Some comments, not amounting to an argument.
1. Gunder Frank, as always, put a provocative slant on it with
the merit of causing a second-take. I'm not sure that at the
moment, after 7/8 months, there is the evidence yet to conclude
with Gunder Frank that it signals a shift from west to east.
Further, there are many layers to this thing, and a shift on one
layer one way does not mean a shift in other layers in the same
direction. To put a bold face to it, I think that actually the
collapse has re-entrenched power in the old centre(s); the best
face to put to it is that if there was a shift towards E Asia,
then that has been brought to a halt and a deferment of any
consolidation of that shift.
2. While there's great merit to distinguishing between the 'real
economy' and the other 'unreal economy', there's a limit to this
distinction and the links between them are important and real
enough. In the circumstances of Asia today, the real economy is
taking one hell of a beating. That would happen in any situation
where market capitalization has been halved, and currency values
have dropped by 20-400% (as there are various modes of
reckoning, mine is simply take current value, less previous
value, divide by previous value), with the exception of HK
(because of the peg), India and China (because of
non-convertibility) and Taiwan (because of regulations on
currency trades, limiting to cover trade in goods) and, to a
lesser degree, Singapore (also well regulated, although the
currency has dropped by about 20% against USD)
The obvious impacts are:
- to directly and indirectly financially cripple locally-owned firms
- to relatively cheapen exports ostensibly making them more competitive
- to make imports, especially of capital and intermediate goods,
much more expensive, off-setting the above
- to cheapen labour and other locally-sourced inputs for foreign firms
- all the familiar consequences for the wage earner
In Indonesia, e.g., virtually all large local firms are
technically bankrupt as they can't meet debt payments or service
their debts -- not even well-run firms can escape a currency
devaluation of 400% at today's rate; at one time it was down as
much as 600%. In S Korea, it is estimated that some 50,000
businesses will disappear this year. There's an effective credit
crunch, etc.
Increases in export competitiveness for local firms due to
currency devaluations are to some degree offset by the credit
crunch, the need to import capital and intermediate goods
payable in foreign currencies, and negated somewhat by the fact
that the devaluations have taken place across a broad swathe of
countries, all producing more or less similar goods for the
export market. Further, many of these countries were already
producing at near capacity, facing labour shortages, etc. and
it's not likely that they can rack up productive capacity in the
short term, or if they do, it will have implications for the
necessary shift up the technological ladder. For foreign firms
from Japan, US and Europe involved in manufacturing, it's
generally good, i.e. benefits from reduced labour costs and
local inputs, benefits from currency devaluation, and little
difference in sourcing capital and intermediate goods: in brief
it enhances their basic position of seizing advantage of
localized markets and pricing in certain parts of production,
with global markets and pricing in sales.
3. For a moment 7 months ago, the regionalization scenario on
the economic level looked a possibility with the proposal for an
Asian Fund. But as we know, that got shot down very quickly and
the rapidity and ease with which it was shot down indicates
something about where the centre remains and the centrality of
links between centre and each of the countries in the region
over the links between countries in the region.
4. Further, the recently concluded round on financial
liberalization and the current MAI will further reduce state
autonomy or ability to control the situation. If the MAI goes
through, and via the pressures of the collapse, industrial
policy will effectively become impossible. But of course
industrial policy has been blamed as one of the causes of the
collapse.
Virtually all countries have had to open up to take-overs,
hostile and otherwise -- and there's quite a bit of shopping
going on amongst transnational capital: why not, at knock-down
prices. Yes, mergers with and acquisitions by transnational
capital might strengthen capital operating in these areas and
yes, it could result in a geographical shift of centre, but it
will be of a different sort from the previous shifts from
southern to n-western europe, across the atlantic to the US.
Maybe this is unimportant -- got to sort out my thinking and
emotions on this. But equally, it could as well be a cheap means
of acquiring manufacturing capacity, turning or entrenching
these areas into low-cost production lines, as they have been.
And as implicit social contracts, as in S Korea, are actively
dismantled, the latter could well be the case what with nominal
wage rates for foreign capital effectively halved, bring them
back in real terms close to what they were in the early 1970s
when in a place like Malaysia they were about USD2 per day.
5. And rather than getting out from under the IMF, it would
appear that more than at any other time, IMF theology has
triumphed if with resentment. Some of this has not a little to
do with the middle-classes that have emerged in the course of
the boom, some has to do with local political and economic
structures resented by a majority or at least a significant
minority which hopes that the IMF strictures will eliminate or
ameliorate those structures, some has to do with the collapse of
any visible alternatives other than the market as viewed in a
broadly neo-liberal sense. So in an ironic twist, when
Wolfensohn was in Indonesia recently, some local NGOs were
condemning the World Bank for having extended loans, etc.
without sufficient conditions, while Wolfensohn did a 'mea
culpa' only to note that the critical issue was how to save the
economy!
6. It surely cannot have escaped any one's attention that there
was something of a turnaround - perhaps a flash in the pan,
perhaps the end of the beginning - after the visits of Messrs
Cohen and Summers, Camdessus and Wolfensohn, even ole Henry, and
their making the right noises. It's clear who has the power of
pronouncement. Even the 'nationalistic' Malaysian media has
taken to hanging on to every word of the foreign investors,
analysts, etc. So Mobius says buy and it's reported widely;
George Shultz, poor man hardly seemed awake, was induced to say
the right things, etc.
7. Placed within the context of the current phase of
globalization, I would suggest that E Asia, with the possible
exception of Japan, has been effectively put in its place -- and
I think the media has caught on to this with alacrity. Of course
there's also some alarm; after all, E Asia has been the only
part of the former Third World where the past 30 years has seen
an improvement over the previous 30. Everywhere else, for all
the fluff, things are worse off. And E Asia was the convenient
ideological model of how the market can make good. Hence now the
concern to ensure that people do not mistake this for a usual
capitalist collapse, rather that it is 'crony capitalism' or
'asian values' or what not -- shades of what socialists used to
say about the Soviet Union -- state socialism, actually-existing
socialism, or whatever, but never without a qualifying adjective.
Finally, Dennis Redmond is right to say the situation is
complex. But his response is a compound of what I think to be
absolutely spot-on and some truly off-the-wall stuff that it's
hard to unpack, perhaps lazy might be a better word.
But one point: It blinds as much as illuminates to talk of E
Asia/SE Asia as one entity. The classification into 1st tier
and 2nd tier NICs may be more helpful. If accepted, that the
statement of since 1985 the strategy started breaking down is
false. For the 2nd tiers, the period since 1985 has been one of
unprecedented growth until the collapse. In fact, it's been the
boom fueled by the Plaza Accord of 85 that made them recognized
as 2nd tiers, I think.
Also one query: Dennis R writes that "Singapore is propping up
Malaysia". What is the basis for saying so?
Khay Jin