PARIS -- The triumphalism of most U.S. comment on the Asian crisis conflates three different arguments, ignoring the implications of each.
Conventional comment says that the state-mobilized Japanese and South Korean mercantile systems, together with authoritarian Singapore "Confucian" capitalism and the quasi-feudal "crony capitalism" of Indonesia and Thailand, all have fallen to the competitive pressures of liberal and globalist economic forces.
Asia, the argument says, will be forced to reorganize itself on the model of U.S. capitalism, to its short-term pain but long-term advantage. International investors should be protected (otherwise they might not come back), but local companies, the labor force and society will have to suffer economic purge, new deregulations and greater foreign economic penetration.
(Some foreign economists and commentators, let it be said, including the editors of the Wall Street Journal, object to International Monetary Fund programs protecting foreign investors. They should pay for their errors, too, they say, just as Asian managers and workers have to pay. This not only is morally right but enforces the discipline of the market.)
Conventional comment usually also makes a political claim, that the free market is linked to democracy. Authoritarian Asian economies, it is said, can only recover by adopting the democratic political model.
Francis Fukuyama, known for having buried history in 1989, writes in the latest issue of the New York monthly Commentary that "the well-documented correlation between stable democracy and a high level of development" will "increasingly favor the rule of law and greater popular participation" in Asia.
The crisis thus has been a blessing in disguise, discrediting false political as well as economic models, validating true ones. However, the social and political conditions created by crisis in Indonesia are not self-evidently conducive to stable democracy.
Indonesia experiences a mounting level of violence directed against the Chinese minority that dominates the economy, and serious, potentially anti-Western, political tensions are very strong elsewhere in the region.
A second interpretation of the Asian crisis is essentially economic in nature and very pessimistic. It proceeds from the same diagnosis, that the high level of savings in Asia, together with a very large amount of Western investment, much of it speculative and volatile, has combined to produce a crisis of overinvestment and overproduction, with a vast oversupply of goods for saturated markets.
Depression ahead?
It goes on to argue that this process has only begun, and could produce global dumping of goods, more loan defaults and further devaluations, leading to world deflation and depression reminiscent of the Great Depression.
One does not have to accept this distressing analysis to think that the world economy now needs new and better regulation, rather than the accelerated deregulation recommended by some Americans (for example, the global investment liberalization now sought by the United States in discussions at the Organization for Economic Cooperation and Development).
The need for new regulation was one of the generally acknowledged themes of the World Economic Forum in Davos, Switzerland, this month.
Some people argue for more central bank regulation of currency movements, or new regulatory structures attached to the IMF or to the Bank for International Settlements, in order to impose greater transparency on international monetary transactions.
The Overseas Development Council in Washington, which firmly backs globalization, nonetheless proposes a broad "global economic summit," political in nature, to ensure that poor countries are not overlooked by globalization, and to respond to concerns that globalization has proved destabilizing.
Another interpretation of what has happened in Asia, which reflects a radical critique of globalization itself, argues that the crisis has followed a fundamentally irresponsible U.S.-promoted drive to deregulate world markets and production to its own commercial advantage. Former U.S. Commerce Secretary Mickey Kantor has said that the IMF is a "battering ram" to open Asian markets to U.S. exports.
Speculative and unsustainable development in Asia has been promoted and rewarded, while the social and cultural costs of the destruction of established economic structures have been ignored.
Naive market determinism
Critics would say (as I have said in the past) that this program has been rationalized by a naive market determinism, product of the past 20 years, which holds, on the basis of faith rather than evidence, that the universal search for individual self-aggrandizement automatically promotes collective happiness -- and even virtue, if you believe some of the new faith's catechists.
Intelligent discussion of what to do next requires answers about where we now are.
Is this crisis a positive correction in a fundamentally benign process of progressive global economic integration on the U.S. model?
Is it a deflationary crisis leading to a lasting collapse of currencies and markets in the West as well as in Asia?
Is it an episode in a reckless attempt to remake the world economy, with destructive cultural and social consequences that could prove as momentous as those of 19th-century colonialism?
These issues are fundamental to the decisions that will be taken in coming months on investment regulation or deregulation, further market opening and national policies on global finance.
William Pfaff is a syndicated columnist.
Pub Date: 2/12/98
