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Religion battles high finance

Special to the National Catholic Reporter
Seoul, South Korea

The strain on the participants was obvious. Brows pressed, heads held and jaws clenched, their concentration was palpable as they strained to learn a new language: swap markets, capital flow liberalization, shorting the currency, shorting the stock market, OECD (Organization for Economic Cooperation and Development) initiatives on the MAI (Multilateral Agreement on Investment).

These were grassroots religious people confronting high finance. It was tough work, but over five August days in Seoul, about 100 Asian church people and representatives of secular groups plunged into a study of the global financial system, paused to learn how their religious traditions could inform the analysis and then set forth an action plan to confront the “social structures of sin” that had beat their once booming countries into economic submission and driven their people into despair.

The forum, “The Asian Economic Crisis and the Role of the Church -- IMF, Human Rights and the Church,” met in Seoul Aug. 24-29. Convened by the International Catholic Movement for Intellectual and Cultural Affairs-Pax Romana (www.pax-romana.org/ click Regions and then Asia) and the Woori Theology Institute of Seoul, it attracted about 100 people including lay Catholics, religious, clergy and bishops as well as representatives of nongovernmental organizations from Asia together with colleagues from Europe and the Americas.

Many -- probably most -- participants here feel that Asian societies and cultures are about to be absorbed into a global capitalist system that obliterates all it consumes and results in a world dominated by the worst of Western culture: cruel, avaricious free-market capitalism.

The economic crisis that has engulfed the region -- and now threatens Russia, South Africa and much of Latin America -- is not the cause, but only the sign of the evil structures responsible for this havoc, the seminar concluded.

July 2, 1997, is the day a generation of Asians will remember. That day the Thai baht was loosened from its exchange rate peg and allowed to float. But it didn’t float up, it plummeted, from 25 baht to the U.S. dollar to nearly 52 baht to the dollar, before finally stabilizing at about 40 baht to the dollar. By year end, all currencies in the region followed the baht down. Economists and journalists called it the tom yum kung effect, after the Thai national dish, spicy shrimp soup.

To date, four countries have changed governments as a direct result of the economic havoc: Thailand, South Korea, Indonesia and Japan. The crisis has brought chaos to other Asian nations. Malaysia’s prime minister Mahathir Mohamad fired his successor-in-waiting, Deputy Prime Minister Anwar Ibrahim because of differences they had over economic policy and Brunei’s royal family has split over scandals exposed by the economic crisis.

The already weak countries -- Myanmar (Burma), Laos and Vietnam -- have been set adrift after enjoying much support from their once-rich neighbors. In Burma, democracy groups are using the crisis to good advantage, as are independence groups in various regions of Indonesia.

Unexpected crisis

Few people saw this crisis coming. Certainly, almost no one in the countries most drastically hit expected it. They were blinded by a dozen years of astonishingly high growth and believed their own public relations pitches to foreign investors. “The East Asian Miracle” was the name of a report from the World Bank.

When the World Bank issued that report, economies were booming and living standards rising. Things looked rosy. Each country had a slightly different plan, but all basically followed high growth models led by exports. By the mid-1980s, a bit earlier for Korea, a bit later for Indonesia, these plans were in full swing. Trade and direct investment were increasing year after year.

The 1990s saw a dramatic change in development policies. At the urging of international advisers and organizations, these countries began to allow into the country foreign money for short-term loans, for currency speculation and for stock market speculation. The amount of money is staggering. Western banks offered so much money to local banks that they had trouble re-loaning it. Much of the money ended up as margin loans for stock trading or in an already bloated real estate sector.

Thailand, for example, created the Bangkok International Banking Facility -- BIBF -- in 1993. Foreign banks put money into the facility, and Thai banks borrowed that money to recycle as loans for Thai companies. In 1993 the fund was zero. By 1996, it had $35 billion in it. And it wasn’t just Thailand.

Around $2 trillion spins around the globe daily. About 3 percent goes for the exchange of goods. The remaining 97 percent is purely speculative transactions. Nothing is actually produced. Money is making money on money.

In 1996, $94 billion flowed into East Asia from developing nations. In the first half of 1997, $70 billion entered. Then came July 2. In the last half of 1997, $102 billion left the region. The outflow has continued through 1998. This is the crisis that is bankrupting companies, causing massive unemployment, foreclosing on home mortgages and raising suicide rates. But why did it happen?

Going into the seminar, most participants seemed to know who the culprits were: the International Monetary Fund on one hand and the local politicians and businessmen who granted foreign access to domestic markets. What they weren’t sure of was how all this fit together.

Shorting the currency

In his homily at the opening Mass, Bishop Peter Kang U-il, auxiliary bishop of the Seoul archdiocese, set the stage for what would follow over the next five days. Kang said that every day he passes through the cathedral square, which has become a tent city for people who have lost their jobs and are seeking redress. While the IMF and World Bank have operated for 50 years, the bishop said, “Conditions have not improved much. Many indicate it has become notably worse. It would be worthy to examine why this happened, how the things were manipulated at this point ... to analyze and to make manifest these vicious mechanisms and so-called structures of sin.

