I agree with the main t hrust of Redmond's argument:
the present econ crisis in East Asia does NOT reflect the 'meltdown' of
the East As 'miracle' but just the opposite: it reflects the defcline of
the US and the Rise of East Asia in trhe world econ.
A major piece of evidence?
All postwar recessions in the world were US led, and Europe/Jpan,etc
lagged, including still the post/since 1967 Kondratieff B phase ones of
1973-75, 79-82, and 89-92, and alos the subsequent cyclical recoveries
were. --- until THIS one. This is the FIRST major recession of modern
times to START in Asia and to spread from there to others parts of the
world econ! THAT reflects that they dynamo/dynamism has shifted - as
Redmond says it is now Asian demannd -=- and credit! - driven and no
longer US. But a cyclical recession should not be confused with a
structural 'meltdown' as per what we are hearing a propos the APOEC meet
in Vancouver.
world systemaically submitted
gunder frank
agfrank@chass.utoronto.ca
On Sat, 22 Nov 1997,
Dennis R Redmond wrote:
> Date: Sat, 22 Nov 1997 15:22:22 -0800 (PST)
> From: Dennis R Redmond <dredmond@gladstone.uoregon.edu>
> To: WORLD SYSTEMS NETWORK <wsn@csf.colorado.edu>
> Subject: Re: Asia's crisis
>
> 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
>
>
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Andre Gunder Frank
University of Toronto
96 Asquith Ave Tel. 1 416 972-0616
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CANADA M4W 1J8 Email agfrank@chass.utoronto.ca
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