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Economical in Outlook

First, a disclaimer.

Our young, good-looking, English-educated Prime Minister has a Masters Degree in economics from Oxford, whereas your columnist, er, … well, I’m English-educated.

But with respect to economics, I can boast no formal qualifications.

In fact I very often boast about that.

When I was in graduate school, I was an informant in a survey that asked students to rank the degree of affinity between their major and other subjects.  So as a linguistics student, I could, for example, point to acoustic phonetics as an intersection with physics.  Then there was psycholinguistics providing a link with psychology, sociolinguistics with sociology and so on.  Things like molecular biology were as far as I could see, unrelated.

But when the results came out, in the form of a sort of contour map, the two subjects that were on opposite sides of the academic world were linguistics and economics.

So Khun Abhisit knows his economic onions and I don’t.

Except there has been something of a revolution in economics since Khun Abhisit got his degrees.  More like a revolt, really.

A group of graduate economics students in the Sorbonne in 2000 got fed up with the economic orthodoxy that they were expected to imbibe and issued a manifesto.  This questioned the fixation of academic economics on a fairly narrow range of questions, many of which assumed conditions that you never actually find in real life.

This amounted to indoctrination in an ideology, rather than a disinterested inquiry into truth.  They called for more teaching of different traditions and more tolerance of dissenting views.

This cry of angst was taken up by students in Cambridge (er, not Oxford, you will note) and quickly spread elsewhere.  The post-autistic economics network was born.

It was also pointed out that graduate students might, with difficulty, become aware that there was more to economics than was presented in their lecture halls.  But those studying economics as a sideline to their major interest, such as MBAs or poli sci people, were getting a blinkered view of the subject without realizing they were being blinkered.

The result would be generations of business leaders and politicians confusing assumption with fact and belief with certainty.

 

So let us look at the results of Khun Abhisit’s latest jaunt to represent ASEAN at the G20 summit in London.

Very pleasing, says the PM, highlighting the enormous funding boost for the IMF, the commitment to free trade over protectionism (with a nod to the Doha so-called Development Round), and the growing recognition of the developing countries in the new world economic order.

 

Let’s take these in reverse and challenge the PM’s economic orthodoxy with some facts.

The poor have more clout, eh?

The G20 summit decided to implement the bulk of its objectives through the IMF and the development banks.  These are profoundly undemocratic organizations which routinely ride roughshod over the aspirations and interests of those countries who, because voting rights are determined largely by wealth, have only token representation and who must accept the dictates of the major economies.

There were murmurings that the leadership f the World Bank and IMF would not remain the private domain of the US and Europe respectively.  But no actual promises, you understand.

 

$250 billion has been allocated to trade finance.  With $200 billion of this for the rich economies and the remainder for the poor.  Another $250 billion worth of Special Drawing Rights (the currency of the IMF) will be made available, but only $19 billion of this is earmarked for the poor countries.

But if you think all this is a bit cheesy, take heart from the fact that the IMF has been told sell some of its gold reserves to help the poorest countries.  All of $6 billion worth.

Now free trade, perhaps the biggest shibboleth of economic fundamentalism.

$250 billion (these suspiciously rounded numbers tell you all this has been carefully costed) will go to help finance world trade.  Details are not clear but it is expected that much of this will be in the form of export credit guarantees.

This means that if one company in one country decides to sell to another company (or government) in another country and the buyer doesn’t pay, then the seller will get paid by the guarantee.

Hmmm.

Now we got into this crisis when some sharp sods reckoned they could sell mortgages to people who could not afford them in the expectation that they couldn’t lose because the government would give them (or whoever ended up with the repackaged debts) a bailout (a confidence that has been amply rewarded).

Isn’t this just another way for the same sharp sods to game the system, selling stuff to people who can’t afford it?  And dumping the bill on whoever?

And protectionism has had an extremely bad rap under the current economic ideology.  The argument goes like this.  Look at the rich countries; they don’t hide behind barriers to trade in a misguided attempt to protect their own industries (though in agriculture this is exactly what they do).  So there is an obvious cause and effect.  Open your economy and you can become rich like them.

But if you look at the history of the rich countries’ economies (a subject that the post-autistic economists point out is very much downplayed in the mainstream orthodoxy), you discover that the reverse is true.  As a result of protectionism, the rich countries got rich and then became free traders.  There are precious few real world examples where opening up an economy has led to prosperity and plenty where prosperity came from carefully shielding an economy from free trade, from the UK and the US to more modern examples like South Korea and Taiwan.

And finally, PM Abhisit has welcomed the $750 billion trebling of resources available to the IMF.

It beggars my belief to think that any Thai politician who has been awake for the past 12 years would think that a more powerful IMF could possibly be a good thing.  But for a Democrat?

The same party that let the IMF dictate the Letters of Intent that Finance Minister Tarrin signed but didn’t actually write?  The Letters of Intent which initially were kept secret from the Thai taxpayers who were going to have to pay for the consequences?  The same IMF whose post-1997 prescriptions for the Thai economy were so wrong-headed that you cannot find today anyone with a good word to say about them?

PM Abhisit made no mention of the failure of the G20 meeting to seek a solution to the economic crisis by linking it to the climate crisis.  Oh, it was mentioned, but no money, no deadlines, no commitments.  And it was the protestors’ Climate Change Camp that was smashed up by the Metropolitan Police in the wee hours with no press in sight.

But this may in the end be some comfort to the Prime Minister.  If the collective wisdom of our leaders continues to ignore the issue in this way, we won’t have to worry about whether the reds or the yellows are blocking Victory Monument.  In a generation it will be all blue.

Under water.

 

 

About author: Bangkokians with long memories may remember his irreverent column in The Nation in the 1980's. During his period of enforced silence since then, he was variously reported as participating in a 999-day meditation retreat in a hill-top monastery in Mae Hong Son (he gave up after 998 days), as the Special Rapporteur for Satire of the UN High Commission for Human Rights, and as understudy for the male lead in the long-running ‘Pussies -not the Musical' at the Neasden International Palladium (formerly Park Lane Empire).

And if you believe any of those stories, you might believe his columns.

 

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