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Author Topic: Capital flight: what is the Left's strategy?
rasmus
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posted 21 June 2002 01:59 AM      Profile for rasmus   Author's Homepage     Send New Private Message      Edit/Delete Post
Capital flight threatens every Leftist government even before it takes office. And it's pie in the sky to believe that an insurrectionary government is in a different position, as Lenin very much discovered. Look what's happening to Brazil.

quote:
Election fears deflate Brazil's markets

By Raymond Colitt in São Paulo

Published: June 21 2002 2:12 | Last Updated: June 21 2002 2:12

Brazil's financial markets were battered on Thursday, with bond prices falling to their lowest level in more than three years and the currency nearing an all-time low on mounting fears of a leftwing victory in October's election.


Yet most leftists just stick their heads in the sand when confronted with this brutal reality. Instead we need to acknowledge it and figure out what it means for our strategies. So, what does it mean?


From: Fortune favours the bold | Registered: May 2001  |  IP: Logged
Mycroft_
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posted 21 June 2002 03:46 AM      Profile for Mycroft_     Send New Private Message      Edit/Delete Post
You're going to accuse me of being simplistic but it means that any assault on capitalism has to be international. Capitalism is a world system and it has to be overturned on a world scale.
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rasmus
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posted 21 June 2002 03:48 AM      Profile for rasmus   Author's Homepage     Send New Private Message      Edit/Delete Post
No, that's no simplistic... but it is schematic. How to get from A to B? (Fill in the boxes -- who, where, what, and when, and how.)
From: Fortune favours the bold | Registered: May 2001  |  IP: Logged
markhoffchaney
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posted 21 June 2002 04:01 AM      Profile for markhoffchaney     Send New Private Message      Edit/Delete Post
I'm glad that someone bought up the Brazil elections, cause Narco News has a prediction.

quote:
One more locale which may soon see US Banana Republic diplomacy is Brazil, where perennial far-left Workers' Party candidate Luiz Inacio "Lula" da Silva is making a surprising showing in polls leading toward Brazil's Primary elections on Oct. 6 and Secondary elections on Oct. 27. Da Silva's election - he's currently leading the field - would present the US with the spectre of a non-US aligned block in South America, with Chavez not-yet-gone in Venezuela, generally leftist Argentina as well as Brazil all opposing Bush's plan for the implementation of a Free Trade Zone throughout the Americas by 2005. While the State Department's official comments have suggested that a da Silva win would not necessarily hinder US Free Trade plans, to this reporter, it would seem an untenable situation for the US. And several government sources speaking on condition of anonymity have already begun joking about what type of accident the boys at the CIA will arrange for him if he looks to still be ahead in the polls by late September.


As for what to do with capitals inevitable flight I have my ideas but they make me sound like a commie nut, even to me. As a result I have yet to attempt to articulate them.


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DrConway
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posted 21 June 2002 05:06 AM      Profile for DrConway     Send New Private Message      Edit/Delete Post
The solution lies, partially, in the Tobin Tax. By imposing the tax on all inbound and outbound capital flows (or even more broadly, on all financial transactions, thus making it a Financial Transactions Tax) it would help recapture some of the "hot money" zooming out of the country.

It should also be noted that computerization of financial flows also makes them easier to track for the purposes of imposing direct exchange controls, as Malaysia does.

The Left probably has its "head in the sand" because nobody has ever attempted to develop a comprehensive program for cleaning up the mess and in preventing the flight in the first place.

It's another example of the Cult of Impotence rearing its ugly head.


From: You shall not side with the great against the powerless. | Registered: May 2001  |  IP: Logged
rasmus
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posted 21 June 2002 09:21 AM      Profile for rasmus   Author's Homepage     Send New Private Message      Edit/Delete Post
Well, the reality is that a party seriously proposing the Tobin tax, likely being a lefist party, were it likely to win elections, would provoke capital outflows before taking power... that's the whole point of the Brazil example. We're months away from the election, and capital flight has already begun, bigtime. Proposing the Tobin tax as a policy once you've taken power doesn't address this problem.

