Posted on 12-6-2003
Washington's
Politics-As-Usual
By Steve Hanke*, Le Figaro, Monday 09 June 2003
Most people believe that the United States' recent overthrow
of Saddam Hussein derives from a new policy. This policy is
new perhaps under the specific circumstances, but the ideas
of regime change and of putting it into effect are not.
It's well-known that Assistant Secretary of Defense, Paul Wolfowitz
and a small group of people related to the neoconservatives
developed this idea quite some time ago and have not ceased
to promote it ever since. When, in the 80s, the American government
arrived at the conclusion that The Philippines' President Ferdinand
Marcos' power was not legitimate, he was forced to leave in
1986, with the United States actively contributing to his departure.
And the key man who put that departure into effect was none
other than Paul Wolfowitz, Assistant Secretary of State at the
time.
During his tenure as Indonesian ambassador in 1986-89, he launched
a new idea for regime change. This time President Suharto was
the target. He was considered corrupt and anti-democratic. The
United States, with the help of the International Monetary Fund,
achieved their objectives in 1998 when Mr. Suharto fell. It
happens that I know a certain number of things about Suharto's
overthrow. At the end of January 1998, I was giving a series
of lectures at the University of Bogazici. One evening, while
I was in the Ciragan Palace Hotel of Istanbul, I received an
urgent phone call. It was an invitation from President Suharto
to come and meet him in Jakarta. The Asian crisis of 1997 had
hit Indonesia hard. The IMF has responded by prescribing its
standard remedy and Indonesia let the rupee float on July 2
1997. The results were catastrophic. The rupee's value collapsed,
inflation rose and economic chaos followed.
Mr. Suharto knew I had counseled Bulgaria and Bosnia to establish
currency boards in 1997. And, as day follows night, monetary
chaos stopped dead in its tracks in Bulgaria and Bosnia immediately
after these countries had adopted fixed exchange rates guaranteed
by their foreign currency reserves. President Suharto understood
that the IMF's remedy killed the patient and that a currency
board could prevent the complete collapse of his country. Following
our first meeting in Jakarta, Mr. Suharto named me special consultant.
Shortly afterward, I proposed a currency board for Indonesia,
which Mr. Suharto approved. That contributed to the rupee's
28% re-appreciation against the dollar the same day the proposal
was announced. But that suited neither the United States' government
nor the IMF. Even though the currency board proposal had garnered
the support of numerous Nobel Prize winners and other eminent
economists such as Gary Becker, Rudiger Dornbusch, Milton Friedman,
Merton Miller, Robert Mundell and Sir Alan Waltersit, it became
the object of a brutal attack. Suharto was simultaneously entreated
by United States' President Bill Clinton and IMF Director Michel
Camdessus to abandon the idea if he wanted the 43 billion dollars
of aid money that had been promised to his country.
Why did the proposal of an Indonesian currency board provoke
such a reaction? Nobel Prize winner Merton Miller immediately
understood the maneuver. He declared then in the Christian Science
Monitor that the United States wanted to overthrow Suharto and
that a currency board militated against such a project. Professor
Miller brought to notice that a currency board would stabilize
the rupee and the Indonesian economy and that in consequence
Suharto would remain in power.
The former Australian Prime Minister arrived at the same conclusion:
«The United States Treasury deliberately gambled on the country's
collapse to get rid of President Suharto», he said. Former American
Secretary of State, Lawrence Eagleburger, formulated a similar
diagnosis: «We (the American government) were very shrewd to
support the IMF so that he'd be overthrown (Suharto) ». As for
Michel Camdessus, he proudly declared as he left for retirement:
«We created the conditions that forced President Suharto to
resign. »
Neoconservative ideas about regime change are nothing new. The
only novelty in Iraq was recourse to armed force and to an overwhelming
extent, so as to succeed.
* Steve Hanke is Professor of applied economics at Johns Hopkins
University in Baltimore (USA). Was Senior Economist at the Council
of Economic Analysis of the Reagan Administration
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