Did I post that article that mentioned that something like 59% of the office space in Singapore is leased to American companies?
Which one, Japan or China will attempt to break out, and form an Asian block? Could a general malaise in Asia, lead to anything else in the next couple of decades?
It's hard to believe that such a power vacuum could remain in the East forever. But maybe it will be "just another American town". I read that our Big Cigars are very busy in Beijing too.
What daya think Henry? Yoshie? Australians too, I guess. I always think of Australia as a sort of big, floating, Anglo-version of Texas, plunked down in the middle of the Orient.(where does the word, Orient come from?)
Interview With a Vampire was pretty good. Nosferatu, ok. I mean, how come nobody noticed that guys ears. Maybe Spock was being too sensitive, eh? And all that pussy-footin' around in Farewell My Concubine, what was that about? Wait. I just got it. Between the magic box, and, well, the new magic box, I may never leave my house again.
But anyway, you gotta admit, STRATF"OR got the seeming irrelevancy right.
The G-7 Finance Ministers Meeting Drifts into Irrelevancy
Summary:
Few will remember the February meeting of G-7 finance ministers. Nothing of importance was accomplished or even discussed. That is what makes this meeting extraordinarily important: nothing happened or was expected to happen. After 18 months of global financial crisis, the G-7 met and no one expected it to matter. This means that there is no Asian crisis any longer. That is not to say that all of Asia's problems are no longer there. Quite the contrary. But it does mean that it has ceased to be a crisis and has become the normal condition of Asia. The meeting also signaled the absolute triumph of U.S. policy makers. The U.S. opposed any new multinational initiatives in favor of interest rates cuts, and that is precisely what took place. Some of Asia is beginning to recover. The major Asian powers, China and Japan, are not recovering but sinking deeper into the morass. That is no longer a crisis either. The important news this week was being made by foreign ministers and generals. The G-7 finance ministers were ignored. We are now fully into a new era, which for want of a better name, we'll call the post-post-Cold War era. It is also the post-Asia crisis era.
Analysis:
The G-7 finance ministers met in Bonn this weekend. The important news from the meeting was that there was no news. The meeting was best symbolized by the single concrete proposal that emerged from it, which was the creation of a "Stability Forum" consisting of members of various multinational bodies, whose mission it would be to sound the alarm in the event of financial instability. Since the body is supposed to meet only twice a year, the probability of catching an impending crisis is fairly low. Clearly, the proposal is not intended to be taken seriously. It is at most intended to be a symbolic gesture to those who, only a few months ago, were vociferously calling for the creation of an international regulatory body to oversee and control financial flows.
What the weekend meeting really represented was the utter victory of the American position on managing international financial crises, at least within the elite G-7 group, and therefore within the secretariats of the IMF and World Bank. The American position, consistent throughout the crisis, was that the free market should be allowed to work itself out. Indeed, from the American standpoint, many of the international problems stemmed from state intervention into markets and therefore required a relaxation of controls, not an increase. At the most, the U.S. was willing to countenance interest rate cuts by central banks. Indeed, the U.S. view is that the massive rate cuts by the U.S. Federal Reserve staved off a global crisis and stabilized the Asian situation as well.
Just a few months ago, serious discussions were being held about increasing the power of the IMF to regulate international credit markets. The Japanese, as well as the French, seemed in favor of the proposal. The Germans, after the election of their new leftist government also seemed willing to consider the view. What used to be called the Anglo-Saxon countries (U.S., Canada, and UK) were fairly well isolated in opposing this. Yet they won the day. There was no serious talk about a super-IMF. Indeed, there was little talk about a systemic international financial crisis. What concern there was focused on Russia and the danger of default there. The solution, as one could expect, is increased deregulation and an ongoing commitment to reforms.
The G-7 did, in fact, predict slower global growth. Now, G-7 predictions on growth in the past have been wildly inaccurate, so the prediction may or may not be true. What is interesting is the calmness with which the ministers and governors took the prediction. The collective view was that the normal process for stimulus should be taken by each nation as deemed appropriate. There were no calls for concerted, coordinated action on interest rates. Rather, there was the general view that the normal processes that have governed the international system are working. The U.S. did manage to get into the communiqué the demand that Japan and Europe increase domestic demand, but the Japanese were delighted that there were no resolutions and hardly any pressure on Japan on trade issues. Everyone left happy, except the Russians, and nothing could be done about them.
