Date: Wed, 4 Feb 1998 17:27:42 -0500
From: Yoshie Furuhashi <Furuhashi.1-AT-osu.edu>
Subject: Re: M-TH: Fixing Asia


Justin wrote:
>>Rob posts an attack by Jeffery Sachs on the IMF's policies towards the
>>ex-dragons after the recent collapse of the Asian markets. This boggles
>>the minds. It's like the Pope advocating contraception or Clinton
>>attacking free trade. What's going on? Doug? Please explain.

I don't find Sachs' position strange. Rational capitalist ideologues would
rein in short-term greed to consider the survival of capitalism as system
first, and Sachs in this instance is representing capitalist reason and
collective interest in survival of the system.

Stringent applications of IMF policies will cause severe recessions--make
them depressions--in East Asia. Japan has been financially shaky for quite
a while, and now the banks there are encouraged to squeeze smaller business
debtors out of credit and the government is prepared to let the market
discipline even venerable financial houses such as Yamaichi out of
business. The U.S. market is probably peaking just now (if it hasn't peaked
already) and faces a recession in the near future. The prospect that all of
the above may coincide must be enough to make a rational capitalist faint.

East Asia is important for purposes of capitalist legitimation as well. It
has been the only part of the non-European world that escaped (or was
escaping) the periphery status. Without Asian Miracles as carrots, the only
capitalist tools to discipline the Third World are sticks of tight money
and lower wages, backed up by the US military in case workers revolt.

Besides, smart capitalist ideologues (such as Sachs and Soros) are very in
touch with how irrationality of capitalist markets--especially in times of
financial panics--can wreak havoc. One of the big contradictions here is
while one kind of capitalist reason demands 'transparency' of economic
information, another kind of capitalist reason knows that too much
'transparency' destroys 'market confidence.' Rationality of individual
capitalists causes systemic irrationality. Honest and public accounting is
not always good for capitalism. For instance, Sachs wrote:

"A better approach would have been for the IMF to stress the strengths
rather than the weaknesses of the Korean economy, thereby calming the
markets rather than further convincing them of the need to flee the
country. Months ago, when the financial crisis began, the Fund could have
quietly encouraged Japan, the US and Europe to provide some credit support
to the Bank of Korea. It  might well have worked with the major banks to
encourage them to roll over their short-term debts without inflaming the
panic. With appropriate confidence-building measures, Korea could probably
have got by with a modest slowdown in growth, no credit crunch, and a
realistic time horizon of a few years to complete its needed financial
reforms."

Within the terms of capitalist reason, Sachs is quite right.

Yoshie




     --- from list marxism-thaxis-AT-lists.village.virginia.edu ---