Nasdaq Japan

Andy Pollack

week the National Association of Securities Dealers (NASD), operator of New
York’s Nasdaq exchange, announced it would open a new "electronic stock
market" in Tokyo in the last quarter of the year 2000, in alliance with
Japan’s Softbank Corporation. This new extension of the world’s financial
markets around the clock and across the globe, using the latest high-tech
tools, comes hard on the heels of speculation about extended hours at the New
York Stock Exchange and the entry of old-line brokerage firms such as Merrill
Lynch into the online investment field.

The new market,
said a corporate press release, will follow Nasdaq’s "screen-based
approach to trading equity securities and will include the Internet as a key
conduit to provide a state-of- the-art electronic stock market." The
exchange, offering around- the-clock electronic trading, will allow Japanese
investors "the opportunity to invest in the world’s leading high-tech and
high-growth stocks, and will provide enhanced access to equity capital for
emerging Japanese firms."

It’s fitting
that this link between the world’s two biggest industrial powers, and their
piles of money, should happen through Nasdaq and not the older NYSE, as the
former is dominated by the stocks of virtually all publicly-traded high-tech
firms, such as Microsoft, Intel, Amazon, and Cisco Systems. Just as fittingly
the announcement came the same week that software industry leaders announced
their sector was on the verge of becoming the largest in the U.S. as measured
by total revenues.

partner in the deal, Corporation of Tokyo, is also no piker in this field.
Described in the press release as "a leading provider of information and
distribution services for the digital information industry" and "Japan’s
largest distributor of software and computer technology publications," the
company has stakes in more than 60 Internet- related companies, with at least
a majority ownership in the Japanese arms of Yahoo, Geo-Cities, ZDNet,, ONSALE, CarPoint, InsWeb, and e*Trade Japan. In the United
States, Soft- bank owns majority stakes in high-tech stocks, Ziff-Davis and
Kingston Technology, and over a quarter each of Yahoo and e*Trade.

Frank Zarb,
chair and Chief Executive Officer of the NASD, claimed that "we will utilize
the power of the Internet to create an equity market that stimulates job
creation and economic growth." In the press release’s explanation of how
the market will do so, flowing, watery metaphors abound. The market is
expected to offer, for both Japanese and U.S. investors, "a transparent,
liquid, efficient, easily accessed and well-regulated market" and "access
for issuers to pools of capital linked on a global basis by creating seamless
electronic access between Nasdaq Japan and financial interests in other
countries." Workers will benefit too, said Zarb, as the "dual listings of
companies on both Nasdaq Japan and the Nasdaq Stock Market" will contribute
to "job creation and economic growth in Japan through an efficient market
that links investors and entrepreneurs."

It’s far more
likely, however, that neither Japanese nor U.S. workers will benefit from the
creation of Nasdaq Japan, that rather than floating on a seamless, flowing
stream of capital, workers will butt their heads against the same stony walls
separating them from better jobs and higher wages that have been erected as
part of the broader globalization process. If anything the rivalries which pit
U.S. and Japanese workers against each other will be worse at the end of the
day, as capital adds this new conduit allowing capital to flow most smoothly
to wherever labor can be most easily exploited.

This has been
the clear result of the globalization of manufacturing. The investment across
countries in auto, steel, garment, and toy factories, supposedly designed to
create more jobs, has instead meant lost jobs, lower wages, and harsher
working conditions—and more antagonism between workers of different
countries (don’t forget that the "seamless" flow of capital into Eastern
Europe played no small part in reviving competition for resources between
nationalities, and thus ethnic hatred, in Yugoslavia).

Zarb’s claim
that the market will more efficiently find investment opportunities for
capital, across broader geographic reaches, ignores the plain fact that
capital under the current setup has too many places for productive investment
already. Under current levels of world demand there are already too many
factories. That’s why the stock market mania of the last two decades
represents money chasing money in an irrational speculative orgy. Nasdaq Tokyo
will only lend this orgy a new high-tech gloss and a quicker pace.

A good
explanation of this absurd situation was carried in an article by New York
economics correspondent, Louis Uchitelle, in "Global Good Times,
Meet the Global Glut" (11/16/97). Writing at a time when everyone feared
global catastrophe growing out of that fall’s Asian financial crash,
Uchitelle said: "The Asian financial turmoil may be the first stage of a
developing worldwide crisis driven mainly by a phenomenon called overcapacity:
the tendency of the unfettered global economy to produce more cars, toys,
shoes, airplanes, steel, paper, appliances, film, clothing and electronic
devices than people will buy at high enough prices. ‘There is excess global
capacity in almost every industry,’ Jack Welch, chair of General Electric,
said in a recent interview in the London Financial Times. Whether
it’s Airbus jets in Germany or sneakers in the United States, goods have a
tendency to pile up in today’s global economy."

"The problem
arises," says Uchitelle, "because the global economy sucks businesses into
building too many factories…. The danger is that at some point this house of
cards must tumble down. In an open-border global economy nearly every car
manufacturer, for example, is trying to have a presence in every market. But
when factories crank out more cars than people can buy, down come car prices.
Down go the profits of car companies. Out go the workers. And down go the
number of people who can afford to buy cars. Economies can spiral downward
toward recession, or worse. That is what is beginning to happen in Asia

Uchitelle then
points to the role of globalization in worsening rather than alleviating this
situation: the global market produces "more and more goods even as it
suppresses wages at both ends of the world, in industrial as well as
developing countries…. You cannot do that forever—producing more and
cutting the wages of those who buy—without some collapse."

