Back in the nineties I got it wrong, or at least I've reversed myself since then. I thought and wrote that Matahir Mohamad was wrong to peg the ringit and limit capital flows and I thought that the euro was a doomed concept. What it was really about was the border between the theoretical and the practical. Theoretically, I always thought the Euro was a good idea but I thought the practical problems of implementation were too risky. Practically, I knew that Malaysia would suffer from the rapid inflows and outflows of hot money but I felt that the Matahir represented the old, wrongheaded theory of national autarky. I think ATTAC may well represent that wrongheaded idea today. I also think the Thai government is probably very smart in threatening to use a hot money tax as a way of fighting the strength of the baht versus the dollar.
In the nineties I wanted to make the point that there was no use trying to go back to a time before hot money. The empire of the dollar has developed largely from the need of all people for international liquidity. It seemed crazy to think that a country like Malaysia could wall itself off from that flow and prosper. I didn't realize just how vulnerable these small currencies are. They are essentially in permanent crisis and all the governments can do is fight to keep the crisis from becoming acute.
I also didn't realize how strong that need for international liquidity is. The euro system has many faults, but the fundamental logic of it is so strong that once a nation is in, I think that nation quickly loses any thought of getting out. With all its faults, I think it is not unreasonable to say that the euro has the most potential to create meaningful change of any concept in political economy right now. Mired as it may be in Brussels for the moment, one can only imagine the transformative effect the euro may have in countries like Turkey and Russia. Hopefully Brussels will get its act together and promote the expansion of the Euro with a fair-minded federalist approach.
peace,
boddi