LONDON - Mahathir Mohamad, the former prime minister of Malaysia, is clearly
enjoying himself even as the global economy teeters on the verge of collapse.
Never one to mince his words, he was forthright in his views when he was
invited to speak at the Royal Commonwealth Society in London on "The
Alternative G20 Agenda: Real Financial Fairness".
As Group of 20 leaders met in London last week to thrash out an agreement on
how best to tackle the world recession, Mahathir, once the champion of
so-called "Asian values" was scathing about the role of the international
banking system. According to him, the main lesson the world should learn from
the present financial turmoil is that governments should never trust anyone -
especially bankers.
"If you keep the present system, this crisis is going to recur. Do
you give banks the right to print money out of nothing? Sometimes governments
borrow money from these banks which create money out of nothing. That was what
happened in the US. So, we need to look at the system in total and this should
be done in a new Bretton Woods kind of conference," he said, referring to the
1944 gathering that established the International Monetary Fund and World Bank.
Mahathir said that most wealth comes from playing around with money, not from
actually producing goods for useful purposes or providing services. If real
business had been done, the situation would not have been as disastrous as it
is today, he claimed.
"We now have tax havens, hedge funds, currency trading entities - they don't
submit their accounts to anyone; the banking system has been abused. Things
have to come out in the open. Most of these things happen in the very rich
countries. Poor countries do not have hedge funds and big banks, but because
the world is interconnected, when our trading partners collapse we feel the
impact."
Mahathir had equally strong views on the action taken by governments like the
US and UK. "Why are the governments in the West giving out so much money in
order to resuscitate banks which were the cause of all this trouble? They
should be allowed to close down. This is what they should do to be fair to
taxpayers."
Hedge funds, he said, should not be permitted to operate from tax havens, while
everybody should come clean and expose their accounts to the authorities. Given
Mahathir's stringent views on tax havens, it was somewhat ironic that the
30-member Organization for Economic Cooperation and Development this month
included Malaysia on a "blacklist" of three countries dubbed non-cooperative
tax havens. Costa Rica and the Philippines are also on the list.
When asked about the role of the World Bank and International Monetary Fund
(IMF), which have gained greater prominence from the G-20 summit, Mahathir
said, "When they bring gifts, like the Greeks, we need to examine these. Their
idea of saving us is to bankrupt us. The World Bank is not a world bank, it is
an American bank, and it carries out the policy of America."
Mahathir served as prime minister from 1981 to 2003, and during his term of
office he was credited with staving off the worst of the financial crisis that
engulfed much of Asia in 1997-98, by ring-fencing Malaysia's currency, the
ringgit, through the imposition of controversial capital controls. His
government also oversaw the consolidation of the banking system, reducing the
number of financial institutions from 54 before the crisis to 10.
Malaysia emerged from the 97-98 crisis by taking radical and unorthodox
measures, he said. During that time, Mahathir rejected the IMF-prescribed
recovery package accepted by neighboring Thailand and Indonesia. The rescue
deals, including provisions requiring the opening of local markets to foreign
investment, were seen by many in Asia as tailored towards the interests of the
US and other Western powers.
The IMF and World Bank subsequently acknowledged that Mahathir's unorthodox
approach had worked after Malaysia returned onto a path of fast economic
growth. British economist and Labor peer Meghnad Desai questions that
assessment.
"Dr Mahathir Mohamad has not changed his views since the Asian crisis of 1997.
He blamed international bankers then, rather than his own weak regulatory
systems which let Malaysian banks make unwise real estate investments," Lord
Desai said.
"Now again he blames the bankers. Like many leaders of the West and East, he
enjoys the good things globalization brings to his nation but not the costs
when they fall due."
Renowned for his criticism of Western and other developed countries, Mahathir
is now calling for an overhaul of the global monetary order. "We should stop
using the US dollar as the trading currency. We should reduce the use of the
dollar and move to an alternative currency like the euro," he said. "The US
should be treated the same as any other nation. China is capable of producing
almost anything that it needs. We have benefited from China's increasing
wealth."
All countries should work together to figure out how to curb the abuses which
led to the present crisis. "When you are poor you must learn to behave like a
poor person so you don't end up in debt. We have to accept that the whole world
will be poorer," he said.
As a former statesman, Mahathir was in the fortunate position of being able to
speak his mind without being judged by his actions. But the situation may
change now that he has rejoined the United Malays National Organization, the
main party in the current ruling coalition he led during his 22-year tenure.
Announcing his decision this month, Mahathir said he was prepared to share his
knowledge and experience with the government led by Prime Minister Najib Razak,
who was sworn into the post on April 3, taking over from Mahathir's successor,
Abdullah Badawi. Many believe Najib will restore Mahathir allies to positions
of power. The time may come when mere words will not be enough - Malaysians may
turn to their former leader once more for concrete solutions to lift them out
of their current financial and economic mess.
Rita Payne is a former Asia editor for BBC World TV and is currently the
chair of the Commonwealth Journalists Association (UK).
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