Capitalism: global restructuring,
sovereign debt, benign bloc politics and safety nets
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17th January 2012
We’ve lost control. Unregulated internationalized capitalism is
in the driving seat, and it is demanding that countries, communities and
individuals subordinate themselves to its needs and interests1 .
As countries find themselves with unmanageable sovereign
debt2 , they are being
subjected to ‘structural adjustment’ to make them more accountable – and
vulnerable – to an internationalized capitalism which has gained the whip
It now demands that we accept our lot; that we reduce our lives
and our vision to its horizons; that we accept that we are nothing more than a
malleable, expendable ‘workforce’ for its activities and a ‘consumer base’ for
As this happens, you and I are similarly being ‘adjusted’ to the
requirements of an unregulated capitalist world 3 . As Peter Coy and his co-writers
Peter Cappelli, director of the Center for Human Resources at the
University of Pennsylvania's Wharton School, says the brutal recession has
prompted more companies to create just-in-time labor forces that can be turned
on and off like a spigot.
"Employers are trying to get rid of all fixed costs," Cappelli
says. "First they did it with employment benefits. Now they're doing it with the
jobs themselves. Everything is variable." That means companies hold all the
power, and "all the risks are pushed on to employees."
(Bloomberg Businessweek January 7, 2010 )
It’s time to take back control of our communities and our
individual lives. It’s time to make capitalism the servant and not the master of
countries, communities and individuals4 .
Let’s indulge ourselves and pretend that the future could be
kinder, gentler than the present; that human beings might cooperate for the good
of all rather than indulging their darker urges.
First, the Eurozone
What if Europe’s leaders decided to protect their populations
from the ravages of unregulated capitalism, making capitalism the servant rather
than master of the Eurozone?
How wonderful it would be if, instead of predictably travelling
down the path of deregulation, erosion of working/ living conditions and
reduction of welfare provisions to the lowest common denominators of member
states 5 , Eurozone leaders
decided to reverse the process.
When I listen to Angela Merkel and Nicolas Sarkozy I sometimes
believe I hear a tentative, nostalgic inclination toward this (perhaps I’m
delusional, or perhaps it’s double-speak – after all, Germany, the “economic
power-house” of Europe is one of the countries setting Europe’s lowest common
denominators. Amongst other things, it does not have a universal minimum wage
For many years I have admired the French determination to retain
minimum welfare and labor standards in the face of international pressures for
Of course, there has been an implied but fundamental
contradiction involved in this determination.
On the one hand, France has wanted to become a member of the
club of internationalized capitalist nations; on the other, it wants to retain
those minimum labor, living and welfare conditions, hard-won during earlier
times of regulation and protection. As Sarkozy rightly argues, you can’t have
But, perhaps a united Europe could retain minimum standards.
France’s Sarkozy reforms of the past few years could be rolled back,
re-establishing those minimum labor and welfare protections to which France was
previously committed. Those standards could become the standards of a united
Europe. A Europe dedicated to guaranteeing the quality of life of all its
inhabitants. We could have a set of standard minimum conditions for all of
Europe’s member states!
What? This would make the Eurozone (including Germany)
Of course it would – so long as the Eurozone remains an
unprotected servant of unregulated, internationalized capitalism! But, remember,
we are aiming to tame capitalism, making it servant not master.
Yes, that would require a ‘protected’ Europe – Europe with a
protected working, living and welfare environment, with a social welfare safety
Yes, that would still require some structural readjustment in
Greece, Spain, Italy and other European states which have even more civilized
working and welfare conditions than France used to have (unless, of course,
those higher standards were used as the base for reform!), but at least we’d now
have Eurozone-wide sets of minimum working and welfare conditions to safeguard
populations from free-market exploitation - we would not have an expanding
population of “working poor” and destitute retirees8 .
Yes, that would require the introduction of welfare measures in
those states where, until now, the least advantaged have not been protected from
the ravages of unregulated capitalism. Until now, those states have, by default,
slowly but inevitably eroded the living standards of Europe.
It would, at last, be a united Europe with a soul!!
