Will Bush Follow Bill to Bailout City?

by Patrick J. Buchanan – June 26, 2002

“When sorrows come, they come not single spies, But in battalions,” said Hamlet. If President Bush has time left over from defusing a war between India and Pakistan, and preparing a plan for Mideast peace, he best take a quick glance south. From Tijuana to Tierra del Fuego, democratic capitalism is in deepening peril.

Some 500 maquiladora plants in Mexico have moved to Asia, taking 250,000 of Mexico’s best jobs, in search of 25-cents-an-hour Chinese labor. The global race to the bottom is on.

Mexico’s stock market has lost one-seventh of its value in three months, and the peso has lost 10 percent of its value against the dollar. Finance Minister Francisco Gil Diaz compares Mexico to Argentina. While it has been selling off national assets to cover budget deficits, you can only sell the family silver once. “At some point, we are not going to have anything more to sell,” said Gil.

In Colombia, the war with the narco-guerrillas goes on and on, as Venezuela seems headed for another coup. In Peru, President Toledo’s popularity has plummeted to below Nixon-at-Watergate levels, two cabinet ministers resigned last week, and riots erupted in Arequippa to protest plans to privatize two electric generators.

Last Friday, Uruguay let its peso float and it lost almost 30 percent on local markets, as the IMF rushed in $1.5 billion. Uruguay is in its fourth year of recession, with GDP down 17 percent – a depression. But it is in South America’s giants where the crisis is deepest.

On Friday, Brazil’s currency fell to a record low against the dollar. Second only to Argentina, Brazil is the riskiest place on earth to invest. The spread between Brazilian and U.S. bonds is similar to that between Russian and U.S. bonds before Moscow’s default. Fears that Brazil may follow Argentina into default have soared as the old radical Luis Ignacio Lula da Silva is running 2-to-1 ahead of the incumbent party’s candidate for president in the October election.

Argentina, once the most promising nation in Latin America, is becoming a failed state. Last year, an Argentine peso was worth a dollar. Today, it is closer to four to the dollar. By tens of thousands, Argentine professionals are fleeing their country, and First World companies are following – Wendy’s, Home Depot and Sky TV are gone. Airlines have cut back on flights to Europe and America. Foreign newspapers and magazines are disappearing from newsstands.

On Friday, Argentina’s central banker, Mario Blejer, resigned. With spreading social unrest and a dead economy, Buenos Aires may resort – as Berlin did in 1923 – to printing-press money. If Argentina does not get another bailout from the IMF in June, it may be forced to default on its old loans to the IMF. Then the rot in the Global Economy will be visible to all.

Many factors make this crisis in Latin America more serious than 1998. Most Latin countries have already sold off their prized national assets – telephone and utility companies, banks, major state enterprises. There is little left to be pawned at the Casbah of Global Capitalism.

Some Latin nations are so mired in debt it is ridiculous to ship them new IMF loans, so they can make payment on the old IMF loans. And unlike 1998, the U.S. economy is not robust – the U.S. merchandise trade deficit is running at $480 billion a year. Our manufacturing base has been gutted, and our current account deficit is near 5 percent of GDP. Even the free-trade-uber-alles boys are moving to protect America’s farms and factories from floods of cheap foreign imports.

Economic nationalism is on the way back.

Across Latin America, leftist politicians are demanding an end to U.S.-style “neo-liberal” economics, and Latin peoples are searching for someone to lynch for having robbed them. There is little doubt at whom corrupt and incompetent Latin politicians will point the finger: the Big Banks, the IMF, the transnational companies that bought up their national assets for a song – and the Bush administration, for playing Dutch Uncle to their desperately demanded new IMF loans.

Three things keep the great fraud of the Global Economy going. Endless U.S. taxpayer bailouts of bankrupt regimes through the IMF and World Bank, a $480 billion U.S. merchandise trade deficit that sells off America’s manufacturing base to pay for consumer and capital goods not made in the U.S.A., and foreign aid forever.

The day this triple-looting of America ends, the house of cards comes down. Until then, a prediction: President Bush and Treasury Secretary Paul O’Neill will emulate Bill Clinton and Bob Rubin, and get into the bailout business – big-time, as Dick Cheney would say – because no one wants to be the one left standing there when the music stops.