This is aside from issues which would arise with implementation if a country wanted to impose the tax unilaterally.


From: Fortune favours the bold | Registered: May 2001  |  IP: Logged
rici
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posted 21 June 2002 10:41 AM      Profile for rici     Send New Private Message      Edit/Delete Post
The sad thing is that it is not just Brazil which is suffering.

From this morning's paper (La Tercera, Santiago), translating very freely and rapidly, for want of time:

quote:

Brasilian contagion extends itself and regional currencies fall

The contagion of Brasil continues extending over the region. Yesterday, there was a generalised loss of value of Latin American currencies, accompanied by significant drops in the stock markets.

The Brasilian real dropped 3.7%, the Argentinian peso 3.3%, and the Uruguayan peso 9.5%. In this last country, the government decided to free the exchange rate, which meant that in a moment the currency depreciated 30%. In this context, the dollar in Chile also experienced a strong jump of 9.5 pesos, closing at 688 (Chilean) pesos.

All of the above was produced after two agencies of international classification decided to lower the rating of the national debt of Brasil. In turn, this followed a new poll where the presidential candidate Luiz Inácio "Lula" de Silva continued leading the pack of electoral preferences.

The open question is whether there has been an overreaction in the markets. Economists agree that the macroeconomic bases of Brasil are much more solid than those of Argentina. However, what are now dropping are expectations. All the signs indicate that the high level of volatility of the past few weeks will continue until the October elections. We still don't know whether this will have long-term effects in the economies of Brasil and the region. The point is that if there is uncertainty, foreign capital will stop investing, and this could affect the whole region.


(Edited because of modem timeouts)

[ June 21, 2002: Message edited by: Rici Lake ]


From: Lima, Perú | Registered: Jun 2002  |  IP: Logged
J. Hurtado
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posted 21 June 2002 10:52 AM      Profile for J. Hurtado   Author's Homepage     Send New Private Message      Edit/Delete Post
quote:
We're months away from the election, and capital flight has already begun, bigtime. Proposing the Tobin tax as a policy once you've taken power doesn't address this problem.

But Rasmus, capital flight occurs now even without the 'threat' of a leftist government....look at the Asian crisis...the homeward trek of capital to the U.S. from the Japanese and Korean markets a couple of years ago....the dumping for foreign-based bonds for secure American ones...the flight of our very own Scotiabank's holdings from Argentina earlier this year......there is no need for capital to wait for a leftist/protectionist party to even come close to an electoral victory for Capital to threaten leaving.

My point?

The above is a very serious and real part of todays global economy.....capital (as i stated in the "draft Svend" thread BTW) is as fluid as ever.
Leftist programmes do not incite them nor do they really exasberate the threat of investment....the risk of not reaching profit margins do.

Okay, so we all know this. But, does the public?

taking lessons from the experiences of my parents and other Chilean exiles who went through a similiar situation in the lead up to Allende's election, what it comes down to is a satisfying the requirements to a very simplistic equation.

A significant percentage of the population must understand the origins of financial instability that accompanies not complying with market dichtums. They must understand, and then must ferverently believe that it can be overcome....

Rhetoric aside, this is truly the only way in which the inevitable storm brought on by financial flight will be weathered.

Tobin taxes, subsidies....unless a significant number of people understand why things like flight happen and figure out that THEY WILL BE BETTER OFF IN THE LONG RUN these policies will mean little.

Jorge


From: Ottawa | Registered: Aug 2001  |  IP: Logged
J. Hurtado
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posted 21 June 2002 10:55 AM      Profile for J. Hurtado   Author's Homepage     Send New Private Message      Edit/Delete Post
This then of course begs the role of the party...
From: Ottawa | Registered: Aug 2001  |  IP: Logged
rasmus
malcontent
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posted 21 June 2002 11:00 AM      Profile for rasmus   Author's Homepage     Send New Private Message      Edit/Delete Post
So, creating buy-in and commitment on the basis of an understanding of the risks and the (hopefully) long-term benefits? That I agree with. Now, how does that happen. Current methods don't seem to be breaking out of the network of those predisposed to activism -- (mostly white middle class) students and so forth.

