Fixed line wraps, Japan Lacks Political Will to Save Ailing Economy

[Barry Brooks <durable@xxxxxxxxxxxxxxxxx>]

"Henry C.K. Liu" wrote:

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 th!
e 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
ks 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