An interesting snippet pulled off a futurework mailing list a few months
ago which didn't seem to attract any comment: a summary of The Capital
Myth, article in Foreign Affairs May/June 1998, by Jagdish Bhagwai,
apparently Economic Policy Adviser to the GATT.
Apostasy in that raises the issue that free trade in goods may be one
thing, but free CAPITAL FLOWS may not be such a good idea after all, and
thus raising an interesting distinction that may yield some advantage to
the "other side"? Also the poster of the comment indicates that this could
signify a growing awareness of crisis in the world capitalist
nomenklatura, and of a potentially significant split?
This raised a question for me: Could this be a useful weak spot we could
exploit more cleverly than so far? Rather than take on the whole issue of
free trade and thus the entire global nomenklatura, by distinguishing
between trade in commodities and manufactures and the frictionless flow of
financial capital around the globe, tactically it could make it easier to
deal with the problems particularly being caused to monetary systems by
the removal of regulation, and begin to replace necessary regulatory
controls, in effect dividing the capitalist camp between those more rooted
in production and trade in goods, and the money-money financial casino
capitalist...
No, I'm not naive about the overall problem of unrestricted free trade
before anyone gets into lecturing. Sometimes, though, it might be a good
idea to not take on all the big boys at once, and explore ways to avoid
doing so!
Clearly people are tackling the issue of friction in financial flows -
Tobin Taxes, Chilean wait-states etc. But it looks to me that these
persons/organisation are usually operating within the context of a pretty
near total critique of Free Trade in all its manifestations, and thus can
be easily identified as the enemy of all capital (probably true and
rightly so!) and thus subject to the full ideological battering and
scaremongering/ridiculing for going against nature that follows from this,
alienating them from any possible "natural allies" (emphasise the qoute
marks!!) in the capitalist camp.
Any one got any comments on those thoughts?
And no, I don't understand the allusions the commentator is making in his
obvious snipes at certain people!
<snip>
Regardless of the latest poison pen e-mails from the Choir Boys for
Neoclassical Economics and other sophomores of SAIS,there is something
much more interesting in the latest (May/June 1998) issue of FOREIGN
AFFAIRS than Ed Lincoln's piece. Ed Lincoln's article is terrific. It
shows that he is not part of the "mutual understanding" industry and is
prepared to analyze a very serious foreign policy problem for many
countries (including the US), namely Japan's failures as a superrich ally.
It is to be expected that this break with American imperial ideology would
set off the choir boys and mobilize them to attack Ed Lincoln for daring
to be critical of "the linchpin of the Pacific." The triumphalism of
Mortimer Zuckerman in the same issue is on a par with Khrushchev's "we
will bury you" speech (Jim Mann in the Los Angeles Times has already
exposed Zuckerman very nicely). And Paul Krugman, for once talking about
something he is at least capable of doing research on, is highly credible
and persuasive. But the bombshell is Bhagwati!
When you get an article in the ultraestablishmentrian FOREIGN AFFAIRS from
the reigning prince and defender of free trade ideology entitled "The
Capital Myth," something is going on. The worm is actually turning. I was
reminded as I read his piece of that line from the Manifesto where Marx
notes that laissez faire capitalism collapses every historical tradition
and aspect of freedom "into that single, unconscionable freedom--free
trade" (Japan today compared with Japan in the 1950s is a perfect
illustration of this).
Jagdish Bhagwati, Arthur Lehman Professor of Economics at Keidanren East
(formally known as Columbia University), economic policy adviser to the
Director-General of the General Agreement on Tariffs and Trade, the man
who never met a Japanese trade surplus he couldn't defend in impeccable
neoclassical terms, has now invented a new concept: "the Wall
Street-Treasury Complex," the modern equivalent of the military-industrial
complex. He says that the "Wall Street-Treasury complex is unable to look
much beyond the interest of Wall Street, which it equates with the good of
the world."
He goes on to argue: "And despite the evidence of the inherent risks of
free capital flows, the Wall Street-Treasury complex is currently
proceeding on the self-serving assumption that the ideal world is indeed
one of free capital flows, with the IMF and its bailouts at the
apex in a role that guarantees its survival and enhances its status. But
the weight of evidence and the force of logic point in the opposite
direction, toward restraints on capital flows. It is time to shift the
burden of proof from those who oppose to those who favor liberated
capital." The great B says further: "freeing up trade is good, why not
also let capital move freely across borders? But the claims of enormous
benefits from free capital mobility are not persuasive. Substantial gains
have been asserted, not demonstrated, and most of the payoff can be
obtained by direct equity investment. . . .
These assertions (Bradford De Long, Roger C. Altman, et al.) assume that
free capital mobility is enormously beneficial while simultaneously
failing to evaluate its crisis-prone downside. . . . After all, China and
Japan, different in politics and sociology as well as historical
experience (the first time Bhagwati has ever used those concepts!), have
registered remarkable growth rates without capital convertibility. . . .
That brings us to the myth that crises under capital account
convertibility can be eliminated. We have, of course, heard this assertion
before as each crisis has been confronted, and then we have been hit by
yet another one. Like cats, crises have many lives, and macroeconomists,
never a tribe that enjoyed a great reputationfor getting things right or
for agreeing among themselves, have been kept busy adding to the taxonomy
of crises and their explanations. None of the solutions currently
propounded can really rid the system of free capital mobility of
instability."
I submit that this is a trifle more sensational than the U.S. Embassy,
Tokyo's former chief economist, now out of office, daring to write in
public on Japan the same way we write about every other economy on earth.
If anyone has earned the right to open his mouth on
neoclassical economics and particularly its manifestations in
international trade it has to be Professor Bhagwati. His new article is
the equivalent of every single tobacco industry physician standing up and
saying, "Of course our product will kill you. Any fool knows that." This
is real apostasy and a sign of the growing ideological crisis of the
American empire.
For those who would like to read further, let me also recommend the
brilliant review by Marshall Berman of the Communist Manifesto on its 150
anniversary in THE NATION,
May 11, 1998.
Chalmers Johnson President, Japan Policy Research Institute E-mail:
[EMAIL PROTECTED] Fax: (760)
944-9022
