[OPE-L:5740] Re: The vortex of the world market

Gerald Levy (glevy@pratt.edu)
Sat, 22 Nov 1997 12:46:38 -0500 (EST)

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Massimo, aka Your_name Last_name, wrote on Sat. Nov. 22:

> [Jerry, you dont consider this possibility: the fact that there was
> not an increase in investment in other markets may indicate that the
> S. Korea, Malaysia etc. economies are part of a increasingly
> interdependent global economy.

Yes, individual capitalist economies are increasingly part of an
integrated global economy. Yet, even in that context, if investors see a
decline in one segment of the world economy due to nation- or
region-specific reasons, then they are likely to shift their funds to
other markets.

> Investors have also penalised
> Western companies showing past "robust" performances but with their
> prospect of growth almost entirely linked to the south East and east
> Asia growth (just as one example take coca cola).

[Side-note: While it is true that these are big markets for Coke
(especially Thailand and Malaysia), do you really think that Coca-Cola's
prospect for growth is almost entirely linked to that region?]

> Also, we should look at the role/incidence of east-Asian economies
> within the "global factory" to see that the downturn of their stock
> markets may express the uneasiness of investors/speculators with the
> declining prospects of growth in the region and inability to
> promote harsh reforms in the labour market (remember last attempt in
> this direction was met by a widespread opposition in South Korea.) .

Well ... perhaps. Perhaps our Korean comrades on the list can shed some
light on that question.

> In this region, what has been under attack has been the pegging of
> their currencies to the US dollar (the last case in yesterdays and
> todays news is the South Korean Won). The maintenance of the pegging
> is for this region crucial especially as far as the long term
> prospect of foreign direct investment, that is the safeguard and
> expansion of their role within the global factory. The currency
> devaluation that has followed will certainly promote a short
> term boost in their export, but a short lived one, as pressure is
> already mounting in the U.S.
> to take action against the growin g deficit toward East Asian economies
> (Japan, China and South Korea are at the top).

The "pressure mounting" in the US does not always, or even generally,
result in retaliation [especially since the early '80's when the clarion
call of "free trade" was accepted in large part by both Republicans and
Democrats]. In recent years, this type of "retaliation" by the US has been
very slow to develop. More typically, the US _threatens_ retaliation as
part of a bargaining ploy (e.g. with Japan).

>From the _Guardian_:
> "Seouls economic woes which have been gathering pace for a year, have
> done what tear gas, draconian laws against subversion, and an army of
> police with water cannon never achieved. The crisis has halted the
> pitched street battles which have wracked the capital all
> year. . . . Anger has shifted from the campuses to the market, where
> foreign bankers and multinationals make an easy target."

Yet _The Guardian_ is referring above to what they believe is the
*effect*, rather than the *cause*, of the crisis.

And that, in a way, was the question I was posing before. I.e. instead of
viewing strike waves and worker militancy as a cause (yes, certainly not
an algebraic function) of the crisis, aren't they more generally a
response to a crisis?

> I dont know how you
> read it, but I read it screw the working class.

I read it [a quote about structural re-adjustment] as saying that the
purpose of those programs was to re-create the conditions for the growth
of profitability and accumulation ... of which screwing the working class
is a component part.

> And if this is so (via an acquired legitimacy to
> restructure labour markets and blaming it all to the foreigners; via an
> acquired legitimacy in
> cutting public expenditures etc.), isnt this crisis the result of the
> growing "RIGIDITIES" posed in the last few years by S. Korean
> students, workers, etc. to the requirements of the
> global factory?

That's another question I think we could use input from our Korean members
in answering.

> Isnt this crisis allowing a more powerful weapon against those forces
> like last winter movement of South Korean workers refusing to bow to
> more "flexible practices"
> to allow corporation to gain competitiveness (vis a vis the massive
> increase in wages in the
> last 15 years)? ]

That may be an effect, whether it was the *purpose* or not is another

> [Jerry, I think you should give me a bit more credit. I am not trying
> to substitute a sterile economic determinism with another sterile
> sociological determinism. That is, I am NOT suggesting that
> CSMt = f(WCSt-1); f< 0
> where CSM = collapse of stock market and WCS = working class struggle.
> I am simply asking a question [...]

OK, fair enough.

> (Now this is in a nutshell my
> "pre-analytical vision", I wonder what is yours, since each of us has
> one).

I can't really answer that question at this time since I don't know what
the expression "pre-analytical vision" means.

> > a) why didn't stock exchanges crash 80 years ago?
> [Ah ah, so you are asking for unique casual/effect relations throughout
> time.

I wasn't asking for a "unique" explanation. I was asking for a
clarification on what you view as the (yes) causal relationship between
class struggle and stock market crashes. I am perfectly willing to concede
that there is no such "unique" relationship. On the other hand, I wonder
whether the empirical/historical evidence suggests a causal linkage where
class struggle precedes and has a role in causing stock crashes. Since you
reject the formula above, I suspect that we may not be too far apart on
this question.

> [Again, I may read the 1930s **depression** being a result of the
> rigidities posed by the working class.

But, didn't most of those "rigidities" appear *after* the beginning of the

> So, in THAT case the real
> interesting question would be not why the 1929
> crash came about but why it did turn into a 10 years depression.

Both questions are "real interesting." Perhaps others could give us some

In solidarity, Jerry