My answer, of course, is popular education and community organizing on a large scale. And to get there, there needs to be a shift in perception among activists about what work is worth their time and energy. So the next stage is achieving a consensus among activists. And this is a stage at which we can start to fill names and places into the schematic boxes.

[ June 21, 2002: Message edited by: rasmus_raven ]


From: Fortune favours the bold | Registered: May 2001  |  IP: Logged
jeff house
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posted 21 June 2002 12:14 PM      Profile for jeff house     Send New Private Message      Edit/Delete Post
Rici Lake's post makes the point that there is generalized capital outflow from several Latin American countries right now, whether or not they face the possibility of a left-wing victory.

So why do we assume that it is that threat which is at work in Brazil? Is it not equally likely that anti-Lula forces are taking credit for that effect?


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rasmus
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posted 21 June 2002 12:23 PM      Profile for rasmus   Author's Homepage     Send New Private Message      Edit/Delete Post
The Financial Times has been running stories for the last two weeks saying that traders are worried about the possibility of a leftwing government, and an associated increased risk of default. This in turn is creating fears of a pan-American Argentina crisis, which is causing investors to pull out of other precarious economies. Now, maybe the Financial Times is trying to spin this. But that hypothesis doesn't explain apparent particular facts like the market reaction to new polling for the election, for example.

[ June 21, 2002: Message edited by: rasmus_raven ]


From: Fortune favours the bold | Registered: May 2001  |  IP: Logged
J. Hurtado
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posted 21 June 2002 01:00 PM      Profile for J. Hurtado   Author's Homepage     Send New Private Message      Edit/Delete Post
Rasmus-Raven wrote:

quote:
My answer, of course, is popular education and community organizing on a large scale. And to get there, there needs to be a shift in perception among activists about what work is worth their time and energy. So the next stage is achieving a consensus among activists. And this is a stage at which we can start to fill names and places into the schematic boxes.


Sooo R-R...the million dollar question. How do we get consensus amoungst activists....I mean the NPI is a good start but even I as an endorser and participant in the NPI don't kid myself in thinking that it has passed the sieve of legitimacy for on the ground activists (oh god and please let us not get sidetracked on to yet another discussion on the NPI...there are other threads for that).

I think one good place to start with community educating is convincing the darn labour movement of the need for building a strong national left-wing daily periodical.....you want to build popular confidence in an non-market vision? wanna build and widen discussion around the real reason capital flight occurs and why non-market alternatives are worth fighting for?

Nothing like a morning paper a la Metro.....everyday.....all year.....on your lap to read while you ride the GO train in from the burbs.


Jorge


From: Ottawa | Registered: Aug 2001  |  IP: Logged
rici
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posted 21 June 2002 02:28 PM      Profile for rici     Send New Private Message      Edit/Delete Post
Jeff House asks why we think the capital flight is related to the popularity of a Brasilian left-wing presidential candidate. I think it's pretty clear why -- that's what the financial analysts are saying.

This has repercussions outside of Brasil because Brasil is the largest economy in South America and other South American countries are affected by Brasil's economic problems. We've seen that in the past.

The irony is that the problems being faced right now by Brasil are the result of irrational prejudices and fears of financial analysts. So those same analysts (rationally) believe that their own (irrational) judgements will affect more stable economies, like that of Chile.

One could go further, and say that there is an international capitalist conspiracy to destroy Lula's electoral chances. That might be, but I'm willing to accept irrational prejudices as an explanation. In a way, though, that's even more dangerous.

That doesn't answer the question posed by the thread: how does/should the left respond? Well, for a start, let's observe that South America is a pretty good indication of the inevitable results of current economic/political idiocyxxxxxxtheory.

