I thought this editorial from the International Herald Tribune was germane to some of today's discussions. (By the way, the editorial page at the IHT is surprisingly robust these days -- much more interesting than those of its mothership papers.)
Paris, Wednesday, September 9, 1998
It's One World, Ready or Not? But Some Are Not
By Marshall Auerback and Patrick Smith International Herald Tribune
NORFOLK, Connecticut - In the months and years hence, these past weeks
will be better understood for what they are: the point at which
globalism lost its place as the world economy's unassailable logic.
Globalism's fall from grace is a step toward a more diverse community
of nations that is no longer so inclined to look West-ward for
The Russians' economic and political messes have brought financial
markets to calamity's edge, but Russia is in no position to challenge
anybody. At this point, all Moscow wants is help from any direction.
No, those first to confront the primacy of neoliberal capitalism are
the East Asians. They, too, have been in crisis. But they have now
arrived at economic policies entirely at odds with those proposed by
the U.S. Treasury and the IMF, which have long led the globalization
The world took little notice in December when Mahathir bin Mohamad,
Malaysia's prime minister, convened a summit of Asian leaders in Kuala
Lumpur. Most Western analysts pictured Mr. Mahathir as the
neighborhood xenophobe and dismissed his anti-Western rhetoric as a
It was partly that, but more attention should have been paid to the
Kuala Lumpur summit. East Asians have ever since nodded politely
toward the West with no serious intention of carrying out the IMF's
socially destructive, no-pain-no-gain solutions to their currency and
Some banks will close and some corporations will merge; jobs will be
lost and debt will be repackaged and sold. But from Tokyo to Jakarta,
the clear intent is to stimulate the region out of recession while
avoiding structural changes that the IMF has long deemed essential.
''I am an outdated Keynesian,'' Kiichi Miyazawa declared on the day
after he was named Japan's finance minister in July. He soon added
that he favored ''economic recovery, not reform.''
These are more than policy statements; they reflect strategy as much
as tactics. At issue are not just the next quarter's economic results
but preservation of an economic model that has advanced the region at
a rate and for a duration with no parallels in history.
This is the context in which Malaysia's imposition of capital controls
last week should be viewed. Wall Street and the State Department are
reportedly shocked that Mr. Mahathir has taken this step. They should
be. We now have the first live case study of an alternative to the
Anglo-American model, which ranks unfettered capital flows among its
Malaysia's new policy has prompted unqualified objections in Western
financial capitals. Currency controls will produce a fatal loss of
confidence, it is said, and Western funds that have stayed the course
in Malaysia will flee.
Whatever happened to history? With few exceptions, capital controls
were in place across the region during the Cold War years - the Asian
''miracle'' era - and they never impeded investment. China, South
Korea and Taiwan still maintain controls. As to capital flight, the
Kuala Lumpur market's grim numbers suggest that supposedly loyal,
long-term funds left town a long while ago.
Understood properly, capital controls are intended to limit inflows,
not outflows. Mr. Mahathir has concluded that large amounts of
short-term capital from abroad are too disruptive of a system based on
high savings rates and high levels of corporate debt.
Condemned in the West, Malaysia's turn inward has summoned an eloquent
silence from the rest of East Asia. If Malaysians succeed in
rekindling growth, as they have a good chance of doing, it will be one
more signal that Anglo-American capitalism will have to take its place
as one alternative among others. We will eventually count division of
the world into discrete economic blocs among globalism's lasting
Many in the West have viewed Asia and other regions not as complex
societies but as markets ruled by market logic alone. Asian leaders
are perfectly positioned to deliver a correction here. They may fall
short as principled democrats, but their economic success is
intimately tied to the social cohesion that globalism challenges.
It is well understood across the Pacific that globalization caused the
Asian crisis and cannot logically be its cure. Some in the West have
been confident for years that globalism is inevitable. It isn't. One
world, ready or not? ''Not'' is the clear response.
Mr. Auerback is a partner in Veneroso Associates, a global strategic
consulting firm. Mr. Smith is author of ''Japan: A Reinterpretation.''
They contributed this comment to the International Herald Tribune.