PREFACE/XXIIITrust merged in late 1998), Deutsche Bank, Bankers Trust, Chase
Bank, Barclays, Merrill Lynch, Soclete Generale, Credit Agricole and
Paribas, all these banks would have found themselves in a highly
vulnerable position. Indeed, beyond reckless loans to LTCM, they
have all increasingly become involved in speculative operations. In
the second half of 1998, many of these big banks registered
significant losses for the first time in years.
Finally, there is a long list of formerly state-owned companies that
have in no way performed any better in private hands. Huge private
industrial concerns have posted losses hand over fist as a result of
strategic errors, particularly in the information technology sector.
Further proof of private-sector inefficiency have been the
monumental errors made by such private rating agencies as Moody's
and Standard and Poors. They had nothing but praise for countries
now wallowing in crisis.
GOVERNMENT TO THE RESCUE
For the last 20 years, governments have said they would not come to
the rescue of struggling companies and have privatised major state-
owned concerns. Now, however, they have been rushing to bail out
private-sector companies that threaten to go under. Funds for these
rescue packages come from state coffers fed largely by taxes on
working people and their families.
Here, too, the past two years have been telling. On 23 September
1998, the head of the US Federal Reserve convened a meeting of the
world's top international bankers to put together a rescue package for
LTCM ('Fed attacked over LTCM bail-out', Financial Times, 2 October
1998; Le Monde diplomatique, November 1998). Around the same
time, the Japanese government was adopting a rescue plan for the
country's private financial system, involving nationalisation of a part
of private-sector debt - to the tune of 500 billion dollars to be
shouldered by the state.
Thanks to IMF and World Bank intervention in the Southeast
Asian crisis in 1997, some 100 billion dollars were pooled together
to enable the region's private financial institutions to continue
paying off their debts to private international lenders. Most of this
money came from the state coffers of IMF and World Bank member-
countries.