Category: Politics

Yes, lots of politics these days.  I (TP) was flipping through my Economist magazine the other day at the gym when I noticed that there was a big black splotch in the middle of one of my headlines.  Printing error, I figured.  Then I looked at the opposite page and saw another big black splotch, this one strategically placed over the heads of two guys in military uniforms. As I looked harder, I realized that this was no printing error, this was a little bit of deliberate censorship.  The article was about gay men and women serving in the British military, and the picture was of navy gents kissing.  Apparently, this does not work in Malaysia, so they censored it by putting a big glob of black ink over their heads, so it looks like two headless men are standing really close together.  Come on, did they really think that readers wouldn’t figure out what’s really going on?  We’re not sure what the policy on homosexuality in Malaysia is.  Indonesia’s laws about homosexuality are simple and straightforward: homosexuality does not exist, so there’s no need to have any laws about it.  Here, we guess there is an army of censors sitting in some building near whatever entrepot is used by magazine importers, waiting to find offending material and dabble ink on it.

Unlike Indonesia, in Malaysia there is still a good deal of active censorship of the media.  In Indonesia, you can find any viewpoint you like, and there are literally hundreds of daily newspapers available.  Not here, though, because it’s still a dictatorship.  It’s mostly self-censorship, though.  Members of the ruling coalition own every single newspaper of any significance and every local television station, so reporters don’t even try to release controversial stories.  The folks at MACEE report that they stopped getting the daily paper because it’s such a travesty. Strangely, the internet has no active regulations–you can look at whatever you want–but the government sometimes tries to regulate the physical property of critical web publications, such as the excellent online newspaper Malaysiakini.  Police will just confiscate computers and stuff.  When we got our internet we had to sign a document saying that we would not use our computer for subversive activities, and that means criticizing the government and all that jazz.  Due to some rather vague laws called the Internal Security Act of 1960, just about anything could be considered illegal.  So by dictatorship, we meant parliamentary democracy.

(Oh and by the way, the article on gay and lesbian servicemen- and women in Britain made it clear that having openly gay soldiers has made not a lick of difference to the British military.  Soldiers of all sexual orientations are serving honorably in Iraq, and the military has been so pleased with their service that they are actively increasing their recruitment among the homosexual community in Britain. The US should freaking get with the program.)

For anyone out there looking for a dissertation topic, I (TP) have got one for you.  During the Asian Financial Crisis, there was naturally a lot of fussing about the correct way to cope with the problems.  All of the big policy makers and economists were involved from all around the world, and there was no shortage of reasonable people having reasonable disagreements about very fundamental issues in economic policy making.  So, why did countries adopt the policies that they did?  If economic theory was too confusing for economists and sundry policy makers, how did countries get to where they did?  It’s part of my dissertation to explain why.  But, what about the way that people framed the discussion in foreign countries and in multilateral lending institutions like the IMF?  Why were they so married to one particular ideology?  My theory is that many of these people advocated particular policies–free capital markets and floating exchange rates–for  no other reason than the words "free" and "floating" sound good, and they invoke images of freedom, liberalism, and capitalism.

In a sense, I feel like Edward Sapir, a linguistic anthropologist who has whole school of thought partially named after him–the Sapir-Whorf Hypothesis.  Before he went to graduate school, he was working as an insurance adjuster in Peoria, Illinois.  This was in the 20s and 30s, when people were first driving.  He noticed that a lot of his claims involved folks who were driving around with empty gasoline cans in their car who were shocked–Shocked!–when these cans exploded during accidents.  The reason that they always gave for this was that the can was "empty."  You know, empty, with connotations of inert, void, whatever…doesn’t sound like something that would be likely to explode, except if that something is gas vapors.  This led him to the thought that maybe the way we speak (language) constrains what we do (culture).

So when the Asian Financial Crisis hit, Western governments and international lending bodies were clambering for the affected governments to get rid of their crony economic systems and impose real liberal capitalist systems.  Get rid of monopolies, deregulate state-controlled industries, things like that.  All good things, no doubt about it.  So long as we’re doing that, we might as well make sure that we have free capital markets and floating exchange rates.  You know, free, floating, liberal, open, etc.

To borrow the phrase of a famous economist, the problem is that "trade in widgets is not like trade in dollars."  That is, there is no economic theory that says that free capital flows and floating exchange rates are better than capital controls and pegged currencies.  For trade in widgets and gadgets, we have the theory of comparative advantage and the general equilibrium theory of the market.  It helps to prove, both in terms of common sense and through rigorous mathematics, that free trade in goods among countries is superior to trade barriers.  It makes everyone better off.  If you have a monopoly and your economy is tanking, get rid of that monopoly.  There is no corresponding theory for trade in dollars, rupiah, ringgit, euros, whatever.  The closest thing we have is the axiom that some exchange rate regimes are good for some countries at some times, others good for other countries at other times.  For that reason, a tanking economy with fixed exchange rates does not necessarily get better by floating.  The irony is that Mahathir Mohamad in Malaysia bucked the international discourse for open capital accounts and floating exchange rates by fixing the exchange rate and closing the capital account.  Despite outrage from the West, Malaysia got better.  Indonesia followed the discourse, and got hammered so bad that Soeharto eventually had to step down.

The point is that these particular economic policy decisions are not necessarily good or bad, but that they have trade-offs.  Why were so many in the international community so adamant about one rather than the other, regardless of those tradeoffs?  (This includes in particular Deputy Treasury Secretary Lawrence Summers, lately of Harvard University fame.)  Of course, other economists, notably folks like Nobel Laureate James Tobin and wacko liberal Paul Krugman, called for the capital controls and fixed exchange rates before even Malaysia thought of it, but few listened until after the dust had settled.  I certainly have no way of proving my theory, or even of forming a reasonable hypothesis through which to test it.  If you know how, you’ve got yourself a dissertation.