“So what are the mechanisms Bishop Kang referred to?” asked Martin Khor, director of the Malaysia-based Third World Network. “I’ll tell you, it’s called shorting the currency.”

Shorting the currency is a strategy in currency speculation in which currency traders take out massive loans in a local currency and then start selling to buy dollars causing the exchange rate to plummet. When the rate falls, they can repay the local currency loans for fewer dollars and pocket the difference. That happened in Thailand, South Korea, Indonesia and Malaysia.

As local currencies became worth less and less, Asian businesses could not repay the billions of dollars they had borrowed from foreign sources. Real estate investment offered no returns, and stock prices went through the floor. So the speculators and the foreign lenders took their money out of the region.

“They pocket [the money] and clear out of the country, because there are no rules for taking money out of the country,” said Khor, who led the economic analysis at the seminar. His thesis is that global financial liberalization -- specifically the unregulated flows of capital across borders -- caused the Asian crisis.

But the IMF’s cure for Asia is more liberalization, Khor said -- like a doctor who feeds mercury to a patient and when the patient gets sick, prescribes increasingly higher doses of mercury.

Crony capitalism

Western analysts blamed the crisis on “the sins of our companies and the sins of our political leaders. This is summed up in the phrase ‘cronyism and corruption,’ “ Khor said.

“Now this is a very tempting theory to have because, of course, it’s all true. This is something we have struggled with ourselves,” Khor told the seminar. “In fact, many of us have spent our lives fighting these same things: official corruption, big companies and so forth.”

“But we cannot say this is the what caused the crisis,” he insisted.

“It’s true that we have crony capitalism causing our problems,” but, Khor said, it is “international crony capitalism of Wall Street controlling the U.S. Treasury, [which is] controlling the IMF and the IMF controlling the developing world. This is the crony capitalism. This is what Bishop Kang must have meant when he said, ‘structures of sin.’ “

Analysis from Korean and Thai delegations showed that many of the conditions that the IMF imposed to secure loans have little or nothing to do with the crisis. Korea, for example, had to allow greater foreign ownership of domestic companies. Thailand has had to restructure its banking system so that now a foreign company can buy up to 100 percent of a Thai bank.

“The G-7 countries [the world’s leading industrialized nations] have wanted access to our markets but couldn’t get it. They now put their desires -- desires held for many years -- into the list of IMF conditions,” Khor said. “These demands have nothing to do with our crisis. It’s sheer opportunism on their part.”

While the IMF has 180 member countries, voting is weighted according to shareholding, so G-7 countries keep the majority of shares and the vast majority of votes.

Khor noted, “This is not conspiracy, because it happens in the daylight -- it’s not secretive.” Indeed, Khor’s data is drawn from public records and media, such as the Financial Times of London, Fortune magazine and The Wall Street Journal.

The victims’ reality

Seminar participants did not end their analysis of the situation with Khor’s economic research. The group’s final statement explained: “Early in our forum we sought to situate our discussions in the reality lived by the victims of this economic crisis.”

In small groups, they visited striking labor unions, a center for unemployed women and a shelter for unemployed migrant workers. They also visited poor urban squatters and the Seoul Railway Station, which becomes a dormitory for 3,000 homeless people every night. “This experience of meeting with the victims of the Asian crisis helped us to understand its human consequences and to see them in the light of practical reality,” the final statement said.

Seeing with the eyes of the victims was stressed again and again throughout the proceedings. Participants attended workshops to examine the impact of the crisis on the environment and on specific groups, such as farmers, fishing communities, the urban poor and workers, particularly migrant and women workers.

In their analysis of the crisis, government officials and economic experts “don’t see the real world,” said Kim Hang Seob, executive director of the lay-run Woori Theological Institute. They are “locked in a kind of fictitious world of neoliberal idolatry” of capitalism, he said.

This is where the church and theologians can step in to give deeper, people-centered perspective, Kim Hang Seob said.

The Rev. Kim Yong Bock of Seoul’s Hanil University and the Presbyterian Theological Seminary agreed. “The victims are providing clues to the ways to overcome the crisis,” he said. “People themselves have sustained their lives throughout history. They have answers to microeconomic questions that have been largely ignored.”

They should be listened to and their wisdom shared, he said, and “the churches can help mobilize these people.”

Jesuit Fr. Soosai Arokiasamy, a member of the Federation of Asian Bishops’ Conferences theological commission, suggested that Catholic theological analysis begin with the social encyclicals and then examine the social teachings of the local churches. “When these two meet, there is a cross pollination” and a basis for discernment, said Arokiasamy, a faculty member of Vidyajyoti College of Theology in New Delhi.

