Asia: The Coming Fury

Feb 11

As goods pile up in wharves from Bangkok to Shanghai, and workers are laid off in record numbers, people in East Asia are beginning to realize they aren't only experiencing an economic downturn but living through the end of an era. For over 40 years now, the cutting edge of the region's economy has been export-oriented industrialization (EOI). Taiwan and Korea first adopted this strategy of growth in the mid-1960s, with Korean dictator Park Chung-Hee coaxing his country's entrepreneurs to export by, among other measures, cutting off electricity to their factories if they refused to comply. The success of Korea and Taiwan convinced the World Bank that EOI was the wave of the future. In the mid-1970s, then-Bank President Robert McNamara enshrined it as doctrine, preaching that "special efforts must be made in many countries to turn their manufacturing enterprises away from the relatively small markets associated with import substitution toward the much larger opportunities flowing from export promotion." EOI became one of the key points of consensus between the Bank and Southeast Asia's governments. Both realized import substitution industrialization could only continue if domestic purchasing power were increased via significant redistribution of income and wealth, and this was simply out of the question for the region's elites. Export markets, especially the relatively open U.S. market, appeared to be a painless substitute. Japanese Capital Creates an Export Platform The World Bank endorsed the establishment of export processing zones, where foreign capital could be married to cheap (usually female) labor. It also supported the establishment of tax incentives for exporters and, less successfully, promoted trade liberalization. Not until the mid-1980s, however, did the economies of Southeast Asia take off, and this wasn't so much because of the Bank but because of aggressive U.S. trade policy. In 1985, in what became known as the Plaza Accord, the United States forced the drastic revaluation of the Japanese yen relative to the dollar and other major currencies. By making Japanese imports more expensive to American consumers, Washington hoped to reduce its trade deficit with Tokyo. Production in Japan became prohibitive in terms of labor costs, forcing the Japanese to move the more labor-intensive parts of their manufacturing operations to low-wage areas, in particular...

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Alternative views of the economic crisis: Walden Bello Interviewed by the BBC

Feb 09

Meanwhile, different debates were taking place at the "alternative" World Social Forum in Belem, Brazil. There, an eclectic mix of some 100,000 campaigners, thinkers, and working people came to starkly different conclusions about the causes of the downturn, and how best to address it. We asked four participants from around the globe to give us their opinions. Walden Bello is a university professor, senior analyst at Focus on the Global South, and president of the Freedom from Debt Coalition. Week after week, we see the global economy contracting at a pace worse than that predicted by the gloomiest analysts. We are now, it is clear, in no ordinary recession but are headed for a global depression that could last for many years. The origins of the present crisis lie in the strategies adopted by economic and political elites to resolve the crises of stagflation – the coexistence of low growth with high inflation – which followed rapid growth in the post-World War II era, both in the G8 economies and in the underdeveloped economies. Stagflation, however, was but a symptom of a deeper problem: the reconstruction of Germany and Japan and the rapid growth of industrialising economies like Brazil, Taiwan, and South Korea added tremendous new productive capacity and increased global competition, while income inequality within countries and between countries limited the growth of purchasing power and demand, thus eroding profitability. Dilemma This produced the dilemma of overproduction. One "escape route" from the conundrum of overproduction, and for maintaining and raising profitability, was "financialisation" . With investment in industry and agriculture yielding low profits as a result of over-capacity, large amounts of surplus funds have been circulating in or invested and reinvested in the financial sector – that is, the financial sector began turning on itself. The result has been a divergence between a hyperactive financial economy and a stagnant real economy. This was not accidental – the financial economy exploded precisely to make up for the stagnation owing to overproduction of the real economy. Profits, not value One indicator of the super-profitability of the financial sector is the fact that 40% of the total profits of US financial and nonfinancial corporations is accounted for by the financial sector...

