick:
> >What the IMF does so very well (and differently) today, however, is
> >police the outflows so that nearly all of it actually flows out, instead
> >of during the earlier periods when a good chunk of it got caught in
> >sovereign debt defaults (1/3 of all countries refused to pay, during
> >those periods).
> Brad:
> True. But it also provides resources in times of crisis. And *if* the
> crisis is successfully surmounted those resources may ex post appear
> to have been extremely valuable. Stan Fischer likes to compare Mexico
> after 1982 and Mexico after 1994, and attribute a large part of the
> difference to the fact that sovereign debt defaults are extremely
> costly to both sides.
Costly to Southern compradors and their respectability amongst the int'l big cigars, yes, if requisite capital controls are not immediately installed. But if you want an idea of socio- environmental costs of NOT forming/joining a Third World debtors' cartel and instead playing the game the way it's been played these past 17 years, well we do have some data for you.
> >> Brad:
> >> The live questions are: (a) How much in the way of additional capital
> >> flows are generated by confidence that there will be an international
> >> lender of last resort?
> >Patrick:
> >But again to question artificial parameters, two absolutely "live"
> >(and death) questions in emerging markets remain, why do we
> >need "additional capital flows" given what they entail, and what
> >degree of whoring is sufficient to generate confidence by portfolio
> >managers and the IMF cop?
> Brad:
> Well, back at the end of the last century the U.S., Canada,
> Australia, Argentina, and some others were able to use their access
> to international capital markets to accelerate their economic
> development. It seems a shame to pass up one possible channel through
> which developing countries can rapidly add to their capital stocks.
> (Note, however, that both Harry Dexter White and John Maynard Keynes
> thought that international capital flows were too dangerous to be
> prohibited.)
Turn of the century? That's the best we can do in defense of development-by-portfolio-flow? What phase of the global upturn were we in then, still Kondrattief A, if I recall? And without getting its internal class configuration right -- i.e., being run by a merchant not a productive bourgeoisie -- did Argentina "develop." And where would Australia and Canada have been without minerals and immigrant human capital? And the US without nascent imperialism?
> >Patrick:
> >Wait a minute. As I understand it, the IMF directly ordered massive
> >East Asian banking system contraction (and hence foreclosures on
> >plenty of going concerns),
> Brad:
> I had thought that the IMF sought the closure of too few East Asian
> banks, not too many. You do have to shut down insolvent (but not
> illiquid) institutions, after all. But I haven't looked at it closely
> enough to have an informed opinion...
I take Stiglitz's December 1998 speech here as new-conventional wisdom on the needless pain and inequity of East Asian sado- monetarism. Maybe Ismail can provide it?
Beyond whether Fischer/Boorman turned the screws too tightly in 1997-98, the real issue is when you've got lemon banking socialism -- shutting funky banks and thereby nationalising residual assets and liabilities -- can these institutions be turned into something the citizenry can actually benefit from? Mexico during the 1980s and Korea today hint in the negative under prevailing power relations (with IMF bank-supervision advisors breathing heavily over local shoulders). But amazingly, Continental Illinois in 1984 gives us a recent seed for hope: in the first CRA victory ever for the complainant (which was a union I worked for then, the amalgamated clothing/textile workers), the Federal Reserve turned down Contilly's 1988 application to buy an Arizona boutique bank (while it was shutting most of its Chicago low-income retail activity) on grounds that the public interest wasn't being served. It was a small but amazing breakthrough.
> Brad:
> As for the rest, you have a lot of good points. But alas! I have to go grade...
Ah, but your holiday cheer and only mild sarcasm has made this a worthwhile exchange from my part, many thanks.
Off now to document Zimbabwe-under-Fischer(ex-Rhodesian)- thumb and then write more Shut-IMF propaganda... Join us!