by Hugh Mackenzie,
Research Director, United Steelworkers of America

Isn’t free enterprise capitalism wonderful! The bubble bursts in the economies of Asia, and the International Monetary Fund rushes to the rescue. Billions upon billions of dollars are suddenly available, indirectly, from countries that can’t find even half of the money needed to meet even minimal commitments to foreign development aid.

The world braces itself for an economic crisis. International currency trades hone in on Canada as a weak currency. The value of the dollar declines. Interests rates are forced up. Last year’s forecasts go out the window, and with them any hope of avoiding the unemployment trap the Bank of Canada has built for us.

What’s wrong with this picture? Plenty.

To begin with, aren’t these new economic "basket cases" the Asian Tigers" that the geniuses in our financial sector have been controlling a "speculative bubble," in economies that require "fundamental restructuring"?

Aren’t the international currency trades who are currently preying on the Canadian dollar the same geniuses who condemned Canada as another Mexico in 1995, and then deemed Canada a model of rectitude for the world in 1997? Aren’t these the same people who poured billions into Mexico in the 1980s and more billions into the Tigers in the 1990s? Who gets to decide when these guys are right and when they are wrong?

Or, for that matter, are they ever wrong where it really counts – on the bottom line?

The pattern of Mexico is being repeated in Asia. Canadian, U.S. and European banks pour billions into rapidly growing Asian markets chasing extraordinarily high yields. Suddenly, it’s not a boom, it’s a bubble. The bubble bursts, and the bail-out begins.

But who is being bailed out? Not the Korean government. Not the Korean people. Not even Korean financiers. No, the bail-out is for the international financial institutions that bet heavily on the Asian financial market bubble, and lost.

Who wins from the bail-out? Not Korean workers. They’re going to face IMF-imposed public service cuts and a dramatic reduction in their living standards. Not Canadian or American or European workers. They pay the taxes that ultimately provide the IMF’s billions. They are also going to have to cope with economic disruption in industries like steel and automobile manufacturing – disruption caused by suddenly bargain-priced exports from Asia – and in industries like coal and iron ore, whose exports to Asia just shot up in price.

And the winners are: the guys who bet the farm on the Asian bubble, and were wrong.

It’s a great system, isn’t it. You place your bet. If you win, it’s a bonanza. And if you lose, the IMF comes along to cover your losses, and blames the borrowers for a problem you did a lot to create in the first place.

And make no mistake about it: it is now a system. International money trades now know that if they create a speculative bubble and it bursts, they’re covered by the IMF. They’ve now got an international financial system with publicly funded insurance against downside risk. They’ve got the gambler’s dream: reward with a limit on risk.

Adam Smith would not be pleased, and neither should Canadians who are not into international finance. This isn’t just a harmless game like betting on horse races. Real people get hurt. They get hurt in the "beneficiary" countries like Mexico and Korea, and in the countries that supply the bail-out money, but suffering the consequences of economic disruption.

There’s far too much money sloshing around in the world economy these days; far more than is needed to support legitimate trading in goods and services or real investment. A currency speculation tax, imposed internationally at a very low rate, would go a long way to limiting speculation by making much of it unprofitable.

And maybe, just once, the IMF should let the losers in the speculative game actually lose, instead of rushing in with our money to bail them out eery time one of their bubbles bursts.