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‘WSF had a prophetic voice’

Feb 02

Walden Bello has attended every World Social Forum. He is a senior analyst at Focus on Global South, president of the Freedom from Debt Coalition and a professor at the University of the Philippines.As the WSF was winding down in Belem in Brazil, Al Jazeera's Gabriel Elizondo spoke with Bello about his thoughts on this year's meeting. Al Jazeera: How has the 2009 World Social Forum different from the past years'? Bello: This represents the triumph of the World Social Forum over the World Economic Forum. Basically I think that what the forum has been standing for is the strong critique of neo-liberalism and warning the world of the kinds of difficulties neo-liberalism was bringing to the world. And I think that now this economic crisis has really shown that we had a prophetic voice. A consistent voice of critique that was being put forward. And what has happened now is in fact the sum of our fear, but at the same time I think that the WSF held out a hope; a hope that there could be a different world from the kind of neo-liberal capitalism world that Davos represented. And I think that people are now looking to the World Social Forum more than ever for the kinds of alternatives that we need, to be able to restructure the world now that neo-liberalism has failed, now that capitalism is in severe crisis, now that the whole system has lost its legitimacy. This voice that thousands here have represented now is a voice that is going to be heard all around the world as articulating the possibility of a different world. How do you respond to people who say the World Social Forum does not provide any solutions? I think there are a number of very strong themes that have emerged over the last few years. One is that there must be strong controls and regulations over the market. We have consistently held that belief. Two, that globalisation was creating a very fragile world and that we needed to be able to make more independent economies, to make internal markets the drivers of development, rather then the global market. Also that we needed controls on transnational corporations.  ...

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East Asia – The end of an era

Feb 02

MANILA, Jan (IPS) As the US recession drags Asia down, there has been much speculation about a regional response to the crisis. Seemingly lending substance to this have been a trilateral summit of the leaders of China, Japan, and South Korea last December and a flurry of bilateral talks between Japan's Taro Aso and Korea's Lee Myung-bak, all of which had economic cooperation at the top of the agenda. On the face of it, coordinated action by the three could be significant: they account for about three-quarters of East Asia's GDP and two-thirds of its trade, and each is among the other two's leading trading partners. There are, however, reasons to be sceptical of recent declarations of cooperation. Regional Cooperation: the Record First, the idea of Northeast Asian cooperation in the form of a regional trading area has been kicked around for the last 15 years in different formulations, with little movement at all in terms of implementation. Second, government coordination of economic policies in the face of a crisis does not have a good track record. It was not just the US that vetoed the Asian Monetary Fund (AMF) proposed by Japan during the 1997 financial crisis: China also did for fear it could become a vehicle of Japanese hegemony. Third, these meetings have been a case of a mountain giving birth to a mouse. The concrete measures agreed upon -to expand use of bilateral swap facilities under the ten-member Association of Southeast Asian Nations (ASEAN) Plus Three (China, Japan and South Korea) Arrangement and call for the infusion of more capital into the Asian Development Bank (ADB)- were timid compared to the gargantuan task at hand. None of the three named a specific amount they would commit to the ADB, and for nearly a decade now, the institutional evolution of the ASEAN Plus Three formation has been stuck at the level of bilateral swap arrangements to prop up regional currencies subject to speculative attack. One reason economic cooperation among the Northeast Asian giants has become a hot topic is that it was Chinese demand that pulled the Asian economies, including Korea and Japan, from the depths of stagnation and out of the Asian financial crisis in the...

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Walden Bello: ‘It is time to aim beyond capitalism’

Feb 01

In the context of the current global crisis, what is the WSF's most relevant task? We are at a very critical historical junction in which neoliberal capitalism unravels and I think that the WSF is a site where very serious discussions should be taking place, in terms of both anticipating what is the likely response of global capitalism as well as pushing forward alternatives to the current crisis. We must really put the task of WSF in the context of the really massive global crisis. So Belem is to be a crucial stage for the WSF's future. Yes, definitely. It would be extremely critical for global civil society at this point to respond to this crisis beyond the kind of stabilizing solutions you are beginning to see in Europe and the United States. The capitalist elites are in many ways already going beyond neo-liberalism, so I think on the one it is really important in Belem to come to a consensus about the crisis of capitalism and we ought to have very serious discussions on how to go beyond (such) solutions. I think we need to contend alternatives from within the system, like an expansion of social democracy for instance. How can the WSF come out with such a response and how could it possibly implement it? What you really need to look at seriously, in Belem, is identify not just a crisis of neo-liberalism but a crisis of capitalism. We're talking about the roots of the crisis being dynamic at the capitalist mode of production. The alternative to that is something we need to seriously come to grips with. We really need to frame our responses in terms of common universal values, like the question of justice, the question of equity, creating an alternative that really cares for the welfare of people. I think the discussion in Belem will really be very critical in terms of framing the alternatives. As for implementation, you really need to be quite innovative. We need to be looking at solidly linking our movement across different countries, interacting with respects to the alternatives that are being pushed. It can't be easy, but this kind of sharing experiences, creation of networks, the sharing of...

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