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Thursday, 26 March 1998
Page: 1682


Dr THEOPHANOUS (11:58 AM) —We have been told that we have only a limited amount of time to speak on the International Monetary Agreements Amendment Bill 1998 so I will not be able to canvass all of the issues that I want to canvass in relation to this bill. Let me commend to everyone in this place the speech by the honourable member for Gellibrand (Mr Willis) because I think that speech was extraordinary in that it covered a broad brush of the economic background and the causes and effects which have bought us to this point in relation to the problems of the Asian countries, especially Indonesia, Thailand and Korea.

I think it is important that all members understand some of the background in relation to this and that we have a debate in this place about issues concerning globalisation. Essentially, what has happened is that there has been an impact on these economies of the globalisation of economy generally. This phenomenon of globalisation, the way in which controls by the nation state are very difficult to put into place and economic forces have become dramatic in their power vis-a-vis the political power of the state to do anything about it, is an issue which is going to be perhaps the paramount issue for consideration by parliamentarians and governments in the 21st century. Unless we come to grips with this phenomenon in some way, we are going to find many international crises impacting on us.

In the case of the Indonesian economy, one might have thought a government as powerful and as ruthless as the government of Indonesia would have been in a position to actually protect itself from the difficulties which have been created. But the fact of the matter is that the values of the currencies of different nations are now outside the control of governments. Even the plan by President Suharto to bring in some kind of currency board to control the currency and deal with the current crisis has been pooh-poohed around the world as ludicrous. The reason for that is not that it would have been thought ludicrous 20 years ago but that now, with the force of the market—especially the money markets around the world, what they can do with currencies, the values of currencies and, as the member for Gellibrand pointed out, the amazing amounts of money being shifted around the world every day—it obviously has a huge impact on all economies, especially on economies, such as the Indonesian economy, which are vulnerable.

In that situation, Australia was faced with a choice. The choice was: do we assist Indonesia, do we assist Thailand, do we assist South Korea—our key Asian neighbours—by giving them repayable loans that could be used to help in this crisis situation? I believe that the decision to give these countries loans was a correct one. I think we have an obligation to do something about the problems of these regions for ourselves. But we also have an obligation, as I said at the beginning, to examine what is actually happening in relation to the International Monetary Fund and its role from two aspects: first, its role in the stabilisation of Indonesia and the other countries; and, second, its role and the role of the G7 countries in the stabilisation of the world's monetary systems.

One of the problems we have at the moment is that, ever since the breakdown of the Bretton Woods agreement in relation to international finance and exchange rates, we do not really have a solid basis for the values of currencies. A lot of it depends on the behaviour of the marketplace. But, as many commentators have shown, the money markets can move around in ways which are independent of production, the value of labour and the value of resources. In other words, it can be a totally subjective matter.

There is a lot of talk these days about the overvaluation of shares throughout the world vis-a-vis the real value or some concept of the real value of goods and services. We may have to face a crisis internationally before these matters are resolved. Hopefully not, but I might say that there is quite a lot of theory and empirical evidence which suggests that we might.

Recently, I spoke with a gentleman who came to Australia, Hans-Peter Martin. He wrote a book called The global trap where he argues that we are moving towards a global crisis, especially in relation to the behaviour of the multinational corporations and other powerful economic instruments which are far beyond what many small nation states can control.

The situation is not dissimilar to what existed last century before the real development of the power of the nation state. What we had then was a situation in which economic movement, industrialisation and all sorts of powerful forces were unleashed and the state did not know what to do or how to handle these. The market went ahead and crises of a massive social nature occurred until the nation state was strengthened, the welfare state came in, Keynesian economics was introduced as a way of handling these issues and redistribution was brought in as a way of helping the poorer sector.

Many people are now saying that we are facing a similar situation internationally with the creation of huge groups of poor people who are left out of the globalisation and economic process—people who cannot participate in the whole information technology revolution, people who do not have the skills or the access. These people will become poorer and will have to be looked after. If they are not looked after, crises on an international scale will occur.

People are talking about the consequences for Indonesia. People are saying that Indonesia is facing the creation of massive poverty as a result of this huge devaluation. Because food prices have increased dramatically, many people will be lucky, if they have a job, to earn enough to feed themselves let alone be able to purchase goods and services. In this situation where the possibility of starvation is being faced, it is very important that the International Monetary Fund's programs be directed towards resolving that sort of problem.

We in the opposition have said that we support the view that the IMF should tailor its package in Indonesia to take account of these social questions, especially the questions of poverty, food shortages, starvation and the like. Unless the IMF actually ensures that its package and the measures it wants to put in place take account of this, we could be facing a situation of serious rebellion in Indonesia. I do not think that rebellion would necessarily be a bad thing in this sense.

I believe that the fundamental element that is preventing the Indonesian package being put into place is the refusal of the government of Indonesia to move towards greater meaningful democracy and a legal basis for its system, especially its economic system. We should contrast what has happened there with what has happened with South Korea, where the new President, Kim Dae-jung, has been able to move the IMF reforms along. That is because we have seen the actual democratic change in South Korea with the election of Kim Dae-jung. We have seen democracy at work, we have seen more accountability and we have seen more of a legal basis for the economic processes. Unless you have that as a minimum condition, it is going to be very difficult to stabilise the Indonesian economy.

I believe that we should support this package but we should also support democratic movements in Indonesia. We should ensure that, as a result of what we are doing to assist the Indonesian people, we make it clear to the government of Indonesia that we are doing this for the Indonesian people and we want to assist the Indonesian people and, indeed, the government of Indonesia but we also want to see more democratic reforms and more action in relation to human rights. I wanted to say more about a number of other aspects of this matter. I will take that opportunity at another time because I have run out of time.