Yes, it would require increases in various business-oriented
revenue generating taxes and charges to deal with the current sovereign debt
problems of its member states; more than a little ‘protectionism’; the
introduction of tariffs on imports; the stimulation of Eurozone enterprise; and
centralized fiscal and financial management. And, yes, that does imply ‘bloc
politics’ for the Eurozone – isn’t that what the current EU organization is
Yes, that would require individual states to accept minimum
Euro-wide sets of regulations in the interests of the well-being of their
populations. Without such regulation, individual states would find themselves
subjected to the demands of international capital, played off against each other
in a 'race to the bottom'.
Remember, we’re taming unregulated capitalism, not trying to
Second, the USA – and this could be much
In the USA we find the heart of the deregulation dogmas of the
past forty years.
Here is the triumph of neoliberalism, the final defeat of ‘The
New Deal’ 9 .
Not even the wars of the past decade have managed to rescue the
nation from the consequences of that unregulated, internationalized capitalism,
unleashed on us all by the devotees of those dogmas.
In previous decades US administrations have used such conflicts
as a means of triggering an implicit Keynesianism. It has stimulated internal,
protected economic activity through ‘defense’ expenditures in United States’
communities. Congressional competition for home state funding has ensured a wide
distribution of such stimulus funds. And, all the while, it has claimed that
‘national security’ required these expenditures to be contained within the
borders of the nation.
But, over the past forty years it has allowed its internal
protections to be eroded, resulting in a massive hemorrhaging of funds to the
rest of the world. Any attempt at similar internal economic stimulus would now
simply compound its problems.
In urban, sub-urban and rural areas, we find communities
abandoned to their fate, stripped of assets and wellbeing, slowly, but
inevitably decaying, thrown on the scrapheap of unregulated internationalized
capitalism 10 .
And this could so easily be reversed – all it requires is a
reversion to the double-standards of previous decades – talk free market, but
practice protected Keynesian economic activity 11 .
Of course, since US politicians and populations now believe in
unregulated internationalized capitalism, it would be almost impossible to
prevent the external hemorrhaging of internal stimulus funding through purchase
of imported goods and services. So, if the US is to kick-start its economy and
not simply compound its deficit problems there will need to be legislation in
place to limit the outflow of US currency. Yes, that is going to mean
re-regulation! What the heck! Let’s call a spade a spade – it’s going to mean
Finally, An Asian Bloc!
Asian nations have both a problem and an opportunity. First,
their growth has largely been based on supplying low cost products and services
to Western nations. Even where they have managed to move to higher-end products
and services, largely, their competitive edge has been the provision of high
quality items at a lower cost than can often be achieved in Western countries
In order to retain their competitive advantage, Asian nations
are largely locked in to minimal working/living and welfare conditions for the
bulk of their populations. If they are significantly to improve those
conditions, they will need to break free from dependence on exports to Western
destinations 13 .
Of course, if Western nations did re-regulate, this competitive
edge would largely disappear — dissipated by tariff and other adjustments at
ports of entry.
The current economic strength of Asian countries lies in their
development of strongly export-oriented economic growth, coupled with a lower
internal per capita demand for goods and services. This results in strong
export/import surpluses, a 'savings' mentality, and the internalization of
sovereign debt. As in Japan, the sovereign debt, while huge 14 , is largely owed to
Japanese rather than external funders 15 .
In the last month, Japan, South Korea and China16 have formalized a move to
direct trading of their currencies, effectively creating a ‘common market’ which
excludes both US and Eurozone currencies 17 .
I have, for the past several decades, been intrigued by Japan’s
apparent ability to ignore its deficits. It’s as though the numbers are not
‘real’, just characters on a page which can be turned without concern.
I suspect that this is because, deep down, Japan is not a
capitalist country! It is just playing a ‘capitalist game’, akin to the board
Its books don’t have to balance, its corporations don’t have to
abide by the ‘rules of capitalism’; they only have to appear to do so for the
sake of their ‘international image’. I suspect that China and South Korea share
this same detachment. And, I suspect that if one examined other East and South
East Asian countries and communities one would find a similar sense of the
unreality of the game.
This gives them a wonderful advantage! They don’t have to wake
in the middle of the night in a cold sweat, panicking at the size of their
deficits, wondering how one earth they are going to ‘make ends meet’. Even their
‘surpluses' are in some measure ‘unreal’, handy counters in an international
game in which those with apparent surpluses hold the whip hand.
