>Moreover, recent devaluations in Thailand, South Korea, Malaysia, etc have
>not stimulated the kind of export boom that Mexico's peso devaluation
>enabled in 1994. There seems to be at best a weak linear relationship
>between devaluations and exports.
It's not simple, that's for sure. U.S. MNCs took advantage of Mexico's collapse and stepped up investment and production, since the devaluation cut Mexican costs to a fraction of what they were beforehand; nothing comparable has happened in Southeast Asia.
A weakening currency can be as much a symptom of trouble as a stimulus to exports; if, as Shaikh argues (rightly, I think), long-term currency trends are determined by differences in relative productivity, then the weaker countries need devaluations just to stay in place.
>In terms of Brenner's framework, one could actually argue that the dollar
>devaluation may have done greater work in maintaining excess capacity in
>the American based consumer goods industry in particular in the face of
>international competition than in actually stimulating exports which, given
>the weight of capital goods, are more conditioned by the strength of world
>investment demand.
But the early-80s strength of the dollar had a lot to do with the downsizing of U.S. manufacturing - massive bankruptcies and plant closures that provided just the exit that isn't supposed to happen anymore. During the 1980s, U.S. manufacturing capacity grew 2.5% a year, compared with 3.9% in the 1990s, and a post-WW II average of 3.7%.
What consumer goods capacity was sustained here? Zenith TVs for a few years?
>the La Plaza devaluation
It's Plaza, like the hotel in New York that it's named after.
>profitability hardly
>spiked at all. I don't see how this conclusion does not follow from
>Brenner's anti Keynesian framework: if the restoration of profitability
>requires liquidation of marginal firms (or industries), then there can be
>no resort to any Keynesian measures--inflationary money creation, lower
>interest rates, lotsa govt spending or...devaluation of the currency.
But there was plenty of liquidation in the 1980s and into the early 1990s - massive bankruptcies, restructurings, and M&A on an unprecedented scale. Europe is now going through a similar process, though at a more leisurely, less brutal pace than the U.S.
>Now on another front: Brad's drinking buddy has advised Japan not to rely
>on yen devaluations to stimulate its economy--why?
So as not to swell Japan's already giant surpluses and make life difficult for U.S. exporters.
>He seems to be urging
>money creation to escape a liquidity trap, not simply lower interest rates
>and fiscal stimulus. He is worried about the slow down in investment in
>Europe and Japan and obviously concerned that in the face of a collapse in
>internal accumulation abroad, the US will not be able to withstand the
>resulting export push as a mounting US current account deficit leads to the
>implosion of America.
Optimist!
Doug