The Asian Crises and U.S. Hegemony


A framework for understanding of the rise and demise of Asian capitalism requires a
look at the larger historical context and the role of imperial politics. The "Asian
Tigers" grew in the context of the cold and hot wars in Asia between 1945-1990.
Washington sought to showcase the advantages of capitalism over communism and thus opened
its markets to Asian imports. The Asian Tigers also benefited from the ten year
U.S.-Indochina war via military contracts and trade concessions. With the end of
communism, the Asian Tigers were seen in Washington as competitors, increasingly
independent of U.S. tutelage, hence the need to re-subordinate them. The Asian Tigers grew
in a period of global expansion. Their strategy was based initially on state directed
capitalism: savagely exploiting the labor force via state repression while the central
bank and state development agencies channeled investment funds into private companies. The
state protected its monopolies from external competition. In recent years, however, the
neo-liberal virus infected Asian capitalists and politicians as they sought to expand
investments in international financial markets and to capture overseas funds for
large-scale and costly real estate, financial, and insurance mega-projects. The result was
the deregulation of the economy and the growth of a massive speculative economy. This
"new economy" first displaced the productive economy as the site for investment
and later undermined it when the financial bubble burst.

In summary, the "Asian Miracle" emerged as a product of a particular
conjuncture of capitalist/communist conflict. The "miracle" was a product of
heavy state intervention in the economy, defining capital investments and priorities in
the productive sphere over the paper economy.

With the rise of inter-capitalist competition and the penetration of neo-liberal
ideology, the Asian ruling classes increasingly deregulated their economies to capture
foreign financial flows and stimulated investment into the speculative high profit sectors
(real estate, stocks, etc.). The "liberalization" process increased their
economic vulnerability to outside speculators as the state lost control over the key
economic levers.

The deregulation of the internal economy led to a massive shift in financial resources
to the speculative economy. The transfer of industrial earnings to stock and real estate
speculation led to the growth of "bad debts." The result was the predictable
over-accumulation of speculative assets divorced from the performance of the real
(productive) economy. This predictably led to the financial crash and the collapse of
stock prices.

From the viewpoint of U.S. financial and investor interests, the collapse of the Asian
competitors is not a bad outcome. Asian money is fleeing to the "safe haven" of
the U.S. This is lowering the cost of borrowing money in the U.S. and keeping inflation in
check. Secondly, the Asian countries depending on the IMF will have to follow its
prescriptions of privatization, cuts in state budgets, and an end of basic subsidies–all
of which will favor U.S. investors. Wall Street can buy Asian productive assets cheaply,
and enter the Asian markets freely. More important the IMF entry means the return of U.S.
hegemony and the decline of Asian capitalism as an independent and competitive economic
pole. Thirdly, the financial crises and the stabilization policies will have a
deflationary impact causing bankruptcies and lowering the competitive capacities of Asian
producers in overseas markets. Of course, the collapse of Asian capitalism does have some
danger for the U.S. The "domino theory" in which the collapse of South Korea
provokes a crises in Japan which in turn negatively affects the U.S. is a possibility. But
that possibility becomes a reality only if the Japanese capitalists withdraw their
investments from U.S. Treasury notes and dump their products in the U.S. market. This is
not likely. First because Japanese bondholders are not likely to sell strong dollar
dominated notes to reinvest them in a weak yen. Secondly, the U.S. will likely tighten its
import quotas to limit Japanese exports which threaten to increase Washington’s growing
trade deficit.

Despite the rhetoric of "globalization," the Asian collapse demonstrates the
continued division and conflict between national capitalism and states and the continuing
power exercised by imperial countries over the "newly industrialized countries."
While it is too simplistic to argue that a group of Western financial speculators like
George Soros engineered the crises, it is closer to the truth to say that the beneficial
consequences for certain U.S. investors reveals the differential consequences of
neo-liberal policies and de-regulation. Washington and Wall Street’s promotion of
"free market" policies and the penetration of this doctrine among Asian heads of
state and bankers led to the fateful consequences: the collapse of Asian stock markets,
massive devaluation, economic depression, widespread and large-scale bankruptcies,
plunging living standards, and growing unemployment. As Asian declines, the U.S. and to a
lesser degree the European Union gain competitive positions. As the financial arbiters of
Asia’s future, the U.S. and European bankers via the IMF return to dictate Asian economic
policy just as in the "old days" of neo-colonial rule. The multi-polar world
economy is reduced to two–with one unchallenged "economic superpower."

On the other hand, the decline of Asian capitalism is provoking a resurgence of mass
protests: demonstrations against the IMF austerity measures are everyday affairs in
Thailand. Nationalist voices resonate throughout the region and liberalization policies
are the hated targets. As the governments proceed to implement IMF policies, the rising
interest rates will lead to massive factory closures and large-scale unemployment. The
states’ financial bail-out of private investors means that tax payers (mostly salaried and
wage workers) will be asked to pay the bill for the failure of capitalism. General strikes
in South Korea and large-scale protests are likely in Japan. The restoration of U.S.
hegemony could be the prelude to the Third U.S.-Asian Wars.

While Washington privately gloats over its successes and the Wall Street stock market
rises, this could be a pyrrhic victory. The Asian experience demonstrates that short term
successes can lead to long term disasters. While the crises begins in the stock markets,
its outcome will be decided in the streets of Seoul, the jungles of the Philippines, and
the factories of Tokyo.