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Strategies & Market Trends : Asia Forum -- Ignore unavailable to you. Want to Upgrade?

To: Worswick who wrote (2907)	4/6/1998 10:51:00 AM
From: Sam	Read Replies (2) \| Respond to of 9980

Worswick, No offense taken. On the Sheryl article: <<A broader problem is that Japan has been so used to the idea of government direction over the economy that few Japanese leaders seem to have a clear vision of the direction that most of the industrialized world is headed. "I don't think they fully understand what the market means," said Shigenori Okazaki, a political analyst at SBC Warburg Dillon Read in Tokyo. "They lack a fundamental understanding of a market economy. They are more worried about farmers losing jobs in construction work. To me, it's a simple mismatch of the system.">> Okazaki seems to me to summarize the true broad problem. It is not that they "need" more consumption now. It is that their export-driven, government centrally controlled economy has been fundamentally misguided. And the error of its misguidedness is compounded by the fact that the other Asian countries have copied it. To repeat what I have already said earlier, the export driven model can work as a road to national wealth if not too many people/countries do it. Once too many people do it, then there will be a glut of product. If the build-up of goods was financed by debt, then the debt will no longer be serviceable--the Asian situation now. As long as it was just the Four Tigers, it wasn't too bad, except in the targetted industries. But when China joined the fray, everything gets turned upside down (this, BTW, is warmed over Lester Thurow). And the problems get severely compounded when not merely national pride and wealth building is being pursued, but when individual greed is thrown into the mix (as it inevitably does). Then you get the feelings of invincibility, the soaring real estate and equity prices, the loans based on those, and the ultimate illusion of great wealth--until the first banker takes his hand out of his neighbors pocket and sees that nothing its there, or the first currency speculator says "show me the green" in a big way, and the tree turns out to have dry rot inside it, no sap, no life, no reality. (No one on this board believes Mahatir's claims that it is the evil currency speculators that have caused this problem, do they?) These governments have been speculating, and have been allowing their chosen few to speculate in an analogous way to the S&Ls in the US in the 80s, but they were allowed to do it on such a larger scale for such a longer time, that these problems won't take just a 4 or 5 years to heal. They need to go in an entirely different direction--they need to allow a private sector to be built which actually reflects the consumption needs and desires of their population, rather than simply building companies that take over entire industries. That is why I agree with Okazaki's statement that "They lack a fundamental understanding of a market economy" and I disagree with the following statement in the same article you quoted (a number of paragraphs below Okazaki's comment): <<Japan's economic troubles began when the speculative bubble burst in the early 1990s. Since then, Japan has been battling a banking crisis caused by a plunge in the property market that led to bad and doubtful debt of more than $600 billion, an amount larger than the size of the entire Chinese economy.>> The latter comment misses the point entirely. Japan's economic troubles didn't start in the early 1990s, they started with the decisions that made the economic bubble inevitable. And that is why simply trying to "stimulate consumption" won't work either. The paradox, I think, is this: building up great wealth isn't really the Road to [real] Riches. People need to meditate more on Mohan's parable about the ferryman resting by the river. In the highly urban, fragmented society that the modern world was developed into, it is more imperative than ever, I think.