Anyone listening to G-15 leaders letting off steam in Kuala Lumpur this week would have thought it was a gathering of the old Left. The air was thick with talk of exploitative markets and the spectre of a new imperialism. Recalling how glass beads were once traded for the treasures of simple and trusting natives, Prime Minister Mahathir bin Mohammed of Malaysia, warned that the new menace stalking the developing world would be more noxious and debilitating than the old. Vice-president Krishna Kant, standing in for Prime Minister I K Gujral, weighed in with a denouncement of the conspiracy by rich nations to reduce developing countries to a technological underclass. The G-15 (actually G-16 after the admission of Kenya) had more reason than usual to sound off. The currency and stock market turmoil in South East Asia has shaken the certitudes of many market-savvy leaders in the region and lent new urgency and a sharper focus to G-16 confabulations. It has not, however, produced the right diagnoses, as yet, for collective ailments.

Demanding new rules for currency trading sounds suspiciously like a retreat from the open market regimes which have powered the growth of South East Asian economies for the last two decades. Volatility in financial markets has the effect of wiping out many previous economic gains and wrecking well laid out future plans. The huge selloffs in Thailand, Indonesia and elsewhere in the region have been unnerving, to say the least. It is essential, therefore, to find ways to stabilise markets and ride out unavoidable surges and falls in market expectations. Looking for scapegoats in currency speculators may be what some leaders like Mahathir need to divert attention from economic weaknesses and shortcomings. But as the prime minister of a country with its own large investments in other parts of Asia and Africa, even he must know any step which chokes off capital flows and hurts exports will be a remedy worse than the disease. There is no better way to insulate countries from what Krishna Kant called the whims of the market than sound economic policies and exchange rate management.

One hopes G-16 finance ministers, scheduled to meet in a few weeks, will be looking at calmer Asian markets and, therefore, will be able to give their attention to the part played in the turbulence by real factors such as over-valued currencies, current account and fiscal deficits, weak financial institutions and last, but not least, political factors. The irony of the G-16 railing against the tyranny of the market and in the same breath demanding greater access to the markets and capital of the rich G-7 countries will not be lost on anyone. They are right to attack the US for undermining the WTO and its dispute mechanisms and for using domestic legislation to impose trade sanctions, and right also to condemn the technical barriers raised by the G-7 against developing countries' exports. The rules of the marketplace must be fairly applied.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.