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To: Gus who wrote (1694)	12/5/1997 4:46:00 PM
From: Sam	Read Replies (1) \| Respond to of 9256

Gus, Thanks for posting. Interesting article. The following two paragraphs especially caught my eye (my bold type): "When my friend William Greider wrote One World, Ready or Not, he was ridiculed by economists for arguing that the world suffered from increasing overcapacity mismatched with wages that were insufficient to buy all the products. The economists knew better: Obviously, all that economic activity had to go somewhere. If workers were underpaid, then by definition investors were overpaid. And they bought products. Problem solved. Well, it's now all too clear that Asian capitalism does face a glut problem. That, in turn, cascades into bad loans, banking collapses, and global glut. For years, current glib economic reasoning has left out institutional instability and the role of psychology in gluts and financial instability. Sure, economic activity has to go somewhere, but unsold cars still pile up on docks, bank balance sheets do turn sour, and panicky investors do start selling. As always, the weakest link in the whole affair is the financial system." Of course, the problem is that underpaid workers become neither investors nor consumers. And that is where the glut comes from. And why capitalism, in order to actually succeed and not degenerate into a really vicious political system with a few "haves" and many "have-nots" with disastrous, dehumanizing consequences (a situation that Marx, cynic that he was, regarded as inevitable) must have a least a modicum of morality, and reward workers at least somewhat commensurately for their production. I don't think it is exactly true that "the weakest link ... is the financial system". But that is where the symptoms first show up. Governments need to adopt policies that actually encourage the development of a large and strong middle class, and discourage the development of obscenely huge fortunes. There are all sorts of ways to do this, from progressive income taxes to estate taxes, among others. However, that is beyond this thread. Sam

To: Gus who wrote (1694)	12/5/1997 8:10:00 PM
From: tom pope	Read Replies (2) \| Respond to of 9256

Gus, that is the best analysis of the implications of the Asian meltdown that I've seen anywhere. Especially your point about the potentially disastrous consequences of the IMF's standard prescription of fiscal and monetary contraction as their preferred solution when countries get into international payments problems. It doesn't really matter when the IMF imposes its calvinist conditions on Ecuador (or whatever) and causes the country to tank for a decade. It will matter if it causes Southeast Asia plus Korea to fall into credit and asset contraction. Because that will ripple to the rest of the world.