The challenge is explaining to Canadians that what is happening in, say, Perú or Chile or Brasil or Argentina is what could (will) happen to Canada if we don't change things. (There was a really interesting article on the "Peruanisation of Finland" that actually did have a bit of impact in Finland (I think), exactly on this theme. I'll try to find an Internet reference to it.

The fact that the economy of an entire country can be destroyed because some financial analyst in New York has a bad day should be a pretty good indication of the bizarre imbalance of power in the world, and how vulnerable we all are.

I think the message is not that Canada (say) could suffer in the short-term if we were to choose a different political path. It is that we are bound to suffer if the world stays on the same political path; choosing socialism will not stop us from that pain but might limit its longitude.

I agree with J. Hurtado (and others) that education is key. I'm not convinced by the suggestion of a new left-wing newspaper -- although I don't suppose it can hurt. But there are many other vehicles for public education (including this very medium) and we need to use all of them.

From this perspective, the political system itself can be considered as a communications medium, although not an ideal one. Trying to create more international/southern awareness during electoral campaigns seems to me to be a valid strategy.

Anti-globalisation protests could also fall into this category, but, even more than political debate, they have a very small information-carrying capacity. That is, they communicate adequately that some people really hate globalisation, but the channel is not wide enough to explain why, let alone what the alternatives might be. That's not a criticism: I only mean that such protests are just part of a total strategy.


From: Lima, Perú | Registered: Jun 2002  |  IP: Logged
rasmus
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posted 21 June 2002 03:28 PM      Profile for rasmus   Author's Homepage     Send New Private Message      Edit/Delete Post
Rici, I like what you have to say... the only thing I would add is that the financial analysts' panic has also been fanned by the US government's own announcements -- and, I presume, behind-the-scenes consensus building -- that Lula is one of the US's top five foreign policy concerns this year. (Colin Powell said that.) In other words, irrational panic is not the whole explanation.
From: Fortune favours the bold | Registered: May 2001  |  IP: Logged
rici
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posted 21 June 2002 06:32 PM      Profile for rici     Send New Private Message      Edit/Delete Post
I must have misunderstood. You're not saying that American concerns about Lula are rational, surely?
From: Lima, Perú | Registered: Jun 2002  |  IP: Logged
rasmus
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posted 21 June 2002 06:41 PM      Profile for rasmus   Author's Homepage     Send New Private Message      Edit/Delete Post
No, I meant that wilful conspiracy was also part of the picture.
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Jacob Two-Two
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posted 22 June 2002 05:33 PM      Profile for Jacob Two-Two     Send New Private Message      Edit/Delete Post
I think their concerns about Lula are rational, from the point of view of their capitalist imperialism. A strong Brazil might become one they can't dominate. It's important that it remains economically downtrodden.

As for capital flight, I agree with what has been said here. Education is the key. As Chomsky says, "persuasion is to a democracy what violence is to a dictatorship".

We need to get people thinking about the global financial system as something concrete that they are involved in. Imagine a pension plan that you suddenly realise is robbing you blind. You can opt out of this plan, but there will be a substantial monetary penalty, so you are left trying to determine if the monetary penalty is worse than the financial consequences of staying with a plan that is corrupt. These are the kinds of decisions that people are used to making.

What we have to do is get the Canadian public to perceive the global order in a similar way: as a choice they have to make for their financial future. Will they continue with the plan? Are the (very real) consequences of rejecting it harsher than the raw deal they are currently getting? Obviously, we don't think so.

If people can apprehend the problem in a way that makes sense to them then they are able to make a decision. "Yes, I'd rather opt out of this plan and take the penalty. If I don't, then I will be bankrupted in very short order". A public who are conscious about their economic decisions will be prepared to take the consequences of capital flight, and be willing to construct a workable response to it.


