On Sat, 22 Nov 1997 kjkhoo@pop.jaring.my wrote:
>
> Would anyone care to offer an analysis of the Asian meltdown in the theoretical
> framework(s) in use by WSNers, or whatever? It does seem a shame that what
> threatens to be a critical event in the development of the contemporary world
> system (used loosely) should pass by without discussion.
OK, I'll take a preliminary shot at this (I apologize in advance for the
long post, if you want to skip the history, check out the three points at
the bottom). The main reason for the Asian meltdown is, I would argue, the
end of the American Empire. For the past fifty years, the world economy
has been organized and managed by the Americans (politically as the Cold
War, economically as military Keynesianism and the Bretton Wood accords
which enshrined the dollar as world reserve currency, socially as
American-style consumerism and the mass media).
American hegemony seemed to leave newly-industrializing countries with
only two choices: either they allowed the Americans to run their
accumulation regimes (the Brazilian option), or chose autarky (like the
Soviets and Chinese). In reality, there was a third option, chosen by
Japan, the tiger states and Central Europe: what might be called
export-platform autarky, i.e. a strong developmental state leashed the
power the capital, redistributed the social surplus to workers, invested
in the markets of the future, etc. I don't think this was a conscious
decision or anything, but rather a strategic improvisation, which made
sense only in hindsight.
Well, Central Europe and East Asia got filthy rich by keeping imports at
bay, funding plush welfare states to stimulate internal demand, and
exporting like mad to American markets (e.g. VW's Beetle, or the Japanese
car exports of the late 1970s). Their economies were basically giant
condensation-chambers of capital, designed to efficiently recycle
export-earnings into domestic investment (via keiretsu bank-industry
alliances, long-term shareholdings, strategic trading firms like the
Japanese soga sosha). Typically, this involved inordinate amounts of bank
equity, as Japanese and German firms, for example, borrowed huge amounts
of local cash in the hopes of striking it rich in global (i.e. mostly
American) markets. What this meant was that the Central European and East
Asian systems had very high debt-to-equity ratios, and were very dependent
on American markets as a source of final demand.
Well, this system began to fall apart in the Seventies, because East Asian
and European businesses were kicking the ass of American corporations,
resulting in economic crisis for US firms (especially in the
machine-tools, metalworking and chemicals sectors). Nixon's response was
to scrap the Bretton Woods accord, thus allowing the yen, D-mark and
related currencies to strongly appreciate in foreign exchange markets. So
those countries got richer, but their export earnings got stomped. Their
response, in turn, was twofold: (1) shift to higher value-added exports,
like medium-class and luxury cars and electronics; (2) move low-tech stuff
like textiles, mining, smelting etc. to cheap Third World sweatshops; and
(3) insulate themselves against further depreciations by directly
investing in America.
The result was the creation of the Euro-periphery (Eastern Europe,
southern Italy, Iberia) and a Nippo-periphery (Hong Kong, Singapore,
Taiwan, Korea) which did a lot of subcontracting for the rising
metropoles. Caught between the hammer of low-priced, high-quality exports
from the EC and Japan, loss of market share to transplants, and the anvil
of low Southeast Asian/South European labor prices, the US economic
decline continued. In 1985, the US became a global debtor; today, the US
is $1 trillion in debt to the rest of the world on its net investment
position (creditors include Japan, at $800 billion, and Switzerland and
Germany, at around $200 billion each). American consumers can no longer
purchase the net output of Asian exporters, period.
This suggests three things:
1. East Asia and the EU must become the new sources of final global
demand. America is deep in rentier debauchery and decadence, and
can't fulfill this role any longer. South Korea will be saved not by
exports to America, but by exports to Japan (admittedly a tall order).
2. The European Union is neither a purely symbolic gesture nor a utopian
dream, but serves an essential function in stabilizing the economic
contradictions between the core and the periphery of Europe. Ireland and
Portugal have received billions of ECU from the core countries, which has
kickstarted their development; the same thing is happening in Eastern
Europe, where West German subsidies to the former GDR are powering a
mini-boom. Note that currency crises in the Europeriphery have been milder
and the consequences less ugly than in Asia.
3. Mahathir is dead right about one thing: East Asia is going to find that
unless they develop a euro-style united currency and a transnational
system of welfare handouts from the rich to poor countries (an
"Asiastate"), speculators and fickle market forces are going to stomp them
just like the Latin American and African economies got stomped. United,
East Asia has the resources to bail itself out of its mess; divided, they
fall prey to the bond ghouls and vampires of Wall Street. Which is it
going to be?
-- Dennis