by Eric Margolis © 1997 Eric Margolis
NEW YORK - As Asia's financial storm continues to rage, Congressional conservatives and liberals have joined to oppose any more aid to Far Eastern nations. Why, they ask, should US taxpayers' money be used to bail out Asians and make good their financial excesses?
Billions in aid, say critics, will only reward reckless Asian investors, and encourage more dangerous speculation in the future. Let Asian businessmen and financial institutions pay the price of their follies and clean up the mess they created through cronyism, fraudulent accounting, kickbacks, and rotten business practices. Allow the free market mechanism to discipline Asians and restore their battered economies to health.
What's more, the US-orchestrated IMF bailout of South Korea, Thailand and Indonesia, is being done without the approval of Congress. The White House is using the obscure Exchange Stabilization Fund, which enables the executive branch to give emergency financial aid to foreign governments, without seeking Congressional assent. This loophole may contravene the Constitution, which gives Congress control of the federal purse.
Liberals in Congress complain about US aid being given to authoritarian Indonesia. They claim the international bail-out will punish workers, while making whole the Asian financial institutions and politicians who created the gigantic mess.
Both groups of critics are right - to a point. But the Clinton Administration, led by Treasury Secretary Robert Rubin, correctly decided America's national security is gravely jeopardized by Asia's monetary crisis and must take precedence.
A total collapse of Indonesia, Thailand and South Korea, who owe billions to Japanese banks, could bring down Japan's financial system, the world's second largest. Ongoing convulsions in world stock markets give a preview of what a full-blown crisis would look like. A major international financial meltdown could devastate the US economy and produce dangerous political instability in Asia, Russia, Eastern Europe and Latin America.
The same Conservatives who oppose the rescue package keep calling for US military forces to protect America's "vital interests" around the world. Washington spends US $50 billion annually on military forces policing the Mideast, and a similar amount in the Pacific and North Asia.
Many liberals and conservatives ardently backed war with Iraq, which cost $100 billion, to prevent a five cent a gallon increase in the price of gasoline. Surely the threat of an international financial panic is a greater danger to the republic than events in the Mideast, which is no longer even America's principal supplier of oil.
Right now, the biggest threat to American security is not Saddam Hussein, Libya, Sudan or assorted terrorist groups. It's the spectre of a financial panic duplicating the 1930's worldwide Depression which, let's recall, led directly to Hitler and World War II. The newly interwoven global economy is producing dangers and complexities previously unimagined, and is still only poorly understood, even by experts.
Fighting wars for cheap oil violates free market economics. So was helping rebuild demolished Germany and Japan after World War II. But the Marshall Plan restored Europe to health, blocked Soviet expansion, and created a half century of unprecedented prosperity.
The same conservative and liberal critics who oppose emergency aid to South Korea, Thailand and Indonesia - call it the Rubin Plan - regularly vote $3-5 billion in annual aid to Israel, which has received over $85 billion from American taxpayers since 1948. Why is highly strategic South Korea, where 37,000 American troops are based, any less vital than Israel to US interests?
Giving loans to profligate Asians is deeply distasteful. It certainly offends my fierce free market beliefs. The IMF's draconian "rescue" packages have often backfired. Still, it's the best vehicle available.
We're facing an unprecedentedly dangerous situation, what French call "force majeure". Financial and political realpolitik must take precedence over economic ideology. Without the US-mounted rescue, there may be few markets left in Asia, free or otherwise.
[Eric Margolis is a syndicated foreign affairs columnist and broadcaster based in Toronto, Canada.]