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Issue 35, February 1999

Asia's year of turmoil

    Japan in recession
    South Korea - resistance continues
    Indonesia's revolution
    Malaysia - splits at the top
    Keynesianism and socialism

Last year no East Asian country escaped the economic, social and political hurricane that swept the region following the collapse of the Thai economy in July 1997. The myth of the Asian capitalist 'miracle' was finally laid to rest along with the political careers of several 'leaders', most notably Indonesia's General Suharto. ELIZABETH CLARKE reviews a momentous year.

"AFTER A DECADE of 10% annual growth rates", commented the Far Eastern Economic Review, Asia's "economies contracted by as much as 15%. Stock market values were more than halved. By autumn 1998, Asia's total of bad loans was estimated to be $1trn. In little more than a year since the beginning of the crisis, Asia's currencies lost 30-70% of their value". (31 December 1998)

Panicking over the possibility of debt default ($100bn flowed out of East Asia in 1997) and social explosions, the IMF poured over $130bn into the three most stricken economies - Thailand, South Korea and Indonesia. In spite of this, unemployment tripled - in Indonesia from 5% to 15% of the workforce. Hong Kong's joblessness has doubled and Japan's rate of 4.5% is, for the first time, on a par with the US.

Across the region, thousands of factories remain idle and building projects lie half-finished. The ILO (International Labour Organisation) estimates that ten million Asians have lost their jobs, with millions more affected as they are only nominally employed, often going for months without wages. The ILO sees no immediate prospect of a return to strong growth and full employment. 'Without a social safety net (unemployment benefit, pensions etc) poverty can only get worse in Asia', a recent Asian Intelligence Agency report concludes. In Malaysia, it found 45% of workers feel 'very' or 'fairly' insecure about their jobs.

  top     Japan in recession

FEAR ABOUT THE future is the main factor behind the refusal of Japanese 'consumers' to spend what money they have - apart from a small flutter around New Year. The 'Keynesian' prescription urged on the Japanese government by some of the world's staunchest monetarists is still failing to kick-start the world's second biggest economy out of recession. A rise in the yen and share prices at the turn of the year belies the real situation.

The bank nationalisations and leniency towards failing firms have been motivated by the genuine dread felt by Japan's ruling class that sooner or later the patience of the working class will snap and social explosions will rock the system. There is even speculation that provincial mayors may be forced to follow the example of Minas Gerais in Brazil and refuse to pay what is due to central government, in an attempt to deal with local funding problems.

The sea-change in the attitude of Japanese voters towards their notoriously bureaucratic and corrupt rulers was reflected in last July's Upper House elections. The disastrous result for the ruling Liberal Democratic Party (LDP) and the 15% score for the Japanese Communist Party saw not only the replacement of prime minister, Ryutaro Hashimoto, with Keizo Obuchi but also raised the possibility of a left-of-centre 'Olive Tree' coalition. The government coalition finally agreed with the Liberal Party (which split from the LDP just months earlier) seems fated to make no more progress than the previous administration in dragging the economy out of the doldrums. This, the worst crisis for Japanese capitalism, raises the urgent need for a new party of labour firmly on the agenda.

The difficulties of beleaguered Japanese capitalism means it is ruled out that it can rescue the ailing economies in the rest of East Asia - Japan accounted for half the foreign money that took flight from Thailand in July 1997.

It was no accident that Thailand was where the Asian turmoil claimed its first political victim. In November, prime minister Chaovalit Yongchaiyudh was forced to resign and make way for a coalition headed by Chuan Leek-pai. By mid-1998, the Thai economy was still contracting - exports were declining at an annual rate of 6% and imports were down by 30%. By the year end, business failures were 23% up on 1997. The exodus of workers from the cities caused tensions in the countryside where discontent erupted in mass demonstrations.

