Book Reviews

Paul Blustein, The Chastening: Inside the Crisis that Rocked the Global Financial System and Humbled the IMF (New York: Public Affairs, 2001). 431 pages. $30.00

Reviewed by Scott B. MacDonald

Click here to purchase "The Chastening: Inside the Crisis that Rocked the Global Financial System and Humbled the IMF " directly from Amazon.com

Washington Post journalist Paul Blustein has written a well-thought and engrossing account of the International Monetary Fund's role during the Asian financial crisis of 1997-99 and the ensuing contagion that hit Russia and threatened Latin America. He notes that the "Electronic Herd" ("whose ranks included mutual funds, pension funds, commercial banks, insurance companies, and other professional money managers") played a major role in stampeding Asian markets. However, he is careful not to apportion all the blame here - greed, corruption and poor regulation in Asia also played their role in setting the stage for Asia's financial crisis. As the crisis began in Thailand and spread to Indonesia and Korea, Blustein focuses on the IMF's response. The bottom line is that the IMF's approach of large bailout packages, combined with monetary tightening and the closure of banks was the wrong approach. As he states: "Time and again, panics in financial markets proved impervious to the ministrations of the people responsible for global economic policymaking. IMF bailouts fell flat in one crisis-stricken country after another, with announcements of anormous international loan packages followed by crashes in currencies and severe economic setbacks that the rescues were supposed to avert."

One of the major culprits in the failure of the IMF to effectively deal with the Asian contagion, was that the High Command (the IMF, World Bank, and major G-7 countries) had successfully presided over the dismantling of capital controls in much of the emerging markets, a development that was to be seriously undermined by the lag in proper institutions in those countries to deal with volatility, concerns about the creditworthiness of banking institutions and corporate governance. The globalization of capital was "expected to help create a more efficient world economy, raising living standards in rich and poor countries alike. A further justification was that developing countries would reap enormous benefits by establishing modern stock and bond markets to finance their industries instead of relying heavily on traditional (and often corrupt) banking systems." Blustein also points out: "The advocates of globalized capital were by no means unconcerned about the dangers of international crises, and they hedged their recommendations by urging countries to develop proper legal instutitions and improve supervision of their banks before allowing the Electronic Herd to invest large amounts of money in their markets." The message is that globalization is not bad, but without proper institutions to manage the flow of capital it can be a disaster - i.e. Thailand, Indonesia, Korea and Russia.

Blustein provides a good hard look at how the IMF seeks to maintain an image of omniscience as it provides aid and advice. Yet, he concludes: "Peering behind the IMF's facade provides a less confidence-inspiring picture, even to those who broadly share the Fund's views about how to handle countries in economic difficulty." His final advice: "Rather, the main point to bear in mind - is that the current institutions and mechanisms safeguarding the global financial system are dangerously weak, and that boldness is warranted in shoring up the system's defenses before catastrophe strikes anew." Considering that Brazil is likely to threaten another contagion in Latin America, this is sound advice. Yet, at the same time, there must be greater boldness in particular countries in dealing with their own structural and transparency problems that allow leading figures in the government to opaquely move funds out of the country. Still, Blustein is a good read, providing interesting portraits of many of the key players and how they interacted.

Book Review:

The Reckoning: Iraq and the Legacy of Saddam Hussein, by Sandra Mackey, W.W. Norton & Co., New York and London, 2002), 415 pgs., $27.950

Reviewed by Robert Windorf

Click here to purchase "The Reckoning: Iraq and the Legacy of Saddam Hussein" directly from Amazon.com

Since early this year, the Bush administration has dramatically increased its barrage of accusations of Iraq's reported violations of UN sanctions. Furthermore, in the annual State of the Union address, President George Bush identified Iraq as one of the three rogue states, comprising the 'axis of evil,' that have the capacity for nuclear weapons. In addition, as the months have flown by, and the allied forces' daily patrolling of the Iraqi no-fly zones have continued, those accusations have steamrolled into threats of a direct military campaign with the support of the United Kingdom to topple the regime, culminating in Bush's recent UN General Assembly speech in which he called on the member nations to support such a challenging necessary endeavor. In response to this wave of accusations and threats, Saddam Hussein has defiantly responded and sternly warned the west that it would lose the 'mother of all battles' and suffer great agony in its vain attempts to remove him from power. In turn, the global reaction toward the Bush administration's call to arms, despite Saddam's recent acceptance to allow UN nuclear facility inspectors to return to Iraq to carryout their duties, has run the gamut of emotions from strong adherence to strong disagreement and has gone so far to sour the U.S. and U.K.'s diplomatic relations with several of its closest allies, especially Germany and France.

With the global media's up-to-the-minute, over-the-top coverage of this fluid story, it has become very easy for one to lose track of what the clear reasons would be for a potential military strike against Iraq, the numerous consequences thereof, and the prospects for the Iraqi and other Middle Eastern nations in a post-Saddam world, etc. However, for those interested to seek an understanding of and to formulate answers to the many questions surrounding the present Iraqi situation, Sandra Mackey's very timely new book, The Reckoning: Iraq and the Legacy of Saddam Hussein, offers an excellent, very insightful and detailed read. Ms. Mackey, a veteran Middle Eastern journalist, whose previous noteworthy books have examined Iran, Saudi Arabia, and Lebanon, has written a comprehensive account of Iraq's modern history beginning with its developments as a kingdom during the two world wars, the various challenges of its former rulers, the importance and influence of Shiite and Sunni Islam, all of which led to the rise of the Baath Party and Saddam's oppressive regime, and its numerous instabilities and struggles since, including the bloody and senseless war with Iran, the onslaughts against the Kurds, the invasion and surrender of Kuwait, and the chilling consequences of those events. As the book's dust jacket states, it poses a central question: whether a future Iraq without Saddam will be even more unstable and more problematic to the security of the U.S.

Interwoven throughout Mackey's book is the fact that Iraq is not comprised of one people, but many, especially non-Arabs, with the south mainly populated by the Shia and the north, the 'homeland' of the Kurds. Such a reminder lends strong support to discredit the belief that the west's removal of Saddam would ultimately solve Iraq's numerous challenges and many of those within the Middle East and for the west in achieving stability in a region never known for such a luxury. Naturally of concern is what a post-Saddam Iraq would represent and how it would be ruled. Such a monumental challenge arguably eluded the senior Bush and Clinton administrations, as they each had different (and arguably easier) goals within the region following the rebuilding of Kuwait. Now, in the wake of the 9/11 tragedy, the successful removal of the ruling Taliban in Afghanistan, and reported continued Iraqi violations of UN conditions, leading to estimates about Iraq's nuclear capabilities, the U.S. administration now has prepared the world for military actions with the ultimate goal of toppling Saddam. However, as the final chapter of Mackey's book challenges, obviously written prior to the recent heated political debates, if a concerted focus is not undertaken by the west to determine and plan for what a post-Saddam Iraq will be, then Iraq's future disintegration of a country will turn into a nightmare for its peoples and the west.

While reports from Iraqi dissidents reveal growing signs of anxiety among Saddam loyalists who realize they will become targets once he would fall, they more importantly suggest that the U.S. administration's expected campaign, now revealed as an action to 'liberate' the Iraqi people, is not seen as one by many. The majority of the population has suffered the harsh consequences of Saddam's abuse of the oil-for-food program, leading many to question the future warm welcomes for their 'liberators.' Aside from the interested observer, Mackey's book should be required reading for the U.S. administration, as the old adage, "you cannot understand your friend or your enemy unless you understand his history," now loudly rings true.