Re: Japan Lacks Political Will to Save Ailing Economy

["Henry C.K. Liu" <hliu@xxxxxxxxxxxxxxxxxx>]

It seems to me that Japan and the US operate on very different ideology.  Japan
places importance on
the national economy and operates as if individuals and companies can only
prosper IF the national
economy prospers.  The US economy operates as a "natural" calculus of individual
survival.  To
Americans and American corporations, a national economic boom has no meaning
unless the
individual unit first benefits.  As markets globalize, this creates problems for
management in either
regime. For Japan, bailouts are normal, while in the US bailout, though they
occur, are exercised with
apologies.  When in trouble, the Amercian economy historically sacrifices the
weak and the small,
while the Japanese economy punishes the strong and big.

When the long overdue US recession hits, the Americans will lose their faith in
market free enterprise
as the Japanese have been losing their faith in their command economy, despite
the fact that the
government has been resonably effective in insulating the Japanese public from
economic pain.  The
Campaign 2000 rhetoric was already slightly populist and the recession has yet
to begin.

The problem is that around the world there are visible signs of exhaution. Asia
and Latin America are
completely worn out after fours years of tumult. The US boom, fed mostly by
global deflation, has
not been free lunches even in the US.  Even those who are doing well have to
work 14-hour days and
most families need to be two income households. Today, the NY Times run full
page stories on how
people with $40k incomes are living in their cars in Silicon Valley.  At this
rate, unemployment may
even comes as a relief and a guiltless way to get off the threadmill.

There was a moment in the late 60's, before the Vietnam War blew away all of
America's surpluses,
that people were begining to take 3 days week-ends on a regular annual basis
with 8 week vacations.
>From Los Angeles to Dulles to Scarsdale, fathers were home by 5:30 pm
barbarcuing for the whole
family and mothers had time for the children, and the GDP was a mere $200
billion.  We thought
then if the GDP reaches $1 Trillion, all economic probelms would be solved.
Instead, the GDP is
now over $7 trillion, and there is financial crises everywhere - from health
care to social security to
education, even defense.

There's got to be a better way.

The contradiction between globalising and territorially-based national social
and political forces is framed
in the context of past, present, and future world orders. The emerging world
order has always been and
will again be the result of a struggle for the direction of structural
transformation of the current order,
involving economic, political and 'sociocultural' changes. The prevailing trend
of the past two decades
toward the marketization and commodification of social relations has led to the
arguement that socialism
needs to be redefined away from the total visions associated with
Marxism-Leninism, towards the idea of
the self-defence of society and social choice to counter the disintegrating and
atomising effects of
globalising and unregulated market forces.  But this is precisely a
Marxist-Leninist vision: that under
globalization, national sovereignty in the form of nation states and governments
will give way to a
pervasive socio-economic order. In other words - the withering away of the
state.  The sole function of
government is to protect the weak, because the strong is itself government and
needs no other.  This truth
gave birth to monarchyism: the king's function was to protect the peasants from
aristocratic abuse. So in
modern terms, the government's function is to maintain socialist/populists
values in the context of
capitalist market fundamentalism.  So the withering away of the state prior to
the end of economic
exploitation is putting the cart before the horse.

The unwitting by-product of the Right wing's quest to get government off the
back of the people is a
Marxist dialectic.  The only flaw is the economic structure. The Right wants the
withering away of the
State prior to the transformation of capitalism into socialism.

Greenspan is now in danger to falling into the Volcker trap, but unlike Volcker,
Greenspan is merely
fighting phantom inflation rather than real hyper inflation.
The long boom of the 90s had not been engineered by the Fed, its imminent demise
also cannot be
prevent by the Fed.  The people who are misled into admiring Greenspan now  will
be the same people
who will scream for his hear when the crash comes.

There are only two options:  option one is to ease rather than tighten in the US
and let inflation neutralize
the massive private sector debt and  keep the global recovery going; and option
two is to tighten gradually
in the US and abort the global recovery and let the whole thing collapse in a
couple of years.  Either
option will face the inevitable down cycle pay backs.  The perpetual boom has
not replaced the business
cycle, new economy or not. The difference between the two options are not so
much economic but
political. Economically, it will all come out in the wash at the end of the day,
but politically the options
determine who is doing the laundry and who goes down the drain with the wash.
In the age of
information and communication, the majority interest will prevail, with luck
without violence, but most
likely with violence.  Despite US fixations, majority interest does not
necessarily spell capitalism or
representative democracy.
Socialism collapsed in the 80's not because its economic theories are
inoperative, but because in
defending the environment to make socialist principles work, socialists
governments had to adopt garrison
state mentality that overshadowed all other potential benefits.  On the other
hand, capitalist market
fundamentalism worked for as long as this mutation of socialism was posed as a
false alternative.
Now, as the sole operative system, capitalist market fundamentalism is faced
with its own internal
contradictions.

But finance capitalism may turn out to be the deadliest enemy of industrial
capitalism, and finance
capitalism may well be the last transformation of capitalism.  There are clear
indications that insufficient
demand is caused by the abandonment of the labor theory of value and the
acceptance by neo-liberalism
of the theory of marginal utility. Lack of demand is more deadly to finance
capitalism than the fear of
socialism.  Technology has finally turned Charlie Chaplin's Modern Times into
reality.  The rhetoric of
the current presidential campaign is more populist than the New Deal, and the
recession has yet to begin.
Socialism, by other names, is now about to be viewed as the vacine against a
catastrophic implosion of
the capitalist system in its home garden.