From: There is but one Gord and Moolah is his profit | Registered: Jan 2002  |  IP: Logged
SHH
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posted 22 June 2002 10:24 PM      Profile for SHH     Send New Private Message      Edit/Delete Post
I don’t know much about Lula and such but I do have an idea about how the Left might prevent people from protecting themselves from scurrilous opportunists looking to expropriate the property of others to their own war-chests in order to gain political power and, of course, their own wealth.

Stop it.


From: Ex-Silicon Valley to State Saguaro | Registered: Oct 2001  |  IP: Logged
jeff house
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posted 24 June 2002 02:22 PM      Profile for jeff house     Send New Private Message      Edit/Delete Post
quote:
Jeff House asks why we think the capital flight is related to the popularity of a Brasilian left-wing presidential candidate. I think it's pretty clear why -- that's what the financial analysts are saying


But if there was capital flight from Chile and Argentina, Mexico and Brazil, and only Brazil has a left-wing candidate, we can at least say that having only right-wing candidates does not guarantee capital stability.

Obviously, the financial markets have vast and unjust power. And obviously, if they were to feel really threatened, money would be sucked out in the billions.

But they also lie a lot. I can remember all sorts of wild talk about money leaving Canada if we didn't do X or Y. They claimed that we were "unsafe".

Oh sure! They invest in Chechnya, or Sudan, but not in Canada because we are not stable enough.

And does anyone remember the "Brinks Affair"?
Brinks trucks left Quebec, bearing dollars, because of the threat of Rene Levesque. Quebeckers were insulted that anyone would think they were that naive.


From: toronto | Registered: May 2001  |  IP: Logged
rici
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posted 24 June 2002 02:39 PM      Profile for rici     Send New Private Message      Edit/Delete Post
quote:

But if there was capital flight from Chile and Argentina, Mexico and Brazil, and only Brazil has a left-wing candidate, we can at least say that having only right-wing candidates does not guarantee capital stability.

No argument from me. Having a strong left-wing candidate is sufficient but not necessary, as the mathematicians say.

It is probably not a coincidence that Brasil's current mildly-leftwing government is leading South American opposition to the FTAA. Lula would undoubtedly oppose it more strongly. Furthermore, Lula is less likely to simply accept the orders of the IMF.

Chile, at least, also has a mildy-leftwing government. Argentina's government, to the extent that it has any ability to govern at all right now, is also somewhat hostile to IMF demands.

And I cannot believe that it is a coincidence that the White House started backing down on its criticisms of Lula just at the moment that the financial crisis started to affect Mexico, whose president is a fellow cowboy, albeit a popular one.


From: Lima, Perú | Registered: Jun 2002  |  IP: Logged
rasmus
malcontent
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posted 25 June 2002 03:31 PM      Profile for rasmus   Author's Homepage     Send New Private Message      Edit/Delete Post
quote:
I don’t know much about Lula and such but I do have an idea about how the Left might
prevent people from protecting themselves from scurrilous opportunists looking to
expropriate the property of others to their own war-chests in order to gain political
power and, of course, their own wealth.

Stop it.


Bif! Bam! Pow!

[ June 26, 2002: Message edited by: rasmus_raven ]


From: Fortune favours the bold | Registered: May 2001  |  IP: Logged
SHH
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posted 25 June 2002 03:54 PM      Profile for SHH     Send New Private Message      Edit/Delete Post
Well, I was being a tad – okay, more than a tad – flippant, but more seriously it seems to answer the query we must first understand the reason for the flight in the first place. Is it unfounded hysteria as some have suggested, or is it a collection of rational actions rooted in some or many components of Leftist policies? And if these policies scare investors, what exactly about them does so? Any strategy, it seems to me, must first answer these questions.

Maybe it’s just any change without promise?. Investors dislike uncertainty more than anything (and they don’t much care about ideology so long as the ROI is good). I’ve read that the Indian/Pakistan situation was in part temporarily mitigated because investment (and plans for future investment) dried up so fast and so furious once war reared its head, it shocked the respective leaderships. Millions dead? Heh, that we can handle. Capital flight? Yikes!


