Economy still flows, even with whitecaps

January 15, 1998|By Franz Schurmann

THE river of economic history can play tricks on people -- like suddenly changing course. But it doesn't happen often. So now, too, East Asia's economic river, for all its rampaging, is likely to stay on course. Early next century -- even more than now -- Asia will be the world's No. 1 economic powerhouse.

Economies are made up of things of value. Money itself has no value. It only measures value and gives people access to valued things accordingly. But because of the kind of economic system all the world's people now swim in, many confuse money's storm-driven whitecaps with the river.

Global matters

Our current globalized economy is impelled by a system of consumer capitalism. Every day, cash-rich people pour huge amounts of capital into investments to produce enormous amounts of goods. These goods get consumed by people already in the new paradise of global consumption and many more seeking inclusion. Nothing in the current East Asian financial crisis so far indicates this paradise is about to end.

The rampaging waters are entirely a crisis of money, not of economies. Some of the whitecaps have been caused by scavenger rogues who feed on diseased financial bodies riding the river. But the scavengers are not the problem. Rather, the problem is the bodies and the debris collecting around them.

Capitalism has been around for a long time. Wherever it has appeared, too much of the value it creates floats up to the rich and the powerful, whose elegance and mastery decay easily. If renegades don't come along to sweep away the resulting debris, the river will break its banks and seek new directions.

Renegades emerge at key points in history to sweep the debris away. One of global capitalism's biggest renegades was the United States when it was flush from victory in World War II. It swept away German and Japanese bureaucracies, corporations and cartels, which sucked enormous amounts of wealth from below to wage hideous wars, impoverishing their people.

At first, the German and Japanese peoples were ravaged. But soon enough, a new economic system was built up -- consumer capitalism -- and it created economic paradise. Newer and younger entrepreneurs transformed money into capital that produced goods, which pretty soon most Germans and Japanese could afford.

In the 1970s, it was our turn to undergo debris removal. It was England's "Iron Lady," Margaret Thatcher, who told the kindly Ronald Reagan that unless America's overloaded ship of state was radically lightened it would sink and block the river's flow.

Mrs. Thatcher's message was to make money flow faster and faster and soon enough, America's consumer paradise would return. By August 1982, signs of the current bull market appeared.

'Big bang' reform

In 1989, a big overloaded state structure, the Soviet Union, collapsed through "big bang" reform. No consumer paradise has replaced it. But something that looks like one in the making is coming about in its one-time ally China. Deng Xiaoping created a market economy, slimmed down the state and has given the Chinese a prosperity such as they had never experienced.

Now it's East and Southeast Asia's turn to get rid of bloated states and transform them into slimmed-down, can-do governments. With the exception of China, financial storms have struck most East and Southeast Asian countries. Yet, some bankruptcies aside (and most of these are financial institutions), the productive economies remain sound.

In the West, official after official vaunts the strength of Asian economies. Some critics dismiss such talk as wishful thinking. But the reality is that West and East are riding the same river. East Asians make most of the goods that fill up the West's shopping malls. That means we Westerners are the world's No. 1 consumers while Asians are its No. 1 producers.

In the Depression era, many people saw no alternative but that the river be allowed to change course. Now, with growing anger against states and corporations, little desire exists to wreck what still looks like the best attempt yet to create economic paradise. Rising average longevity in most of the world is a good indication thatthe economics of the world economy -- if not its money -- are fundamentally sound.

Franz Schurmann is a professor emeritus of history and sociology at the University of California at Berkeley and the author of numerous books on Asian and global affairs. He wrote this for the Pacific News Service.

Pub Date: 1/15/98

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