Globalization is not a new trend.  It was policy for all empire building.
Globalization under modern capitalism began with the British empire, marked by
the repeal of the Corn
Laws in 1846, five years after the Opium War with China (I have posted my view
on the historical
relationship of the Corn Laws and WTO), and two years before the Revolutions of
1848.  Great Britian's
embarked on a systemic promotion of free trade and chose to depend on imported
food. France adopted
free trade in 1860 and within ten years, was faced with the Paris Commune, which
was suppressed
ruthlessly by the French bourgeoisie, by putting to death 20,000 workers and
peasants, including children.

Despite a backlash movement towards protective tariffs in Britian, Holland and
Belgium, the global
economy was characterized by high mobility of goods across political borders.
As Europe adopted
political nationalism, international economic liberalism developed in parallel,
until 1914.  Only WWI, the
1929 Depression and WWII caused a temporary halt of free trade.

Like the US now, Britian was a predominantly importing economy by the close of
the 18th century.
Despite the industrial revolution's expanded export of manufacturing goods,
import of raw material, food
and consumer amenities grow faster export of manufacturing goods and coal. The
key factor that
sustained this imbalance was the predominance of the British pound, as it is
today with the US dollar and
its impact of the trade deficit.  British hegemony of marine transportation and
financial services (cross
currency trade finance and insurance) earned Britian vast amounts of foreign
currencies which could be
sold in the London money markets to importers of Argentine meat and Canadian
bacon.  International
credit and capital markets were centered in London.  The export of financial
services and capital is the
hidden surplus to sushioned the trade deficit.  This financial hegemony is now
centered around New York
with dollars as the base currency.  When the Asian tiger export to the US, all
they get in return are US
treasury bills, not direct investment in Asia.

Chartalist  theory of money claim that all governments, by virtual of their
power to levy taxes payable
with government designated legal tender, do not need fianancing and should be
able to the employer of
last resort to maintain full employment.   This is economics truth except for
international finance and
banking which drive down the exchange value of any currency whose government
imposes chartalist
measures.  Capitalism is thus made necessary by the finance arhitecture imposed
on the world by
the hegemonic finance power, first 19th century Great Britian, now the US.  When
the developing
economy call for a new international finance architecture, this is what they are
really driving at.  Foreign
exchange markets insure the demand for capital export.  Hobson and Lenin
identified the surplus of
capital in the core economies and the need for its export as the material basis
of imperialism.  For
neo-imperialism of the 21 century, this remains fundamentally true.

Then and now, the international economy rests on an international money system.
Britian adopted the
gold standard in 1816, with Western Europe and the US following in the 1970s.
Until 1914, the exchange
rate of most currencies were highly stable, except in victim semi-colonial
economies such as Turkey and
China, or a radical upheaval such as the French Revolution.  The gold standard,
while greatly facilitaing
free trade, was hard on economies that produces no gold, and the gold base
mentary regime was generally
deflationary (until the discovery of new gold deposits in South Africa,
California and Alaska) which
favored capital. William Jenning Bryanin spoke for the world in 1896, when he
declared that mankind
should not be "crucified upon this cross of gold."  But the 50 years lead time
of the British gold standard
firmly established London as the world's financial center.  The world's capital
was drawn to London to be
redistributed to investment of the highest return around the world.  Borrowers
around the world were
reduced to playing a game of "race to the bottom".
The bulk of economic theories within the context of capitalism was invented to
rationalize the global
system as natural truth. The fundamental shift from the labor value theory to
the marginal utility theory
was a circular self validation of the artifical characteristics of an artificial
construct based on the sanctity
of capital, despite Marx's disection that capital cannot exit without labor -
when assets are put to use to
increase labor productivity, it remains idle assets.  Mergers and acquisitions
became rampant.  Small
business capitalism disappeared between 1880 and 1890. Workers and small
busineses found that they
are not competing against their neighbors, but those on other sides of the
world. The corporation, first
used to facilitate the private ownership of railroads, became the organization
of choice for large industries
and commerce, issuing stocks and bonds to finance its iundertakings that fell
beyond the normal financial
resources of individual entreprenneurs.  This process increased the power of
banks and financial
institutions and brought forth finance capitalism. Cartels and trusts emerged,
using vertical and horizontal
integration to eliminate competition and manipulate markets and prices for
entire sectors of the economy.
Middle class membership was mainly concentrated in salaried workers of
corporations while the working
class were hourly wage earners in factories. The 1848 Revolutions were the the
first proletariat
revolutions in modrn time.  The creation of an integrated world market, the
financing and development of
economies outside of Europe and the consequence of rising standards of living
for Europeans were the
triumphs of the 19th century system of unregulated capitalism.  For the 20th
century, the process
continued, with the cneter shifing to the US.

Frederich List, in his "National System of Political Economy" (1841) asserts
that political economy as
espoused in England at that time, far from being a valid science universally,
was merely British national
opinion, suited only to English historical conditions.  List's institutional
school of economics asserts that
the doctrine of free trade was devised to keep England rich and powerful at the
expense of its trading
partners and it must be fought with protective tariffs and other protective
devises of economic nationalism
by the weaker countries.
List influenced revolutionaries in Asia, including Sun Yatsen, who until he came
under the influence of
Marx and Lennin, was primarily relying on List in formulating his policy of
economic nationalism for
China.  List was also the influence behind the Meiji Reform Miovement in Japan.


    Henry C.K. Liu