From: Ex-Silicon Valley to State Saguaro | Registered: Oct 2001  |  IP: Logged
jeff house
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posted 25 June 2002 07:29 PM      Profile for jeff house     Send New Private Message      Edit/Delete Post
quote:
. Is it unfounded hysteria as some have suggested, or is it a collection of rational actions rooted in some or many components of Leftist policies?


Any policy to redistribute wealth threatens the wealthy of the world. In some third world countries, 70% to 90% of all wealth is in the hands of a very small elite. In those same countries, people suffer malnutrition, or even starve to death. There is no health insurance, and no school for children without money.

The IMF pressures third world countries to reduce social expenditures in the name of balanced budgets, but refuses to take responsibility for the moral catastrofe its policies cause.

Since the policies of the IMF and the World Bank have not solved the problem of dire poverty, and do not even promise to do so, some other policies will have to be tried.

The "market" is utterly undemocratic. When 5000 investors have more power than 500,000,000 poor people, something is radically wrong.


From: toronto | Registered: May 2001  |  IP: Logged
frandroid_atreides
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posted 25 June 2002 08:22 PM      Profile for frandroid_atreides   Author's Homepage     Send New Private Message      Edit/Delete Post
Does anybody know what is Venezuela's debt position? Do they owe tons of money through the IMF? Was there massive capital flight when Chavez was elected?

I think that we are at an historic conjecture for Latin America... Chavez in Venezuela, Lula coming in Brazil, and the left possibly coming in Argentina? Banded together, who knows how far they could advance the continent? They would certainly block the FTAA, which would be a major victory...


From: Toronto, Arrakis | Registered: Apr 2002  |  IP: Logged
SHH
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posted 25 June 2002 11:46 PM      Profile for SHH     Send New Private Message      Edit/Delete Post
jeff house: While we may quibble as to what degree of wealth distribution is desirable, we can certainly agree that the situation you describe in some 3rd world countries is horrendous. Too much inequality begets destructive unrest; too much redistribution snuffs the flame of incentive. It is, like just about everything, a question of degree.

Some of the worst offenders are of course simply corrupt despots, and it seems little can be done short of force and coercion (which is frowned upon). In the fledging democracies though, it would seem that the failure of the masses to successfully require more equitable distributions, is again often the result of corrupt leaders that make faux promises to gain power and wealth – and neither the Left nor the Right has a monopoly on these nasty sorts. In functioning democracies, the people usually get what they want eventually. (eg The US, like most Western democracies, has a highly redistributive wealth system despite all the “market” banter). It seems many of these 3rd world democracies, due to corruption and inexperience, aren’t fully functional yet…my hope is that the “market” of the ballot box soon prevails.

I would also guess that capital would be less inclined to flee if there were some assurance the “tyranny of the majority” wouldn’t visit. Maybe some very strong and irreversible property rights laws (eg see the US) could be traded against an offsetting and highly redistributive tax structure? And of course, corruption, the real culprit I think, would have to be dealt with harshly.

Wandering a bit, but still relevant on Wealth versus Income: Numbers on wealth and such are often misleading and rarely tell the story without detailed context. One person could have a very high income all their life and spend it all on cars, clothes, drugs and vacations; never accumulating any wealth. I doubt any of us would fret for this sort (see Hollywood for examples). On the other end, one could be in the top few % points of “wealth” holders with $500K invested in bonds from an insurance settlement and still only have -- @ 10% pre-tax -- a median level of income. And then there are countless variations in between. (Quintile distribution numbers are even more misleading; almost always presenting a picture of changing patterns that is more dismal than it really is because there’s no end to the “top” quintile while nobody works for income less than zero at the “bottom”.)

Back to the topic: In the end, the promise of property expropriation with no backstop protections against the excesses of perfect majority rule will inevitably result in protective actions by those in the bulls-eye. It’s like trying to shoot into a herd of zebra and expecting no stampede. Give the herd a reason not to panic. You’ll catch more flies -- zebra too I suspect -- with a sugary gradualism v a bandanaed revolution.


