PREFACE/XXVin productive activities - which require long-term investments. As a
result, most short-term capital was invested in speculative activities,
in strict accordance with criteria of capitalist profit.
Southeast Asia's financial system was no weaker than those of
other so-called emerging markets. Instead, it was undermined by
deregulation measures which gave free rein to supposedly high-profit
short-term activities such as the quick buying and selling of (often
vacant) real estate. According to Walden Bello, 50 per cent of Thai
growth in 19 9 6 stemmed from real-estate speculation. Although the
IMF and the World Bank were supposed to be monitoring the
economic reform process in these countries, their unflinching defense
of neo-liberal precepts blinded them to the real problems at hand.
YET ANOTHER DEBT CRISIS
All but a handful of the countries of the periphery - which account
for 85 per cent of the world's population - have now to endure yet
another debt crisis. The immediate causes are: an increase in interest
rates (which are actually falling in the countries of the North); a fall
in all types of foreign capital inflows; and a huge drop in export
earnings (caused by the fall in the prices of most of the South and the
East's exports).
There has been a swift increase in the total debt owed by Asia,
Eastern Europe (especially Russia) and Latin America. Short-term
debt has increased, while new loans are harder to obtain and export
earnings continue to fall. In relative terms, Africa has not been as
hard hit by changes in the world situation: loans and investment by
the North's private financial institutions have been so dismally low
since 1980, things can hardly get any worse (except for South Africa).
With the 1997 Southeast Asian crisis spreading into Eastern
Europe and Latin America, private financial institutions have been
increasingly reluctant to make new loans to countries in the
periphery (whether in the Third World or the former socialist bloc).
Those countries which continue to have access to international
financial markets - and continue to make government-bond issues
in London and New York - have had to hike the guaranteed return
paid on their issues in order to find buyers.
Argentina's October 1998 bond issue on the North's financial
markets, for example, offered a 15 per cent rate of return -2.5 times
the average rate of the North's government bond issues. Yet this has