1999 opens with little sign of economic recovery. The new prime minister has brought no relief to the suffering workers and peasants and has himself become the subject of an impeachment move by the opposition. A number of his ministers already face censure for corruption. It will not be long before organised struggle gathers momentum in Thailand, aiming, as it inevitably will, at replacing discredited capitalist politicans with genuine representatives of working people.

  top     South Korea - resistance continues

IN SOUTH KOREA'S presidential elections in December 1997 a ruling party candidate was defeated for the first time ever. However, ex-dissident Kim Dae-jung, elected on an anti-IMF stance, immediately made it clear that he intended implementing all the draconian conditions for the $57bn IMF bail-out.

It was the attempt in 1996 to foist deregulation and 'flexibility' on the long-suffering Korean working class that provoked the massive general strike from which the regime of Kim Young-sam never recovered. It was then that the veil was stripped from the ugly face of capitalism in the 'tiger' economies. Massively inflated corporate debt and overproduction of up to 30% in cars, ships, semi-conductors, steel, etc meant a collapse was just waiting to happen. But the world's profit-hungry speculators carried on regardless until the time-bomb they had helped to create blew up in their faces. They can take their money away and the IMF can make up the losses, but for workers there is no way out but to struggle.

The latest round of attacks on jobs and conditions dictated by the IMF brought Kim Dae-jung into collision with the heavy battalions of the powerful independent trade union federation, the KCTU. Workers in the car and ship-building industries not only rejected a tripartite deal signed by the government, bosses and the predominantly white-collar KCTU leaders, they removed the union leaders from office and replaced them with leaders elected from their own ranks. Kim Dae-jung took his revenge by deploying the hated riot police to break up the union's May Day rally in Seoul - shattering the illusions of thousands of trade unionists that he might behave differently from his notorious predecessors. In fact, although Kim Dae-jung was himself on death row under the military dictatorship, in the first year of his stewardship the South Korean state has arrested and imprisoned more youth and union leaders than in the previous two years under Kim Young-sam.

With 10,000 redundancies a day and no new jobs for graduating students, there has been a marked radicalisation amongst workers and students. 'Finding a job is harder than pulling a star out of the sky', said Cho Eun-young from Korea University. Students demanding shorter hours and sharing out work demonstrated in soldarity with car, telecomms and bank workers who are all facing retrenchment and mass redundancy.

  As absolute incomes were slashed and living standards plumetted, domestic demand for cars fell 50% and for steel 33%. Daewoo and Hyundai Motors ran at less than 50% capacity for most of last year. Total losses for all firms quoted on the Seoul stock exchange increased three-fold in 1998 to $11.2bn. What used to be the world's 11th largest economy contracted by over 6% compared with an expansion of 5.5% in 1997. It also came top of the league for foreign direct investment (FDI) growth. This merely reflects the flurry of activity in the 'fire-sale' after the inferno of Korea's economic crisis. In any case, FDI is starting from a very low level since, until the recent prising open of the Korean economy to foreign ownership, international capital was only present in the form of loans rather than equity. South Korean firms have foreign debts of $80bn; the state's debt is $63bn.

Kim Dae-jung has agreed to the privatisation of eleven state-owned enterprises - a move opposed by the KCTU. He has also attempted to reorganise many of the top conglomerates, or chaebol, that dominate the economy, opening them up for foreign involvement, but with only limited success.

The largest chaebol, Hyundai, with a value of 73trn won last year, has actually increased its value to 90trn won ($77bn) by gobbling up a number of ailing subsidiaries of rival chaebol, such as Kia and Asia cars. It now controls 70% of the Korean car industry. With a debt burden of 'only' six times its equity, Hyundai is proportionally less indebted than some of the other chaebol. Like them, it continues to receive favourable treatment from the troubled banks.

As in Japan, the South Korean government has been forced to nationalise two of the largest banks, sinking as they were under a pile of unpaid loans. While fighting every inch of the way for their jobs, bank workers and their union opposed the move because it was a prelude to rationalisation and resale. Demonstrations and strikes in other sectors of the economy have shown the legendary resistance of the Korean working class when their hard-won gains are under attack.

