It is amazing to read this book by Paul Bulstein on South East Asian crisis (and Russian and Brazil) and role of IMF/Washington to mitigate (actually worsen) the crisis. Why it is amazing is one can just change the country setting and some players (many players like Stan Fischer still remain) and you get a recipe for ongoing Euro and Greece crisis as well.
The book is like a breezy thriller on the 1997 crisis full of plots and sub-plots:
Lauded by reviewers and scholars alike, Paul Blustein’s The Chastening examines the role of the International Monetary Fund in the series of economic crises that rocked the globe in the last decade. Based on hundreds of interviews with officials at the IMF, the World Bank, the U. S. Treasury, the Federal Reserve, the White House, and many foreign governments, The Chastening offers a behind-the-scenes look at the Fund during an extraordinarily turbulent period in modern economic history and at a time when the IMF has become the object of intense political controversy. While the IMF and its overseers at the Treasury and the Fed have sought to cultivate an image of economic masterminds coolly dispensing effective economic remedies, the reality is that as markets were sinking and defaults looming, the guardians of global financial stability were often floundering, improvising, and feuding among themselves. The Chastening casts serious doubt on the IMF’s ability to combat of investor panics at a time when massive flows of money traverse borders and oceans. A readable, compelling account of the deeply flawed workings of the international political system, The Chastening is vital reading for students and scholars of international diplomacy, government, and economic and public policy.
There has been a lot of research on the SEAsian crisis but such accounts are really useful. They give you a perspective which research papers/books lack. It brings all the key actors and the drama behind the scenes.
The book gives you a great account of how some select few people from US shores dominate and determine economic policies across the world. It is quite worrying as well. The recipe is standard, a PhD from an elite Us university, job at IMF/World Bank/Treasury/Fed and then the whole world is yours. All these institutions suffer from bias of having people from just one kind of background. All eggs are from one basket.As most have very similar educational training, their solutions for the crisis are just similar. This obviously irked the local politicians but did not bother these guys. They miscalculated quite a few things but retained their jobs and actually grew more powerful over the years. It required a crisis in their own backyards to get something kicking but again most have remained unscathed.
The way US administration controlled and monitored IMF/World Bank then is quite a read. How US Treasury officials were not just interested in economic reforms but even political reforms in some countries. All kinds of games were played to remove certain politicians which was like a coup in many ways. Barring Korea and Brazil, the actions taken by all these elite priests of finance only backfired. Even in these two, it was their second effort which worked. But then again supremacy of both US and its high priests remained unquestioned.
The book also has an interesting discussion of how IMF new recruits are given training in crisis management. It was fine if such training was given within the social structure of a country, but it is all homogenised. It is as if the recruits want a crisis to happen so that their training could be used. Another irony is that the countries they fly to for resolving the crisis, all stay in top hotels. There are riots and all kinds of issues due to their policies but all continue to get five star treatment. The outside situation does not matter.
The crony capitalism which has is much talked now, is all visible in the pages. The relations between top Wall Street executives, academics from US univs, PhDs working in IMF/World Bank/Treasury/Fed is just too cosy and comfortable. So the Wall Street guys (called electronic herd in the book) invest in countries like there is no tomorrow, as things go wrong they hole the system to ransom. This leads to academics and IMF etc coming to the troubled countries to help their crony partners. Infact, it does not end there. These guys move so seamlessly within these institutions that it is amazing. The book mentions how these elities were worried over corruption in SE ASian countries never really looking at what is going on in their own systems.
Again coming back to the first para, just replace the countries and one would get similar a plot in EZ crisis as well. One can easily visualise what Greece policymakers must be saying to these guys. Just that this time around, the game is being played in European countries which were partners with US in their previous adventures.
Quite interesting and eye opening. Written in 2001 it remains as apt and relevant..