>From "Capitalism in Asia at the End of the Millennium" by Prabhat Patnaik
July-August 1999 Monthly Review
http://www.monthlyreview.org/799pat.htm
The crisis in East and Southeast Asia is superimposed, however, on a deeper
phenomenon-the fact that the high growth rates once enjoyed by several
countries on the periphery are no longer possible for them, let alone for
the others. The current phase of imperialism entails a tendency towards
stagnation, not only generally but in particular in the third world, where
the distinction between the linked and the delinked economies (vis à vis
imperialism) has progressively disappeared.
Exclusive preoccupation with the crisis has indeed diverted attention from
this deeper phenomenon, but the delayed recovery from the crisis clearly
points to it. The Bretton Woods institutions and the Western governments
are generally agreed that restoring investor confidence holds the key to
recovery; and the IMF has explicitly based its prescription on this
diagnosis. But in several of these countries, of which Thailand is the
prime example, this restoration of investor confidence itself has proved to
be elusive, prompting a World Bank official for Thailand to remark that
"ten years will pass before the structural reforms take effect and
prosperity can be measured for the vast majority of the people." Even
where, judging by the scale of capital inflows and the growth in reserves,
investor confidence has apparently been restored, e.g., in South Korea, the
real economy's contraction nonetheless has actually increased: even as
South Korea's usable foreign reserves rose from less than nine billion
dollars in December 1997 to over forty billion dollars in August 1998, its
quarterly GDP growth rates were -3.9, -6.8 and -6.8 percent, respectively,
for the first three quarters of 1998.
The reason for the dismal performance of the real sector lies partly in the
fact that the very means adopted to restore investor confidence, namely
domestic deflation, also hurts growth. But it is also partly a result of
low export growth rates, in the case of South Korea, to the developing
countries in particular, since all of them are experiencing deflation and
stagnation.
Both of these factors hold for the entire third world and for the entire
current epoch. With economies being opened up to speculative capital
movements, retaining investor confidence acquires overriding importance
everywhere; moreover, since capital, whether of the metropolis or the
periphery, feels more confident moving to the metropolis which is its
bastion, there is a tendency for capital, all else being equal, to flow out
of the periphery; to counter this, it has to make strenuous efforts to
retain investor confidence. It has to offer higher real interest rates than
those that prevail in the metropolis (which it has been doing) and keep the
economy even more deflated, which causes it to become even more markedly
afflicted by stagnation.
But that is not all. In a liberalized economy, the rate of growth
ultimately depends on the rate of growth of exports, which, for the third
world as a whole, depends on the rate of growth of its exports to the
metropolitan countries. Now, one of the remarkable aspects of the East and
Southeast Asian development experience is that their exports, as far as
modern manufacturing products are concerned, are confined to only a limited
range-specifically, machinery and transport equipment, and office machinery
and telecom equipment. The diffusion of modern manufacturing activities to
this region has been confined to a limited number of activities. When
Southeast Asia enlarged its exports, it inevitably hurt East Asia, and when
China enlarged its exports of these commodities, it hurt the Southeast
Asian economies' export performance. Given the rigidity of the range of
activities, and hence the fact that newer activities are not getting
diffused from the metropolis to the periphery, the rate of growth of
exports of the latter depend ultimately on the rate of growth of the
metropolitan countries. Since, as argued earlier, the era of globalized
finance entails a slowing down of growth in the metropolitan countries
taken together, countries that were hitherto successful exporters from the
third world will be less successful from now on and will experience slower
growth than they have. The miracle economies, and the third world as a
whole, will experience a slowdown in growth, since they are liberalizing as
metropolitan economies' slow down.
Two additional factors strengthen this conclusion. First, the slowdown in
metropolitan countries is making them adopt protectionist measures, even as
they impose liberal trade on the third world. This is particularly visible
in the area of textiles and clothing, which still constitute a major chunk
of third world exports, including that of the East and Southeast Asian
countries. Secondly, the decline of communism has reduced the geopolitical
importance of the East and Southeast Asian countries, and of many others.
The market access that such countries enjoyed in the metropolis in the past
is no longer available to them. Indeed, even in the matter of bailout
following the crisis, the tough position adopted by the IMF vis à vis the
East and Southeast Asian countries provided a contrast to the position
adopted vis à vis Mexico earlier, and indicated the reduced strategic
importance of these economies for imperialism. This fact must affect their
growth rates.
In short, we are witnessing a new phase in the history of capitalism. Not
only will the metropolitan countries, taken as a whole, experience lower
growth and higher unemployment than was average during the postwar period,
but the whole third world will have lower growth than in the past. Poverty
will increase in the third world as a result of the deflation-induced rise
in the rate of surplus value, and assets will keep passing into the hands
of metropolitan financiers.
Louis Proyect
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