54/YOUR MONEY OR YOUR LIFE!
of commodities. As a result, much of the capital accumulated from
new profits is not invested productively. This capital floods into real
estate and stock markets for speculation and for merger and takeover
operations. For a few years now, there has been huge growth in
speculation on currency rates, debt paper and various derivative
products.
Table 4.2 Finance expanding more quickly than GDP: Trade and
foreign direct investment in OECD countries (1988 compared to
1980)
GDP in OECD countries* +195%
Trade + 200%
Financial transactions on exchange markets + 850%
Foreign direct investment + 350%
- Provides a reliable index of production levels.
Source: Claude Serfati, in Alternatives Economiques, No. 23, first quarter
Governments and financial institutions have pulled out the stops
to get all legal obstacles to the free international circulation of capital
removed. Now they worry about the scale of speculative activities,
which threaten monetary stability (European Monetary System crisis
in 1992), sink major financial institutions into bankruptcy (Barings
in Britain and Cosmo in Japan, both in 19 9 5; again in Japan, in 19 9 7
at Yamaichi and 1998 at the Long Term Credit Bank) or plunge
entire countries into crisis (Mexico 1994-95 and Thailand,
Indonesia and South Korea in 1997-98). Yet they refuse to adopt
measures to restrict the free circulation of capital. The BIS reiterated
this refusal in its June 1995 report, as did the G 7 heads of government
following their June 1995 meeting in Halifax, and the IMF/World
Bank team during their Washington meeting in late April 1997. The
3 0 April 1997 edition of the French business daily Les Echos ran the
following completely contradictory leader:
The Interim Committee of the IMF, the institution's highest
decision-making body, gave the green light Monday evening in
Washington for the IMF to promote and organise the liberalisation
of capital flows, including in developing countries, (emphasis mine)