So Nasdaq Japan
is designed to solve a problem that doesn’t exist. Given the way our system
functions, the problem isn’t that capital can’t find places to invest; the
problem is that capital can’t invest in new goods- or service-producing
facilities whose output can find a market. Yet if anything this leads capital
to search more desperately for investment opportunities, both real and
intangible, to make up for declining profits. And the more it does so the less
chance it has of making a go of the newest investments. So new stock markets
only increase the fury with which capital chases its own tail.

description of capital’s dilemma may not seem to match today’s headlines,
and Uchitelle’s worries could all too easily be written off as the momentary
panic brought on by the fall 1997 crash. But recently new evidence of the thin
ice on which the world’s economy skates could be heard. Many economists and
businesspeople still worry that the rest of the world’s economy will drag
down the U.S.—and the economy of Japan, stagnant now for decades, will be
one of the biggest drags. Gretchen Morgen- son, in "U.S. Shoppers Shoulder
the Weight of the World" (New York Times, 6/20/99) quotes a banker
who told her "a slowdown in consumption here could stop the improving
economies elsewhere dead in their tracks: ‘If he [the American consumer]
slows down at all, we’re going to feel the world weak again." Like
Uchitelle, this banker also points to the role of low wages in weakening
demand and thus preventing the use of existing factory capacity: "Perhaps
most important, annual growth in real wages has fallen from about 3 percent
early last year to around 1.5 percent." So, he concludes, if the U.S.
consumer doesn’t continue to fuel world consumption, "there is nobody out
there to take his [sic] place… If it [the global economy] really slows down
and gets into a more scary scenario, then the whole stock market gets into
trouble." And, I would add, more efficient, more global stock exchanges such
as the newly global Nasdaq, will spread that trouble all the more quickly and

Almost no one
of any political or economic persuasion would deny that the world has too many
factories for the given level of demand. Not for the potential demand, of
course, but for the existing demand. (Note that Uchitelle says there are more
factories for the number of cars—and toys and shoes and paper—which people
can buy, not more than they need.)

But society is
not equipped to deal with what should be a relatively simple problem, how to
match the capacity of its factories with the needs of its people. Yet the kind
of computers that will keep Nasdaq Japan running can perform millions of
calculations per second—far more than is needed to run the equations
required to match production and consumption even on a global scale (for a
concise proof of the mathematical, technical and organizational possibilities
of doing so, see Cockshott and Cottrell’s Towards a New Socialism,
Spokesman, Nottingham, 1993).

The real
problem is that our market economy forbids us from even posing the question
this way. We’re forbidden by social, not technical, barriers, from doing the
relatively simple math needed to figure out how many hours the world’s
workers need to work to produce the number of goods the world’s consumers
want. Yet we can take the most sophisticated computers, and the mathematical
skills behind them, plaster the newest web interface on top of them, and
create stock exchanges that can figure out in seconds how to match billions of
trade orders by millions of investors.

But at the
heart of this irrational situation lies part of the solution. On the 150th
anniversary of the Communist Manifesto last year, even mainstream
writers, made nervous by the previous fall’s global economic crisis, worried
that perhaps Marx and Engels’s prediction of the inevitability of systemic
crises was being proven true again. Left out of such commentaries was any
mention of the fact that these two authors also saw within the institutions
set up by capital the potential for a more rational society. Capital had
socialized production, investment, even consumption, but control and ownership
remained in the hand of wealthy individuals. All that remained, they wrote,
was for workers to end this contradiction by socializing these institutions,
by putting control and ownership in the hands of the world’s workers.

Nasdaq Japan is
just the latest example of this contradiction. For stock exchanges are nothing
but the socialization of investment: used, however, not for the benefit of
society, but to provide a technique by which individual investors can seek to
enrich themselves by out competing each other.

In the U.S.
alone there are many Nasdaq groups joined together in one "seamless"
electronic network—that’s 5,600 brokerage firms and more than
half-a-million registered brokers. What if this network was taken over by
unions and community groups and turned into a mechanism for rationally
calculating society’s needs—and for providing democratic input from those
affected? What if, that is, this socialized investment tool, and the computers
that make it go, was for the first time drafted into serving society as a

The same could
be said of the computers run by the other key players in Nasdaq’s new arm.
What if Softbank’s affiliate e*Trade was converted from a high-tech exchange
for rich people into a computerized gauge of production, registering the
activities and wishes of hundreds of millions of workers instead of the greed
of millions of coupon-clippers?

Another of
Softbank’s affiliates is Microsoft’s Carpoint, an online automobile
market. This website alone could become the technical centerpiece of rational,
democratic planning for world auto production, matching consumer needs with
factory capacity, and thus eliminate the cyclical layoffs, speed-ups, wage and
benefit cuts that come from an unplanned industry. (Given the historic
tensions between U.S. and Japanese autoworkers fostered by their bosses and
politicians, this seems like a good place to start expropriating the bosses’
technical toys.)

Needless to say
nobody at Nasdaq Japan or on any of the rest of the world’s exchanges is
going to politely relinquish their seat and turn over their laptops or
mainframes to representatives of the world’s working class; their bottoms
are going to have to be forcibly removed from those seats.

You can agree
or disagree as to whether this removal would represent social progress. But
with the creation of global, "user-friend- ly" cybermarkets, to argue that
democratic social planning is technically impossible is becoming less and less
plausible every day.     Z

Pollack is a computer instructor  and author of "Information Technology
and Socialist Self-Management" in
Capitalism and the Information
Age: The Political Economy of the Global Communication Revolution,

(Monthly Review Press), and a member of the New York Metro Chapter of the
Labor Party.