How wonderful it would be if, while they are still relatively
insulated from the traumas of Western-style internationalized capitalism, they
could reinvent capitalism to suit their own internal purposes, making it servant
to the prosperity of their peoples, while retaining the advantages of not taking
the game seriously.
Yes, this would require 'bloc' politics, with Asian nations
forming their own 'common market', generating their own internalized economic
dynamic and raison d'être. And, yes, this would require bloc-wide
regulatory structures and conditions to ensure the well-being of their
In my Dreaming I imagine Asian countries finally reinventing
capitalism, tailoring it to the needs and interests of their various
communities; making it servant to, not master of, their futures.
And, since it is only a dream, I see Western nations finally
coming to their senses, learning from Asia and taming and shaping capitalism to
ensure benign and supportive working/living/welfare conditions for all their
Back to Reality
But, I guess the age of utopian dreams and schemes is in the
past 18 . We are left with the stark
reality of a world where unregulated capitalism reduces humanity to a
'resource'; where countries, communities and individuals are 'restructured' to
the demands and requirements of an asocial capitalism which need accept no
responsibility for their well-being and their futures.
It looks as though, if our political leaders have their way, we
will have to resign ourselves to being, forever, merely a 'workforce' and
'consumer base' for unregulated, internationalized capitalism's activities and
Ulrika Lomas (Tax News, 14 Dec. 2011) described Sarkozy's determination to
reinvent France and the rest of the Eurozone to meet 'rating agency' demands
(before the downgrading!):
Providing his assurances that the commitments undertaken by
France will be respected, the French President explained that the government has
already taken, or is in the process of taking, the necessary measures to
According to President Sarkozy if the government had not
embarked upon pension reform in France in 2010, accelerated recently with the
framework of the country’s second austerity package, it would only be delaying
Otherwise, there is no key measure or “miracle”, Sarkozy
remarked, noting that what counts ultimately, as much as measures aimed at
reducing spending, are initiatives intended to increase growth, for example the
development of the research tax credit and the abolition of local business tax
According to Sarkozy, the agreement responded to the crisis and
to the concerns of rating agencies…
The BBC reported France's subsequent credit rating
downgrade (14 January 12 13:04 GMT):
French PM Francois Fillon has defended his government's
economic policies following the decision by ratings agency Standard and Poor's
to downgrade the credit rating of France.
He said the government would push ahead with reforms and debt
Standard and Poor's said Europe's austerity and budget
discipline alone were not sufficient to fight the debt crisis and may become
The downgrade stripping France of its top AAA rating was
announced on Friday.
The government is on a communications campaign to tell the
French there is no need to panic and that the policies of reform and debt
reduction will continue as planned, says the BBC's Hugh Schofield in Paris.
(France downgrade: French PM downplays rating decision)
Reassuringly, as David Beer of Standard and
Poor explained in a CNBC interview, rating agencies do not have a 'hit
list'. As school-masters of economies, they discipline anyone who does not
perform as they believe they should:
After Standard and Poor's historic downgrade of the U.S.'s
credit rating to AA-plus from triple-A, fears are growing that other countries
may be next, most notably France, which is facing big costs from a bailout of
troubled Euro zone countries.
But the global head of sovereign ratings at S&P says the
agency does not have a target list and will downgrade ratings as and when it
sees deteriorating economic performance or debt burdens.
"We don't have a hit list, we've obviously taken a number of
rating actions in the Euro zone going back a number of years, that's still an
unfolding story which we're watching very closely," David Beers told CNBC on
(Deepanshu Bagchee, CNBC Asia, Sunday, 7 Aug 2011, S&P's Beers: We Don't Have a Hit List)
See Global economic forces, Western realities; Comparison of holders of sovereign debt for more on
For a detailed comparison of the external debt
data of countries see World Bank Quarterly External Debt Statistics.
Peter Coy, Michelle Conlin and Moira Herbst (Bloomberg Businessweek January 7, 2010 ) spelt out the
consequences for individuals:
You know American workers are in bad shape when a low-paying,
no-benefits job is considered a sweet deal. Their situation isn't likely to
improve soon; some economists predict it will be years, not months, before
employees regain any semblance of bargaining power.
