[OPE-L:5738] Re: The vortex of the world market

Gerald Levy (glevy@pratt.edu)
Tue, 18 Nov 1997 23:29:17 -0500 (EST)

[ show plain text ]

Massimo wrote on Tue, 18 Nov:

> So, question for everybody. To what
> extent the spreading militancy in Eeast Asia and South East Asia has
> affected economic performance and therefore contributed to shake the
> markets and worrying the speculators? If we look at the stats on
> strikes, the upward trend all during the 1980s is remarkable in East
> Asia and South East Asia.

Two comments:

1) Capital invested on stock markets is by its very nature a flow of money
capital. Thus, if the problem was specific to certain markets, then one
might anticipate withdrawal of funds from those markets (e.g. Hong
Kong, S. Korea) and *investment* in other markets (e.g. on Wall Street,
London stock market). That did not happen. Rather, there was a general
(although, perhaps transient) decline in all stock markets. This
suggests both that:

a) the fundamental cause for the crash was not nation or region
specific, and;

b) activity on all of the stock exchanges is strongly linked in the
sense that movements in one direction on one exchange tend to
influence strongly (at least temporary) movements on the other

2) If strikes and worker militancy brings about crashes on stock
exchanges (which Massimo seems to be suggesting), then:

a) why didn't stock exchanges crash 80 years ago?

b) the level of militancy in the US increased in the 1930's, well after
the beginning of the Depression. Yet, if strikes and militancy can
help bring about a crash, shouldn't the radicalization have begun
before 1929?

c) there were lots of strikes, militancy, and even some
pre-revolutionary situations in a number of countries in 1968. Yet
while there was a political crisis, this militancy didn't bring
about a stock exchange crash, did it?

Thus, from a historical perspective I think the empirical evidence
linking strikes/militancy to stock crashes is very weak. Nonetheless,
I will admit that such a link is conceivable.

btw, it's good to hear from you again, Massimo.

In Solidarity, Jerry