From: Ex-Silicon Valley to State Saguaro | Registered: Oct 2001  |  IP: Logged
Smoov
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posted 26 June 2002 12:47 AM      Profile for Smoov     Send New Private Message      Edit/Delete Post
quote:
Too much inequality begets destructive unrest; too much redistribution snuffs the flame of incentive. It is, like just about everything, a question of degree.

Balanced, intelligent commentary on Babble? Did Hell freeze over last night or something?


From: Halifax | Registered: Jun 2002  |  IP: Logged
rasmus
malcontent
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posted 26 June 2002 05:56 AM      Profile for rasmus   Author's Homepage     Send New Private Message      Edit/Delete Post
Here, the former Undersecretary of US Treasury for International Affairs -- the kneecapper-in-chief -- says what should be done about Brazil:

Brazil Needs Help

quote:
In return for additional assistance, the IMF should seek a written commitment from the leading presidential candidates on the policies their administrations would follow, should they win. That commitment should avoid specifics but it must encompass four crucial elements. First, the next administration must increase the primary surplus by at least 1 percentage point of GDP until the ratio of public debt is reduced to, say, 45 per cent of GDP. Second, it must increase the domestic and international competitiveness of the Brazilian economy to reduce its external debt. Third, it has to maintain a realistic inflation- targeting monetary policy framework. Last, it should make prudent use of international reserves to cushion downward pressures on the Real but without targeting a particular exchange rate.

In the absence of such commitments by the leading presidential candidates and support from the official international financial community through the IMF, Brazil may be forced to default on its domestic and international obligations either before the end of 2002 or soon thereafter. That is a risk not worth taking.


Situation Critical

quote:
At the root of market concerns is Luiz Inácio Lula da Silva, better known as Lula, the presidential candidate of the Workers' party (PT). Since early May, Lula's opinion poll lead over José Serra, the ruling Social Democratic party (PSDB) candidate, has increased significantly, raising the possibility that the former metalworker will become Brazil's next president.

Born out of the militant trade union battles of the late 1970s, the PT has become much more moderate in the past decade. For example, it has gained a reputation for clean government and responsible management in the cities and states where it has won local elections. But the PT's recent move to the centre has revealed internal divisions.



From: Fortune favours the bold | Registered: May 2001  |  IP: Logged
J. Hurtado
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posted 26 June 2002 10:41 AM      Profile for J. Hurtado   Author's Homepage     Send New Private Message      Edit/Delete Post
Rasmus quoting the Financial Times wrote:


quote:
First, the next administration must increase the primary surplus by at least 1 percentage point of GDP until the ratio of public debt is reduced to, say, 45 per cent of GDP. Second, it must increase the domestic and international competitiveness of the Brazilian economy to reduce its external debt.

...which is code for decreases in public spending, de-regulating state-subsidized companies.

Which in real applied terms would mean that institutions massivley financed by the Brazilian state such as its airline industry which has taken severe beatings at the hands of WTO rulings against them and are major motors of the economy, would have to shrink production costs (workers) or merge/sell parts of the companies off to foreign companies.

So as i see it threats to Capital are coming to Brazil with or without Lula's impending election. As I see it, Brazil is headed for a serious collision course with the rules of international finance and its gonna be hard for any government to contain popular disapproval when the sh@#!t hits the fan....couple that with tht fact that all other south american nation's economies pretty much revolve around the Brazilian one and you get a sense that things are gonna get worse before they get better in the near future.

....however.....it's not like this isn't the same old story that the developing world has lived through before.

Great article Rasmus...thanks, it's good to know what the other side is saying.

Jorge Hurtado


From: Ottawa | Registered: Aug 2001  |  IP: Logged
Boinker
rabble-rouser
Babbler # 664

posted 26 June 2002 12:33 PM      Profile for Boinker   Author's Homepage     Send New Private Message      Edit/Delete Post
I really think that everybody is missing something in the general analysis of "capital flight". That is the nature of money itself is being overlooked. If we look at the history of money in Canada we have only had a common currency for about 200 years. Prior to that money was always in short supply in the colonies and just about any form of currency from wampum to gold dubloons were considered acceptable currency.