That's because this recession's unusual ferocity has accelerated
trends—including offshoring, automation, the decline of labor unions' influence,
new management techniques, and regulatory changes—that already had been eroding
workers' economic standing.
The forecast for the next five to 10 years: more of the same,
with paltry pay gains, worsening working conditions, and little job security.
Right on up to the C-suite, more jobs will be freelance and temporary, and even
seemingly permanent positions will be at greater risk.
"When I hear people talk about temp vs. permanent jobs, I
laugh," says Barry Asin, chief analyst at the Los Altos (Calif.) labor-analysis
firm Staffing Industry Analysts. "The idea that any job is permanent has been
well proven not to be true." As Kelly Services (KELYA) CEO Carl Camden puts it:
"We're all temps now."
(The Disposable Worker: Pay is falling, benefits are vanishing, and
no one's job is secure. How companies are making the era of the temp more than
David Wessel (Wall Street Journal July 27, 2011 ) put it succinctly:
Over the past 10 years:
- The U.S. economy's output of goods and services has
- Nonfinancial corporate profits have risen 85%.
- The labor force has grown by 10.1 million.
- But the number of private-sector jobs has fallen by nearly
- And the percentage of American adults at work has dropped
to 58.2%, a low not seen since 1983.
What's wrong with the American job engine? As United
Technologies Corp. Chief Financial Officer Greg Hayes put it recently: "Sales
have come back, but people have not.''
That's largely because the economy is growing much too slowly to
absorb the available work force, and industries that usually hire early in a
recovery—construction and small businesses—were crippled by the credit bust.
Then there's the confidence factor. If employers were sure they
could sell more, they would hire more. If they were less uncertain about
everything from the durability of the recovery to the details of regulation,
they would be more inclined to step up their hiring.
Something else is going on, too, a phenomenon that predates the
recession and has persisted through it: Changes in the way the job market works
and how employers view labor.
Executives call it "structural cost reduction" or "flexibility."
Northwestern University economist Robert Gordon calls it the rise of "the
disposable worker," shorthand for a push by businesses to cut labor costs
wherever they can, to an almost unprecedented degree.
(What's Wrong With America's Job Engine? Wary Companies Rely on
Temps, Part-Timers, Hire Overseas, Wall Street Journal July 27,
See Just-In-Time and Total-Quality-Control: Let's be flexible! for
more on this.
an unregulated internationalized capitalist world, the weak are vulnerable. If
individual countries attempt to tame capitalism they will fail. The only way in
which capitalism might possibly be tailored to communities, rather than
communities to capitalism, is through banding together. It's time for 'bloc
politics', for groups of nations to band together, forming large enough units to
become internally economically viable.
Of course, the problem of 'unattached' regions,
those which seem, inevitably, to fall outside of the bounds of major blocs, is a
problem which has always existed, and will continue to exist into the future. In
the past people living in such regions have been prime candidates for
exploitation, unable to protect themselves from the predations of organized and
dominant power blocs of the world. Perhaps a fortified United Nations could
provide a regulatory umbrella under which they might shelter.
and, over time, to the lowest common denominators of the world.
Michael Birnbaum (2012), in a Washington
Post article, described the consequences of this process in the Eurozone
…many Greeks question whether the terms of the bailout will do much to help their economy in the coming years, and
the “troika” of the International Monetary Fund, European Union and European
Central Bank acknowledged that the recession would worsen in the short run, even
as unemployment has already spiked to 21 percent — 49 percent for those younger
than 25 — and the economy contracted by 7 percent in the third quarter of
Europe has demanded that the public sector shrink by 150,000
people, that the minimum wage be lowered by 22 percent, that pensions be cut and
that Greece do more to sell off its publicly owned companies, among other
measures that filled a 50-page booklet.
When the Greek parliament started implementing them last week,
43 of the deputies in the ruling coalition rebelled, and rioters in Athens set dozens of buildings on fire.
Birnbaum, Deal reached on $170 billion Greek bailout, Washington
Post, February 21 2012)
6 See Information on Minimum Wage Rates for more on this. An article in The Economist (Nov. 5th
Germany is one of the few European countries to lack a statutory
minimum wage. Unions and employers negotiate wages sector by sector. In ten
sectors agreed minimums apply to all. But jobs are growing in fragmented
services not in manufacturing.
