C. Liu,
You wrote:
> D.L.:
>
> I draw your attention to a front page WSJ article, March 8, 1999:
>
> Bearing Up
> Resilient Russia Dodges Calamities Predicted After Ruble's Collapse
> Inability to Import Bolsters Domestic Manufacturing ; Barter Proves a
Safety Net
> The Banks aren't Much Missed.
>
> The point of the article is that there is life after the Western banks
left. The key
> sentence is: "Going cold turkey has been less ruinous than predicted."
> With imports now priced out of the market, domestic production has picked
up in some
> industries, etc.
>
> Your assumption that Asia must need Western capital and capitalism and
Western markets
> is valid only in your head. Asia will survive better with only 15% of
its GDP devoted
> to trade, as the US does. And Asia is working hard to concentrate trade
within the
> region.
> The West is not indispensable.
>
> Henry C.K. Liu
-and I thank you once again for alerting me to a relevant piece. I would, however, suggest that the current fascination some people have for the "golden age" practice of barter is entirely misguided. When an economy is practicing barter, they are completely screwed and that is simply the end of the argument. You cannot finance the building of a semiconductor factory with bartered chickens and potatoes.
As for foreign trade, obviously the case can arise where "entrepreneurs" simply abandon domestic commerce and sell a country wholesale to foreign markets. However, I would suggest that such a practice presupposes a vast difference between the liquidity of the foreign and domestic markets. So then, the question arises what to do in order to increase the liquidity of domestic markets. Certainly there is protectionism. That is essentially the process of forcing an economy to adopt the maximum amount of autarky. It has its place and Western countries accept quite a bit of East Asian protectionist practices. We then come to the discussion of autarky as a desirable and feasible goal. Can Japan, for example, establish autarky? Obviously not. So, that economy, like the Korean economy, has focused on export trade. The benefits are two, first export moves the economy's account balance to the positive and second, and more important in a sense, its economy "finds value" against the more dominant economies. The currency of an exporting country is in demand, since its goods are. That means that fast money growth will not hurt the value of the currency as much. A positive trend in the local currency also means that direct foreign investment is more attractive to foreign lenders.
Clearly, opening up access to a much larger capital base has been tremendously beneficial to East Asian economies. The trouble is that their financiers also have to grow the capital base domestically and not throw the money away playing foreign currency markets (a rampant practice in Russia before the crash). Clearly, Japan and Korea (to mention two) expanded domestic capital base and perhaps far more than they used foreign capital. That seem to play into your point except for one glaring fact: protected mandarin capitalists may begin by expanding the capital base to the benefit of the entire economy but they end, inevitably, by using their power to create credit money for creating distortions and bubbles. This is completely inevitable. We see it in the U.S. in the stock market generally and the Internet stocks particularly. Doing real business is hard work and speculating is easy.
Clearly regulation is the answer to reckless financial practices. To regulate too far undermines domestic capital creation and liquidity, the very things you are trying to engender. To politicize the process of credit creation, absent real worker control of the means of production, simply marries a politically elite with an economic elite and then you have the case of the mandarin and the Nomenkltura. The only effective discipline *within the capitalist system* (where we most decidedly are) is the competition of other capitalists. BUT FOR the currency crisis, the mandarin capitalists in East Asia and the Nomenklatura of Russia would have merrily continued pissing away their economies' resources just as they had been up until that time. If not for the fact that Western financiers started taking a second look at their bonds, would the Japanese and Korean mandarin capitalists have changed their ways and revealed their terrible debt situation? If not for the fact that their currency became worthless to foreigners, would the domestic capitalists of the stricken regions have turned their attentions towards the internal market? Conversely, if not for the influence of foreign markets and capital, would Thailand, et al, be in the position where they even had something to lose? Compare the growth rates in Thailand before and after the beginning of the influx of foreign capital and the concentration on serving foreign markets and you tell me.
The ugly truth is that there is no economy under capitalism which does not serve the pleasure of capitalists. You can piss and moan about it all you want but so long as they have all the money, what are you to do about it? Even the red mandarins of the P.R.C are acknowledging the entrepreneurs. The reason, I say, (and I don't get bored repeating it, either) is credit creation. The statist model simply does not have as effective a model for credit creation as capitalists have and that is the main trouble with it, economically (politically it's got a million problems, but we can get into that another time). So, you can smirk and wink at the floundering capitalists all you want and hint and point at the successes of state intervention, but what is the ultimate goal of that state intervention. What promise does it hold? How is the fact that a thoroughly elitist Thai bureaucracy wants to institute currency controls and blame the Western bankers for all its trouble supposed to inspire a Marxist? A Proudhonist, maybe, a fascist, a Peronist, but never a Marxist. How do we get from Matahir making populist speeches and imprisoning his political rivals to workers' controlling the means of production?
peace
p.s. - For those searching for a valid, but at the same time pejorative label for me, I would suggest: "red monetarist".
p.p.s. - C. Liu, once again Japan - an East Asian country - is in the G-7, so the East Asia v. Western angle is a little bit of a stretch.