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Ashok Mitra

We can still escape the fate that has struck the erstwhile Asian Tigers

There is a danger of this column acquiring the reputation of whining cantankerousness. Where the choice is between pleasantry and social obligation, no doubt should exist about how the vote is to be cast.

The turbulent developments in recent weeks leave little scope for doubt. A model is emerging, slowly but surely. It has a global framework. Within its fold, a programme has already been fitted neatly. The objective is devastatingly clear: It has to be ensured that the under-developed parts of the world remain under-developed for ever and ever.

The mechanism of the model is altogether uncomplicated. The poor nations are exhorted to open up their system in case they want to be co-sharers of the prosperity, which the affluent Western nations enjoy. They oblige by opening up in the belief that free market economics is the other name for arcadia. Speculators and currency manipulators arrive on the scene in no time. They spread their tentacles over the different segments of the economy, gain control over the country's banking apparatus, stock exchanges and other decision-taking and decision-executing institutions. At an opportune moment these alien forces strike.

Their manoeuvres generate a domestic crisis, capital flight accompanies the collapse of the external value of the national currency, industry and agriculture come to a standstill, inflation soars, a prayer is transmitted to the International Monetary Fund and the World Bank to bail the country out. The benevolent souls ensconced in these institutions respond to the prayer. Negotiations follow and the two international financial agencies arrange short, medium and long term loans for the country. The conditions set are tough, as tough as these could be. But beggars cannot be choosers. The country's rules and the upper classes are grateful for the benediction.

Then the fun really begins. The financial speculators who had been playing truant for some while after their original act of mischief, reappear on centrestage. They deploy their huge resources to play havoc once more with the external value of the national currency. The exchange rate hurtles down, a major exodum takes place from the domestic currency, the country experiences a heavy drain in its foreign exchange reserves every day.

The pattern of movement in foreign currency reserves resembles the primary school arithmetic of one pipe leading in, and another leading out water from the cistern at certain stipulated rates. The Fund and the Bank arrange to supply foreign exchange in driblets, and the speculators immediately raise the pitch of their activity to drain out the foreign exchange that has arrived. Give or take three to six months, the entire extra accommodation offered by the twin financial institutions gets totally exhausted.

At that stage, the country has no alternative but to reapproach the Bank and the Fund -- as Thailand, for instance, has now done. The upshot of the entire exercise is to add to the country's external debt burden. Because the external value of the domestic has crashed, this burden becomes increasingly excruciating. To sum up, cumulative experience consists of sluggish or zero economic growth for the country, rising cost of imports, dwindling exports, an enormous pile of external debt -- all contributing to a rising rate of exploitation of the country by external agencies.

This is by no stretch an abstract model. It is being currently experimented with marked success in each of the countries known till the other day as Asian Tigers. The currency crisis six months ago left them exhausted and numb. They had never trained themselves to be self-reliant. They were therefore caught napping and quickly reached the conclusion that no alternative existed to seeking benevolence from the IMF and the World Bank and under most humiliating terms.

This model of increasing external dependency, the history of the past few months would indicate, has now passed the stage of trial and error. In a single day in the first week of January, the Thai baht and the Indonesian rupaiah lost roughly one-half of their exchange value because of activities indulged in by foreign institutional investors who had been greeted earlier as gracious, kindly lights. The process, rest assured, will continue until the final denouement: Exhaustion of foreign exchange reserves by the countries and their total capitulation to external forces.

So that nothing goes wrong with the model, some muscle-flexing will also take place on behalf of the third luminary in the horizon, the World Trade Organisation. The countries in distress, it will peremptorily ordain, must further lower their tariff walls and reduce the duties they impose on imports. Its dispute settlement panels will routinely dispose of appeals filed against the developed countries for their endeavours to keep off from their markets the products of the poorer countries.

Scan our newspapers, they are not bothered by such not-so-distant thunders. India some of them will suggest, is outside the orbit of the cycle of catastrophes engulfing South-East Asia -- for, are not our economic fundamentals extraordinarily strong? Few have cared to define what these fundamentals are; all the relevant economic indicators show negative signs; charlatans parading as statesmen keep behaving as if nothing is the matter; finance ministers, past and present, responsible for opening up the system and thereby landing the country in the present mess continue to be acclaimed as the nation's saviours.

No earthly reason exists why the speculators and the multinational entities currently holding Thailand, Malaysia and Indonesia will let India off. There is no difference though between the former Asian Tigers and India. Although this country's infrastructure has undergone some wear and tear in the recent period and has been adversely affected by the investment famine, in the wake of Fund-Bank directive to cut back public expenditure, the Indian economy tucks within itself a resilience. This resilience owes a great deal to the industrial base, along with an impressive reservoir of technological skills and manpower, that was created in the decades immediately following Independence. Should we, even in this late stage, go back to a sensible regime of controls and regulations, we can still escape from the fate that has struck the erstwhile Asian Tigers.

Predators from capitalist countries will keep playing their classical role of squeezing dry the under-developed economies. The early warning signals of what wounds these speculators are capable of inflicting are already on; if we in India fail to heed them, the fault will be entirely ours. "India should prepare a watertight supervisors mechanism", urged the Thailand deputy prime minister who was in Madras earlier this month, "before liberalising its financial sector". Alas, few amongst his audience were listening.

This is where the peril lies, in the superstructural politics that has gained dominance in the country in recent years. Notions of right and wrong decided by the society's upper crust dominate the milieu who is truly globalised. This species have denationalised themselves to the hilt; whether India dies or survives means little to them. It will be an immense tragedy if this degenerate lot retain their hold on the polity in the aftermath of next month's election.

Ashok Mitra