-Caveat Lector- Dave Hartley http://www.Asheville-Computer.com http://www.ioa.com/~davehart -----Original Message----- From: Katie Hernandez [mailto:[EMAIL PROTECTED]] Sent: Monday, September 20, 1999 3:46 PM To: [EMAIL PROTECTED] Subject: [evoco_discussion] An Interesting Economic Model. Excerpted from Stratfor's weekly analysis http://www.stratfor.com Regarding economics and the stability of Asian economies... ==== Indonesia's neighbor, Malaysia, followed a very different policy, which originated in a radically different analysis, heavily ridiculed at the time and today. According to the Malaysian prime minister, the origins of the crisis had little to do with imbalances in the country's economy. Rather, they had to do with the structure of the international financial system and particularly the management of international currency flows. According to Mahathir, it was an illusion to think of short-term capital flows as market driven. On a day-to-day basis, control of short-term capital was in the hands of a relatively small number of massive currency hedge funds. Mahathir claimed that George Soros and other hedge fund managers were orchestrating the collapse of Asia's currencies. Because they profited from relatively small differentials, they were prepared to create sudden, massive and uncontrollable outflows of capital that would wreck national economies by causing both short- and long-term capital flight. Mahathir's analysis tended to be more colorful, charging Jewish conspiracies against Muslim countries. The primary purpose of his analysis was political. Mahathir used his analysis to explain why his government had not failed. Rather, he argued Malaysia and the rest of Asia had been victimized by the international system. He personalized the system into the person of George Soros for further political effect. In short, needing to stabilize his polity, Mahathir created an economic analysis in which the stabilization of his society was its grand purpose. He successfully diverted his attention from the Pan-Asian economic practices that had triggered the crisis, such as irrational capital allocation, absurdly low rates of return on capital, an undercapitalized banking system and the failure to create domestic demand while relying on exports. Instead, he refocused domestic attention on the claimed defects of international systems. It was effective politics. It also spawned economic policies that the World Bank has now endorsed. If the central problem were the nonexistence of a free market in short-term currency flows, and that these flows were instead controlled by a few financial institutions, then the rational answer to oligopoly was government regulation. Accordingly, Mahathir slammed currency controls on the flow of money into and out of Malaysia. Conventional economic theory said this should have had a devastating effect. In fact, compared to Indonesia, the actions (along with other acts of repression, such as the trial of Anwar Ibrahim, Mahathir's former protege and advocate of the international economic community in Malaysia) not only helped stabilize the political system, but also did not seem to have produced a great deal of economic harm. ==== Without commenting on Mahathir's ideology, politics, or ideas about conspiracies, it seems that we have before us, again, proof of the power and efficiency of LOCAL control. The strategy used by Malaysia might not work anywhere else, but it is simply a perfect fit for Malaysia... For those who are interested in a LETS type monetary system, this seems to be providing a model of how it could work within a large regional, if not global, economic system -- including "traditional" monetary systems. This is not my area of expertise, but I bring it to the attention of those who have been investigating alternative economic systems -- studying Malaysia's successful strategy may help you identify the critical questions to ask when designing a LETS system that eliminates some of the larger pressures to "conform" to existing systems. Creating the World We All Want to Live In, KT Katie Hernandez - ICQ 11136094 * * * * * * * * * * * * * * * * * * * * * * * * * * EVOCO - Transformational Leadership - http://www.evoco.net TEAM EVOCO - Web Design and Web Hosting - http://www.evoco.net/team_evoco ------------------------------------------------------------------------ The topic for discussion through September 10, 1999 will be the Evoco Mission Statement. DECLARATION & DISCLAIMER ========== CTRL is a discussion and informational exchange list. Proselyzting propagandic screeds are not allowed. Substance�not soapboxing! 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