Another reason why the devaluations in East Asia have not had the "desired elasticity" in terms of exports is a ridiculously technical and trivial one: shortage of transport capacity. In particular, the number of ships available to carry exports to the US from SE Asia depends on the number going there with goods. Apparently does not pay well to just carry stuff one way. So, the decline in imports with imploding economies there has reduced their ability to export because of a drying up of shipping availability, so to speak. Barkley Rosser -----Original Message----- From: Doug Henwood <dhenwood at panix.com> To: lbo-talk at lists.panix.com <lbo-talk at lists.panix.com> Cc: brenner at history.ucla.edu <brenner at history.ucla.edu> Date: Tuesday, March 02, 1999 1:07 PM Subject: Re: Brenner on dollar devaluation
>Rakesh Bhandari wrote:
>
>>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
>