In the Hispanic community there is one rather conservative economist who points out that much of the problem with Latin American countries is that much of their land has not been properly valued and if they could use it as equity to borrow they could solve many of there financing problems without the need of massive loans from the World Bank. I'm not sure if I agree with the rest of his program but what he points out is that value vcan be anchored by strong social movements that do not take the easy route and accept markets as the only way to create wealth.

To me the glorification of the dollar is a cultural phenomenon and a technological event. Most people I know no longer need cash everything is done by the debit card. I see no reason why the state could not issue debit cards to individuals with specific limits built in to allocate monies for food, accomodation, transportation which would compensate for any economic downturns in a transitional economy.

One final comment on the idea that a revolutionary change would cause economic instability. In short I disagree, most people are not investors per se. The monies investors invest are in share purchases which are separate from operating income and expenses and forn a separate part of any business' financial organization although it is sometimes used to finance growth. What cause havoc in the financial sector is capitalism itself with its cyclical accumulations and period crisises that cause people to panic and pull massive con jobs like Enron.


From: The Junction | Registered: May 2001  |  IP: Logged
pogge
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posted 26 June 2002 02:21 PM      Profile for pogge   Author's Homepage     Send New Private Message      Edit/Delete Post
Should a discussion of strategy focus just as much on where the money is running to, as it does on where it's fleeing from? "Follow the money" is a well-worn phrase for good reason.

Theoretically, the money goes to a jurisdiction that has been judged to provide a better climate for investment. And that judgement is made by the same financial analysts whose credibility is taking a bit of a beating these days. Is there an opening there?

Just a couple of thoughts.


From: Why is this a required field? | Registered: Mar 2002  |  IP: Logged
rici
rabble-rouser
Babbler # 2710

posted 26 June 2002 09:59 PM      Profile for rici     Send New Private Message      Edit/Delete Post
F_A: For some information on Venezuela's debt, you can look at this report from last year (in English). The quick answer is that there was not much panic in international financial markets in 1998, partly because Chávez worked pretty hard to avoid it, and partly because Venezuela has a lot of oil. Despite its privileged position, Venezuela is not immune from IMF pressure.

As for the various comments above about land ownership, forced nationalisation, and so on: the issue is no longer about nationalisation, although don't you think that it would be a good idea? Look at what's going on in England's transport system for a compelling argument (and one which many Brits, many of them not Labour militants, would accept).

No, the issue today is not whether some southern government is going to nationalise a precious national resource, but whether it will fail to privatise it. Brasil (and other South American countries) are being punished because some financial analysts think that their governments may keep the people's resources for the people. This is against the rules these days.

Moreover, these same governments might not be happy with the F*** The Americas Agreements. (Or ALCA, as we more politely call it here.) Shame on them! The markets will speak.

The sad fact is that however much Peruvians or Argentinians or Brasilians want democracy, the best -- the absolute best -- they can hope for is to control their national governments. But those governments are virtually powerless; they are being held hostage by the illegitimate debts run up by previous regimes (many of them encouraged to go into debt by international bankers and economists) and now by the IMF.

As to Hernando de Soto (I think that's the "Hispanic" economist referred to above), I'm not a big fan of his either, but even so I don't think that is exactly what he is saying. I refused to buy his book, though, so I can only go by what I've heard him say at public meetings and so on during his non-presidential campaign, but as I understand it he is saying that people, not governments, suffer from informal land ownership, and that those same people could advance (and thereby advance their national economies) if they could borrow against their land. It is true that lack of access to credit is a major problem for microenterprises in South America, but that's as far as I will go in his favour.

[ June 26, 2002: Message edited by: Rici Lake ]


From: Lima, Perú | Registered: Jun 2002  |  IP: Logged

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