ASIA: Economy recovers, bound and gagged

Dennis R Redmond dredmond at
Thu Aug 24 10:17:24 PDT 2000

On Wed, 23 Aug 2000, Stephen E Philion crossposted from Sean Healy:

> foreign direct investment. Restrictions on foreign ownership have
> largely been lifted, conglomerates have been forced to break up (in
> Korea, especially), bankruptcy laws have been redrafted to allow easier

No they haven't. Daewoo went to the wall; Hyundai, LG, Samsung and SK are doing quite well for themselves. East Asia's conglomerates were responsible for some of the highest investment and growth rates on the planet for the past fifty years, and they have no intention of slashing their own wrists for the likes of Larry "Current Account Deficit" Summers.

> The South Korean car industry,
> arguably the most productive sector in the region, is passing into
> Western hands. The country's second-largest car manufacturer, Daewoo,
> which collapsed in 1999, began merger talks with Ford in late June.
> France's Renault bought Samsung in April and, in early June, Korea's
> largest, Hyundai, signed a “strategic alliance” with Daimler-Chrysler.
> The two other pre-crisis car manufacturers, Kia and Ssangyong, had
> already been bought by domestic rivals.

Daewoo had an insignificant production-base, and Samsung was also pretty small. Hyundai snapped up Kia and remains by far and away the biggest single presence in the market. Daimler's equity stake in Hyundai isn't the same thing as managerial control, it's a long-term biz alliance. I'd also note that Daimler is run by German codetermination laws (meaning, the unions have 50% of the supervisory board seats) while Renault is 44% owned by the French state, a fine example of the Eurokeiretsu bailing out the Asiakeiretsu.

> The weakened East Asian economies are now on a
> permanent drip. The bailout and budget deficits have put them deeply in
> debt. Government debt, chiefly to the IMF, has quadrupled in Indonesia
> (to 91.5% of GDP), more than tripled in Thailand (to 50.3% of GDP), more
> than doubled in Korea (to 29.5% of GDP), and added half again in
> Malaysia (to 52% of GDP).

So what? Late capitalism needs debt like mercantilism needs gold. No nation in history *ever* got rich without piling on debt. And the debt isn't owed directly to the IMF, but to domestic bondholders, a different kettle of fish altogether. China and Singapore have developed a superb array of bureaucracies with which to keep the bourgies in line (of course, they copied Japan); Korea, Thailand and Malaysia ought to do the same.

> Much of
> the debt falls due in two years' time, which is also when industry
> analysts expect the world market for semiconductors and other electronic
> goods to crash.

(Sigh). The Left is always predicting the last crash. The Asian recovery is pretty deep and broad-based, and mostly financed by Japanese and EU money (the Miyazawa plan, plus helpful Eurobankers). Japan in particular has been getting its act together, and is starting to provide serious money for SE Asia; there also seems to be an emerging consensus among Asian elites that Asia needs EU-style institutions to prevent future crises. It's not just Taiwan and Malaysia; China and Japan have been talking about early warning systems for currency markets, that sort of thing.

-- Dennis

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