Arokiasamy’s suggestion was accepted, with the acknowledgment that such discussions in Asia must include other religious communities: They cannot be limited to a strictly Catholic or Christian perspective.

The final statement said that the church “learns in the spirit to enter into dialogue with the poor of the world (especially of Asia) and with the cultures of Asian people with deep respect and humbly takes off its shoes before other religions because it recognizes God’s presence and action in them.”

The Seoul forum participants pledged to “discern their response of committed action in solidarity with people of other faiths and good will in service of all in love.”

One voice heard only faintly at the Seoul Forum was that of women. During the morning tea break of the second day of the conference, an ad hoc meeting of women delegates met and demanded greater participation in the forum. They noted that women were given minor roles on the panels, not as keynote speakers or topic leaders. The women took their concerns to the organizers and made pointed interventions during discussions.

Susanna Yoon Soon-nyo, who chairs the Korean Catholic Women’s Community for a New World, told the forum it was making a big mistake in not listening carefully to what women were saying about the economic crisis. Yoon cited rising cases of unemployed men abandoning their families. “Women are given the task to take full responsibility for the family. This has always been the case in [Korean] history. In the wars and since, women have always sacrificed themselves to save the family,” she said.

“We really have to bring the women’s role and a feminine perspective to this reform of the neoliberal system,” Yoon said. “I will fight this with you, but I will fight this as a feminist.”

The ad hoc group continued to meet throughout the forum and at one point wrote a statement that they planned to issue in parallel to the forum’s final statement. On the last day of the conference, the women’s statement was accepted by the body and incorporated into the final statement for the Seoul Forum.

From the ad hoc group came the final statement’s call to all Asian bishops’ conferences to establish women’s commissions. “Women, especially because of their suffering from the Asian economic crisis exacerbated by gender discrimination, need an official channel to express their needs and participate in dialogue for improvement,” the final statement said.

Several women delegates were still disappointed, saying that tacking on women’s concerns to the larger group’s agenda still kept women marginalized.

In the end, Seoul forum participants adopted two plans of action, one titled “An Agenda for Solidarity Action,” which focused on the “need for a fundamental restructuring of the international financial institutions,” and “An Agenda for the Renewal of the Church,” which noted it was important for the church to start “with our own conversion based on a critical review of our own behavior, mentality and values.”

A global view

The forum passed a resolution calling for opposition to an IMF initiative to amend its articles of agreement to promote full capital liberalization. The group called the plan “an irresponsible action on the part of the IMF.”

The group also endorsed campaigns against similar liberalization plans put forth by other international and regional groups, such as the World Trade Organization’s financial services agreement, the U.N. Organization for Economic Cooperation and Development’s Multilateral Agreement on Investment and NAFTA’s prohibitions against capital controls.

Participants were adamant: “Controls on capital transactions must be maintained.”

According to Anselmo Lee, president of the International Catholic Movement for Intellectual and Cultural Affairs-Pax Romana, these kinds of resolutions are evidence of a changing perception among church-based grassroots people in Asia. They saw, some for the first time, the connection between what happens at the international level and what they have to battle at the local level, Lee said. They saw that just as they can make positive actions and have influence at the local level, they can take positive actions and have influence on a global scale.

Michael Chai, a Malaysian directing the Asian office of Consumers International, echoed Lee’s thoughts. After years of work among indigenous groups and on environmental issues, Chai said, “I learned that I needed to go to places like Japan and Europe to campaign among politicians and business persons there. ... They also have to change the way they consume because they encourage the local people to destroy the forests blindly and to ignore the rights of indigenous people.”

Lee said this perception change, which one participant described as globalization from the ground up rather than globalization from the top down, was one of the most significant outcomes of the five day forum.

Renewing church

The group also said that the economic crisis was an ideal time for deep re-examination of pastoral priorities within the church. “We believe that church structures should provide for lay participation at all levels including decision-making; that there should be less emphasis on administration and more on pastoral concerns; and that, in particular countries, a change from investment in large buildings and structures to investment in people and their needs,” the final statement read.

They called on churches in the First World and the global church institution -- particularly the Pontifical Council for Justice and Peace -- to use their clout to lobby the international financial institutions and G-7 governments to follow a more humane program.

They urged the Federation of Asian Bishops’ Conferences and lay Catholic groups to endorse the Jubilee 2000 campaign for forgiveness of the debts of poor countries. They also called on the Asian bishops’ federation to lead a delegation to the IMF and World Bank to ask them to review their policies in light of the suffering of the poor of Asia.

They asked that as the Asian bishops prepare pastoral documents or other responses to the economic crisis that they engage in dialogue with victims of the crisis. “Lay people, especially women, should be ensured representation in the process of formulating such documents,” the final statement said.

National Catholic Reporter, October 2, 1998