As the American financial crisis lurches into territory unseen since the 1930s' Great Depression, the financial systems and economies of the South are more vulnerable than ever, writes Gamal Nkrumah Developing countries of the South have been unwittingly sucked deep into the maelstrom of the American financial crisis. While resource-rich countries are so far suffering less, with commodity prices holding, the bottom line is clear and simple: there is no bailout for the world's poorest and neediest citizens. Only gigantic multinational corporations are deemed worthy of the bailouts. In the stock markets of the industrially advanced nations of the North, shares plummet and the catastrophe of massive losses across the board loom large. The $700 billion American bailout package, the biggest bailout in history, reverberated throughout the corridors of power in the capitals of the least developed and most impoverished nations of the world. This unprecedented disquietude was obvious in the 63rd session of the General Assembly. The UN is seeking increased financial assistance from wealthy nations to help poor countries meet the faltering Millennium Development Goals (MDGs), including a 50 per cent reduction of abject poverty and hunger by 2015. International gloom about prospects for the poor were reflected in speeches addressed to delegates assembled in New York last week. UN Secretary-General Ban Ki- Moon cautioned that the current dismal global economic outlook threatens the well-being of billions of people and "none more so than the poorest of the poor". The UN secretary-general urged rich nations to provide $72 billion per year in additional external financing to achieve the MDGs by 2015. This sum, after all, is insignificant compared to what the administration of United States President George W Bush offered as a bailout for the investment banks of the country. Representatives of the poor, too, voiced concern. "It is always the poor who pay the price for the unbridled greed and irresponsibility of the powerful," said Father Miguel d'Escoto Brockman of Nicaragua, the newly-elected president of the General Assembly. Western donors now have an excuse to rescind on the targets established by the MDGs. Be that as it may, it is a lame excuse. In the US, the Federal Reserve and the Treasury Department are, contrary to free-market capitalistic logic, making all the major strategic decisions in the financial sector. Fear and panic have taken over as the beacon of world capitalism resorts to socialism and socialist measures of dealing with disaster. State intervention reigns supreme with the rescue of the American International Group (AIG) by the Bush administration. In other words, the US government has effectively nationalised banks, mortgage and lending institution and insurance companies. By taking over AIG, and engineering the Bank of America's takeover of Merrill Lynch, Washington acknowledged that socialism is the solution in times of crisis. "We have to pay for the sins of the past," conceded Klaus Schwab, the organiser of the World Economic Forum. Neo-liberal and laissez-faire measures have proved to be inadequate and incapable of securing effective regulatory mechanisms. The golden age of capitalism is coming to an ignominious close. Socialists and the champions of state intervention in the economy have been vindicated. This is the principal lesson for developing countries. Contrary to the supposed logic of capitalism, stagflation -- the coexistence of low growth with high inflation -- has taken hold of the economies of the North. The Asian financial crisis of 1997-98 and the dubious role played by the International Monetary Fund (IMF) and the US Treasury Department comes to mind, with the deluge of foreign funds designed to garner the quickest and highest returns, i.e., the real estate and stock markets. Needless to say, stock and real estate prices are now plummeting, prompting the panicked withdrawal of funds, which of course merely makes things worse, wiping out billions of paper values. By 1997, the emerging markets of East Asia lost $100 billion in a couple of months. Capital flight not surprisingly induced an IMF bailout of foreign speculators. East Asia plunged into a deep recession in 1998. Only Malaysia, sensibly fixing its currency and taking firm government action, survived more or less unscathed. The developing countries of the South have not forgotten the bitter East Asian financial crisis. Stock markets today have taken a nosedive throughout Asia. Trading on Indonesia's stock market was suspended this week, and even in Japan, Asia's largest economy, the Nikkei recorded the biggest drop in two decades. Are its leaders totally mesmerised by the neocon market delusions or will they take a page from Malaysia's experience and adopt prompt state interventionist policies once again?
