Sorry if I came over excessively acerbic. Please be assured that my bile is directed not at you but at the politicians who continue to hold out hopes of this eminently sensible idea being implemented without planning to do anything about it. Comments below:
>But isn't it just the speculative investment markets which are high risk >investments? A capitalist could lose a lot more money in Thailand than in >Tanzania. Need to consider the role of liquidity as well as risk. You can lose a lot of money in Thailand, but the market is sufficiently liquid that you can decide for yourself when you want to cut your losses and go home. Investing in Tanzania, you are much more likely to find yourself in a position where you try to sell out of your investment and there are no bids. Illiquidity is a much more destructive form of risk to a capitalist operating on borrowed money than mere volatility. >Part of the proposal appears to be to make bankruptcy easier, so that it >can happen earlier before the tension in the tectonic plates has built up >to the level requiring an earthquake to release it, as is happening in >Argentina now. Entirely true and a good idea. >Obviously your experience is important. You may feel it is too easy to >forward an article and appear to be an armchair expert. Please be assured that I would never want to be against the practice of armchair expertise and once again I apologise for my tone. > Against those >prejudices what would I argue? >1) Your experience sounds frustrating but typical. Enormous amounts of work >go into working up proposals then you find they have been thwarted by some >procedural manoeuvre. That is the normal way of political conflict in the >world of economic diplomacy is it not? It is. But the area of bankruptcy law is a more intrinsically intractable problem for international financial diplomacy than almost any other. Most proposals in the international financial system usually boil down to persuading somebody to write a cheque. Bankruptcy law reform would require countries to make substantial changes to domestic bankruptcy codes, and the bankruptcy code is an absolutely fundamental plank of domestic company law; it's not really an exaggeration to say that it sets the entire tone for the type of capitalist system. Negotiating a bankruptcy code for countries would be a project about three times as difficult as, say, the Law of the Sea. >2) You may feel I write as a visionary believer in historical materialism >even though I do not think there is a mechanical inevitability about >events, and think there are merely probabilistic likelihoods. But still it >moves. I have no personal problem with historical materialism, but I don't see that it implies the necessity of an international bankruptcy code. >3) seven years since 1995 is a not inconsiderable time, bearing in mind >that the Soviet Union had only just been dissolved, and it was not possible >to be sure what would happen to the former socialist states. It was before >any mass protests against global capital, which had undoubtedly got its >international representatives on the run. It was not the bombing of the WTC >that reduced the IMF World Bank meeting from 5 to 2 days: it just wiped out >the last two days. Good point. >4) I attach significance too the fact that dedicated and shrewd >opportunists like Gordon Brown are heading the IMF strategy committee. New >Labour believes in neutralising opposition and in constitutional change. >Marshall Aid for Africa is now on the global agenda. So is the Tobin tax. I think you're overestimating the sincerity of the politicians on this one. The Tobin tax has been on and off the global agenda for donkeys' years. The international bankruptcy code is set to join it as an "interesting proposal" brought down from the shelf and dusted off after every crisis. >5) When you look at the practical details, there is a lot of attraction for >mainstream politicians to kick controversial crises into touch, and >regularise the processes by which the workings of international finance >capital require the periodic resignation of the executive committee of >various countries. The ideology of individual freedom and of accountability >under a supposedly impartial law, is very acceptable to modern finance >capital. It provides an immediate idiom with which the longer term social >destinies of capital can be reconciled with the need to control short term >problems. But the point is that lenders *want* bankruptcy to be a messy and painful process. They want borrowers to fear what would happen if they were to default. This was a big theme among big bond investors when I was interviewing them for the 1995 proposal. Investors in sovereign bonds are exposed to the borrower's willingness to pay, so effectively the main thing which underpins the value of their bonds is the debtor's fear of what would happen in the event of a default. Anything that reduces that fear strengthens debtors at the expense of creditors. >This is my immediate and rather intuitive brainstorm. Thanks. My problem with regarding the Krueger proposals as progressive are that they are not just a neutral proposal for an international bankruptcy code for sovereigns. If you look at the article from the Stop-IMF list, you'll see that what she is basically proposing is a job creation exercise for the IMF. The proposal seems to be that a country would only be able to declare bankruptcy if the IMF judged that it was fit to do so, and that resolution of the bankruptcy would be conditional on adopting an IMF program. This looks like a recipe for more IMF interference in the finances of developing countries, not less. Effectively, this is a proposal whereby the IMF gets to increase its effective resources by charging one-off windfall taxes on private sector banks and bondholders, without giving up anything in the way of IMF reform in exchange. So I guess my view is that while, in principle, a bankruptcy code for countries is a sensible idea, the objections that a) most of the official discussion of such a code is not sincere and b) the most credible proposal on the table is a Trojan horse for the IMF, and that consequently, the sovereign bankruptcy issue should be treated as a red herring by progressives until further developments. Sorry for ruining your breakfast ... regards dd ********************************************************************** This email and any files transmitted with it are confidential and intended solely for the use of the individual or entity to whom they are addressed. If you have received this email in error please notify the system manager. 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