The most dramatic confrontation was at Hyundai Motors in Ulsan, in July. With the self-styled 'dinner ladies from Hell' to the fore, thousands of workers camped out in the factory grounds and armed themselves for a showdown with the riot police. Management's climbdown - reducing the number of declared redundancies from thousands to less than 300 - was a huge victory for the whole movement, demonstrating the power of organised labour. Even then the workers voted against the agreement, unhappy that any workers should pay with their livelihoods for a crisis of the bosses' making.

  The most battle-hardened workers believe the heads of the chaebol should be tried and punished. Unfortunately, many leaders of the KCTU, not guided by a Marxist understanding, still have illusions that 'reforming' or dismantling the chaebol is the best approach. Even the new leaders, who are backed by some of the most militant factory activists, are not putting forward a real alternative - for state ownership of the top 30 chaebol, for a plan of production and democratic workers' control and management.

It is not fear of arrest that holds these leaders back - just calling for a general strike puts them on the wrong side of the law. It is a lack of conviction that such an idea can become sufficiently popular to be successful. But it must be the role of those who are convinced to build support amongst workers. This must be linked to the task - started around the time of the 'big strike' - of building a political party that will truly represent the workers' interests. The all-class formation of People's Victory 21 (PV21) is too broad and amorphous to inspire workers to anything more than a passing interest during elections. This crisis demands crisis measures - a programme of action and demands around which to struggle for an end to the system that has spawned the economic and social devastation.

Without this, even the best-intentioned leaders will be pulled towards compromise and moderation. They will be courted by such devotees of private enterprise and the market as the leaders of the international trade union movement and by world-ranking 'left' politicians. Even the British chancellor, Gordon Brown, visited Seoul in the spring and lectured the KCTU on the need to abandon action such as general strikes in the interests of stabilising the economy. In the midst of economic crisis, this can only mean capitulation to the demands of capitalism - crony or otherwise.

The desire of Korean workers for change was shown in the votes in the presidential and then local elections in the summer. In several areas candidates directly opposing all the official (conservative) parties, and some directly standing as PV21 or trade union candidates, made gains. The building of a workers' party is a burning task. Further debates and struggles on the issue are bound to arise as the deep economic and social crisis in Korea refuses to respond to capitalist remedies.

  top     Indonesia's revolution

THIS IS TRUE on an even grander scale when it comes to Indonesia. A catastrophic collapse took per capita gross national product from $3,038 per annum to an estimated $600. It was the horrific effects of monetary crisis and IMF prescriptions to deal with them that lay behind last year's revolutionary upheavals, ending in the resignation of the military dictator, Haji Suharto, after 32 years in power. He was replaced by his protégé, BJ Habibie.

Today, Indonesia is still wracked with unresolved problems and strife. Killings occur daily, including those by state forces in areas like Aceh and East Timor. Large areas of the archipelago are in chaos and life is a scramble for survival. Latest figures show that 130 million people in Indonesia now live below subsistence level out of a population of 200 million.

At the end of last year, Indonesia's students were once more on the streets, this time demanding Habibie's resignation (some his hanging!). He had failed to feed the people, failed to bring in genuine democracy and failed to kick the military out of politics and off the streets. Workers and city poor swelled the numbers of demonstrators on an unprecedented scale. In November, thousands of 'volunteers' were brought to the capital and armed with bamboo pikes to defend the session of the country's Suharto-era 'parliament'. The viciousness of the troops' attacks on the crowd and the killing of students inside a campus compound, led to an outburst of revenge killings and rioting. The Far Eastern Economic Review commented that "the Habibie government is beginning to look as isolated from the people as the Suharto regime did in its final months". (26 November)

Desperate to prevent further atrocities and repression, student representatives approached the leaders of Indonesia's four main 'opposition' movements to plead with them to set up a form of 'joint transitional ruling committee'. Their mission failed. The country's political 'worthies' are more concerned with jockeying for position in the run-up to the elections due in June. They have angered activists by accepting that the military will continue to sit in parliament for another six years. And the November Assembly ruled that any organisation wanting to contest the elections must collect one million signatures or have branches in half of the archipelago's 27 provinces!

