IMF errors may cost lives: Social thinker

IMF errors may cost lives: Social thinker

BUENOS AIRES (Reuters): Social thinker Alvin Toffler warns Latin American nations that free markets are not the gospel truth and that International Monetary Fund medicine can costs lives.

The futurist and author of best-sellers like "Future Shock" and "The Third Wave" told Reuters in an interview on Wednesday the IMF prescribed "essentially the same medicine to every disease."

"To go into Indonesia (earlier this year) and to say that they should raise interest rates in order to attract capital was not only stupid and arrogant, it got people killed," he said, referring to attacks on the Chinese minority.

"And that's not the only place -- around the world they leave a trail of social unrest," said Toffler, who was attending a management forum in Buenos Aires.

For the past decade Latin American nations have toed the IMF line and opened their economies to world competition, slashed public spending, cut subsidies, and reduced the size of government by selling state-run companies.

The IMF-prescribed polices have spurred growth, but caused widespread unemployment and widened the gap between rich and poor. In the current global financial tumult set off by the Asia crisis last year, the IMF has urged Latin American nations to deepen reforms, despite growing signs of social fatigue and political discontent.

As for regional integration now advancing at full steam in Latin America, tearing down trade barriers without taking into account each nation's social needs in terms of employment and education is also a risky proposition, he said.

"The idea of doing it all simultaneously in the fastest possible way may not be correct," said Toffler. "Each country has its own unique set of problems."

Nations in the Western Hemisphere plan to set up a Free Trade Area of the Americas from Alaska to Tierra del Fuego by 2005.

"I believe very strongly in the free market, but I believe in it as an instrument, not as a theology," Toffler said.

"Many countries have large peasant populations that are uneducated, like the northeast of Brazil or in China. If you can't educate those people, you can do nothing," he stressed.

Rather than pursuing the embattled export-oriented model of the "Asian tigers" for development or the European example for integration, Latin American states should take full advantage of their social and cultural differences instead.

The industries of the future will thrive on diversity and will focus on small-market niches. Even large companies setting up shop in Latin America should create their own smaller units to cater to those market segments, he said.

Toffler also advised Latin nations to concentrate on high- technology products, resist the temptation to use cheap labor as a magnet to attract direct investment, and participate in joint- ventures with foreign firms that can ensure the transfer of technology and revert brain drain.

The author, whose "third wave" concept refers to a new industrial era based on knowledge and information rather than tangible assets, said low wages will only work for a while.

Companies first set up shop in Japan before moving to Korea and other Asian countries on the low-salary trail. Likewise, firms coming to Latin America seeking cheap labor may migrate in the future to Africa, he said.

And, in an era in which "each interval of time is worth more money than the previous," companies may even return to rich countries where high technology can ensure fast delivery.

"Technology is cheaper than labor," he said.