Rakesh asks: > why in recent years has capital export taken less the form of > foreign direct investment and more the form of short term credits or hot > money (one of the articles from *The Economist* at the website gives some > rather stunning data on the growth of short-term credit vis-a-vis foreign > direct investment), My impression is that the current E.Asian crises are remarkably similar to the Latin American debt crisis that broke out in 1982, in that (a) the main form of capital export was sydicated bank loans and (b) liquidity crises (dollar liquidity) were provoked by the actions of *domestic* firms and wealth-holders. People more familiar with the region may want to correct these impressions. It's not unusual that lending and portfolio flows dwarf DFI as a source of LDC capital inflows, in fact I think it's the norm since the late 1800s. The Latin American debt crisis was resolved the old-fashioned way through moratoriums, defaults, and renegotiation. Since lenders did suffer, supposedly this was going to shut down LDC lending for a generation. Ha. One factor encouraging a new rush to lend may be that the 1994-95 Mexican crisis sent the message that countries which are important to Washington will be bailed out, and fast. This, it is widely argued, encouraged large flows to S.Korea and Indonesia, and it's not hard to see that this would steer U.S. rentiers toward dollar-denominated loans rather than DFI. What's fascinating is that Rubin and others (we had a brief chat about this last fall) realize that this system of implicit international financial guarantees actually harms accumulation and growth, and adds to the instability of the neoliberal projects that they want to foster around the world. How much of the bailing-out is a matter of protecting U.S. banks and how much of it is protecting U.S.-allied governments I have no idea, but it's possible that U.S. geopolitics impedes neoliberalism after some point. I heard an NPR commentary by Laura D'Andrea Tyson Friday, awful both in its politics (don't worry about human or workers' rights because the best way to achieve those is to retore "stability") and in the relentless circularity of its logic about the need to restore said "stability" in E. Asia. Similar dire rhetoric was used to sell the Mexico bailout. Best, Colin