This was, therefore, an extraordinary meeting. What just a few months ago would have been a tense encounter with the financial markets hanging on every word, became an exercise in unimportance. How did we get from there to here?
In part, the transformation represents the sheer political power of the United States. By blocking all of the panicky proposals floated over the last year, the United States rendered them irrelevant. The fact was that even when totally isolated, the United States had the ability to block any major initiative simply by refusing to participate in it. The U.S. created a policy gridlock by refusing to entertain any fundamental changes in the international economic regime. At the same time, the U.S. did cut its interest rates, which stimulated the global markets decisively, while also strengthening foreign currency prices. In doing this, the U.S. partly mooted the discussion of reform.
The second element had less to do with the U.S. than with Asia itself. The willingness of some Asian countries to impose meaningful reforms also made a major difference. South Korea in particular moved decisively to restructure its internal economic relations. It was joined in this by countries like Thailand, Malaysia, Singapore and the Philippines. Each did very different things, and some did things that were quite opposed to U.S. wishes. Nevertheless, their willingness to shake things up, coupled with the natural resiliency of their economies has created something of a recovery in Asia.
As Asia recovered, Japan suddenly found itself isolated. Its economy, far from recovering, continues to deteriorate in very dangerous ways. Apart from its recent interest rate cut, which was designed less to stimulate domestic consumption than it was to decrease the pressure on business firms very close to the line, Japan has done nothing to restructure fundamentally its economy. For reasons we have discussed extensively in the past, Japan cannot carry out a fundamental restructuring. The gridlock is not political but structural. Higher interest rates will smash huge numbers of businesses; lower interest rates postpones the problem and thereby worsens it. Between a crisis now and a worse crisis later, Japan has chosen a worse crisis later. This is sensible, simply because the crisis now would be devastating and, after all, something unforeseen could still occur to save Japan. Miracles do happen. Under the circumstances, the best the Japanese could hope for was reduced pressure on trade issues--and that they got.
And so, with the Russians marginalized and the Chinese not invited, it was back to business as usual for the G-7. This means, in a way, that Asia has now passed from a crisis to a way of life. It also means that the Japanese and Chinese are officially on their own. Since there is no crisis, there is no need for concerted international help. Moreover, since the only immediate problem is a general deterioration in international economic growth, attributable as much to the general business cycles as to secular shifts in Asia's economy, in other words not a crisis, the expectation is that normal economic policy measures will be sufficient to cope with the problem.
We are now in the post-Asia crisis world. It is a world in which the major Asian powers, Japan and China, continue to wallow in major economic problems while the rest of Asia slowly emerges into a long-term, low-grade malaise. It is a world in which U.S. power is dramatically increased and in which the U.S. is under even less pressure to make serious economic concessions. It is also a place in which Asia, which had been groping toward a regional identity under the pressure of the crisis, is fragmented into national and sub-regional interest blocs, which are generally unable to forge a coherent strategy.
Perhaps most important, it is an Asia and a world in which economic problems are relatively less important that politico- military problems. This is the most startling aspect of the G-7 meeting. For several years, a meeting of G-7 finance ministers was infinitely more important than a meeting of G-7 foreign ministers. That is no longer the case. With the Kosovo issue on the table, along with Iraq and Korea, with Russia reversing its foreign policy course and China becoming increasingly unpredictable, finance ministers are much less interesting than foreign ministers. The G-7 finance ministerial meetings were trivial precisely because they dealt primarily with financial issues. The name of the game today is much more political and military.
This is not only true on a global level; it is also true within Asia itself. We have become used to dealing with Asia on primarily economic grounds, during good times and bad. Today, the most important decisions in China are political rather than economic. Many of the decisions that have increased the economic health of the rest of Asia rested on political will rather than economic processes. In Japan, where an economic reality is being set in stone, the central focus is on political matters. Politics is once again at center stage.
Few people will remember the G-7 finance ministers summit of February, 1999. Nothing much happened there. But that is precisely what made it so important. After 18 months of financial crisis, the February meeting established that the crisis had not gone away but had ceased to be a crisis. Instead, it was the normal condition of Asia. Moreover, it signaled the fact that the set of policies advocated by the U.S. had triumphed. Finally, it signaled the further decline of purely economic policy considerations and the growing importance of political and military considerations. The latter will be the hardest for Asia to get used to.
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