Nevertheless, a period has opened up in Indonesia which is favourable for putting forward energetically a programme for rebuilding the economy and society. This could only be done by mobilising the working class and other oppressed layers to take over and run society through elected committees. They could take control of the production and distribution of essentials like food and move to take the main national resources into public ownership under democratic control. Such a movement would call for the implementation of all basic democratic rights, for the withdrawal of troops from all 'occupied' terrritories and the right of those communities/nationalities to decide what kind of government they want, including the right to self-determination, or separation. The building of a powerful party of the working class and trade unions independent of the state are prerequisites for success.

  top     Malaysia - splits at the top

IN 1998, THE Malaysian economy dived from decades of 7% average growth to a sharp decline of a similar percentage. The relative stability under 17 years of Mahathir Mohamad's authoritarian rule was shattered. Splits opened up in UMNO, the ruling party, on how to deal with the crisis: some wanted to maintain the status quo with additional elements of state control, while others, like Mahathir's chosen successor and deputy prime minister, Anwar Ibrahim, favoured open market capitalism and neo-liberal policies.

Accusations were levelled against Mahathir of cronyism and nepotism. He retaliated by railing against those who were trying to impose 'new forms of colonialism' on Malaysia. In September, Mahathir introduced measures aimed at controlling capital and currency movements and boosting local investment in the economy - measures which bucked the general trend in Asia. Within a day, he had ordered the arrest and trial of Ibrahim on trumped-up charges of sexual and other misdemeanours. Weeks of farcical court proceedings outraged Anwar's supporters. In January his camp scored a significant victory when the police chief responsible for the beatings Anwar received in detention was 'persuaded' to resign. In return, Anwar magnanimously accepted Mahathir's choice of a new deputy prime minister and the delay of inner-party elections until after national elections in April 2000.

Recently, in spite of all the tapes, videos, and web-pages designed to rally support, there has been a marked falling away of the 'reformasi' protests. A stalemate has been reached. It is not clear how much support the predominantly middle class and openly pro-capitalist protesters have evoked amongst the ranks of the long-suffering working class of Malaysia. Al Gore's praise for the pro-Anwar movement when he was in Kuala Lumpur last year for the APEC conference will only have assisted Mahathir in his campaign to smear Anwar as an agent of imperialism. Many Malaysians, not enamoured of US policies in the region, will have the attitude, 'my enemy's new-found friend is my enemy'.

The unsettled nature of Malaysian politics could yet hold many surprises, including the stirrings of independent working class movements. But if some commentators were expecting the early lifting of capital controls in Malaysia, they were mistaken. As soon as the Brazilian currency crisis broke, Mahathir announced that it clearly confirmed the need to maintain them! In the long run, however, such controls can only hold the line against the worst excesses of speculative activity. They cannot overcome the fundamental weaknesses and contradictions of the capitalist economy.

  top     Keynesianism and socialism

STATE INTERVENTION IN Hong Kong towards the end of last year - using $15bn of public money to protect local equity and currency values (ten times the annual welfare budget) - evoked hysterical cries of 'socialism' from some right-wing traditionalists! But such 'Keynesian' measures in the face of recession are far from socialist. They are designed precisely to keep the capitalist show on the road when mass unemployment and poverty can provoke big movements against the system itself.

In the Philippines, growing economic and social problems were behind the rejection last year in the presidential elections of the chosen successor of Fidel Marcos. The victor was Joseph Estrada, an aging ex-film star posing as a millionaire-champion of the poor. (All eleven 'presidential hopefuls' were millionaires, as were all the candidates for the senate!) In an attempt to deal with widespread discontent, strikes and food riots, Estrada is now busy pump-priming the economy with emergency employment projects and feed-the-poor schemes. How long he can avoid mass revolt and an organised challenge from below depends on the success of socialists in their efforts to reorient the workers' movement away from dependence on lawyers and do-gooders in NGOs, etc, who have little interest in seeing the working class coming to power.

In the 'People's Republic' of China, where the 'communist' government is now firmly wedded to the introduction of capitalism, what must be one of the biggest-ever programmes of a state capitalist nature is under way - worth $1.2trn over three years. More than $24bn was poured into state projects last year - 22% up on 1997. This programme of 'Keynesianism with Chinese characteristics' is aimed at heading-off a widely anticipated slowdown from growth figures still reportedly around 8% per annum. A shortage of FDI, limited domestic demand and huge pressure on the Chinese currency - the renminbi - from surrounding deflated economies, are all part of the problem.

In the interests of US imperialism, which is nervous about a Chinese devaluation, the recently re-elected KMT government of Taiwan has been proffering slices of its still healthy reserves to help other South-East Asian countries avoid further slides in their currencies. Developments in Brazil, however, have given rise to new speculation that Beijing can hold out no longer.

  The proposal of a single currency, floated at December's ASEAN conference, is a non-starter. The Asian crisis blew apart the idea of all currencies being tied to the dollar or, given Japan's domination of the region, the yen. Old rivalries persist and are being compounded by new capitalist rivalries within and beyond the region. The very success of the Asian economies in the 1980s and 1990s has brought them into head-on collision with the major trading blocs. While denouncing the protectionism of Asian nations, the US and Europe impose anti-dumping laws and demand cutbacks in the production of steel, cars, computer components, etc.

Korea has agreed to a modest cut in steel production, but China does not yet feel obliged to comply with such demands. Nevertheless, with its own internal problems apart from the complications of an international economic downturn, the world's biggest coal and steel producer has announced a programme of 25,800 mine closures and 400,000 job losses. Other inefficient and bureaucratically controlled state firms are swallowing vast sums of public money. But, as the anniversary approaches of the bloody suppression of the workers' and students' movement in Tiananmen Square, the Chinese government fears new movements gaining support from disenchanted workers and small farmers.

A time-bomb is ticking under the apparently unbudgeable regime in Beijing. It was no accident that a number of fresh faces were brought into the cabinet under the new prime minister, Zhu Rongji, as if to prepare for troubled times ahead. Harsh punishments have been noisily meted out to corrupt police chiefs and bankers.

There are frequent reports of disturbances in the countryside and strikes in the industrial complexes of the eastern coast - the forcing houses of Chinese capitalism. The recent trials and long-term imprisonment of 'dissidents', including labour movement organisers, is unlikely to prevent the burgeoning of independent unions and attempts to set up genuine parties of labour.

Like that of China, the ruling elites of Laos and Vietnam will have trouble holding onto their entrenched ideological positions as the pressures of the world market overwhelm them. Challenges from below, like last year's strikes and peasant protests in Vietnam, will give them worse nightmares. 1998 saw inclonclusive, fraudulent elections in Cambodia, as well as the death in a jungle hideout of the hated mass murderer, Pol Pot. Joy at the news was tempered with a timely reminder of what monstrous regimes can come to power in the absence of workers' parties and genuine revolutionary leaderships.

  As pundits bet on the possibility of an upturn in Asia, socialists looked to the devastation wrought on the lives of millions of working people - the inescapable logic of capitalist crises of overproduction. For all the euphoria in the world's stock markets, seemingly undented by the Brazilian crisis, some capitalist commentators have issued serious warnings. Tucked away in the pages of the financial press are many indications of how much the 'Asian contagion' has damaged the economies of the rest of the world. As 1999 began the Wall Street Journal commented, "Asia hasn't had its day of reckoning yet" (8 January, 1999).

For investors and speculators, this spells a rocky ride in the coming few months. For Marxists, it means a redoubling of our efforts to reach the hearts and minds of the struggling masses of East Asia.

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