Just over half of workers in western Germany are now covered by
central agreements; in the east it is only a third. In 2007, 3.7m workers earned
under €7 ($9) an hour and 1.2m under €5.
Angela Merkel's recently expressed determination
not to carry the debt load of other EU countries should be understood in this
context. Germany has effectively weakened social welfare guarantees for its own
population, accepting an increasing number of 'working poor' as the social cost
for its economic expansion. If it now accepts responsibility for using its
consequent economic muscle to underwrite countries which have retained social
welfare guarantees, it is effectively sacrificing the wellbeing of up to half of
its own population for the ongoing wellbeing of other EU populations.
Some reader comments on the minimum wage appended
to the above article seem sadly in tune with similar comments made by middle
ranking Western Europeans in the 18th and 19th centuries.
See The Virtuous Capitalist, The Poor and the Wasteland
for more on this.
7 The pressures for change
which France faces in an unregulated internationalized capitalist
world cannot be avoided by changing the leadership, as the new French
President Francois Hollande has found.
A Bloomberg report (July 12, 2012) explains
On July 12, Peugeot announced it will close a factory in the
Paris suburbs and cut thousands of jobs at other facilities. Including
reductions announced last year, it’s set to shed some 14,000 workers, mainly in
France. Prime Minister Jean-Marc Ayrault called the announcement “a true
Peugeot had little choice. It will post a €700 million ($860
million) first-half operating loss and is burning through €200 million in cash
every month. The carmaker’s factories are operating at just 76 percent capacity,
as first-half deliveries slid 13 percent. To raise cash and cut debt, it’s
selling off assets, including its Paris headquarters. “Peugeot is pretty close
to bankrupt,” says Nicolas Meilhan, a Paris-based consultant at Frost &
Sullivan who previously worked for the car company.
Other European automakers have suffered sales declines during
the region’s debt crisis, but Peugeot’s problems go far deeper than its rivals’.
Some 40 percent of its production capacity is in France, where high payroll
taxes and rigid labor rules clobber its competitiveness, Meilhan says. French
unit labor costs, now the second-highest in Europe after Belgium, have increased
about 20 percent in 2000 in relation to Germany, benefiting competitors such as
Volkswagen (VOW3). French automaker Renault (RNO) is in much better shape than
Peugeot, as it has moved 80 percent of production abroad, mainly to low-cost
The news from Peugeot only adds to an increasingly dire economic
outlook in France. Unemployment is at 10.2 percent, and the government recently
downgraded its 2012 growth forecast to just 0.3 percent. Two other big
employers, Air France (AF) and pharmaceutical group Sanofi (SNY), have announced
major job cuts since Hollande took office in May.
(Carol Matlack, Layoffs at Peugeot Signal France's Deepening Problems,
Bloomberg BusinessWeek, July 12, 2012)
See Community costs are Production costs for more on this
See The triumph of neoliberalism for more on this.
Rick Hampson (USA Today 3/2/2010) described the scene (still being played
out in 2012) across the United States:
Whether it's textiles in the Carolinas, paper in New England or
steel in the Midwest, most industrial cities and mill towns "are on pins and
needles," says Donald Schunk, an economist at Coastal Carolina University. "Day
to day, week to week, any manufacturing facility seems vulnerable. People don't
know if they'll be there."
That's true in:
- Georgetown, S.C. (pop. 9,000), where the closing of the
local steel mill last year left International Paper as the last major private
- Madawaska, Maine (pop. 4,000), where workers voted last
month to take an 8.5% wage cut to keep the financially strapped paper mill
- Glenwood, Wash. (pop. 500), where flat lumber prices and
rising land prices are crippling the forest products industry.
Anxiety over possible layoffs or closings can disturb workers as
much as the real thing, experts say. Harvard psychologist Daniel Gilbert says
it's uncertainty that really bothers people: They feel worse when they think
something bad might happen than they do when they know it will happen….
In the America where things are made, the recession has been a
depression. According to a new Northeastern University study, one in every six
blue-collar industrial jobs have disappeared since 2007, matching the drop in
overall employment in the Great Depression.
Last year, about 1.3 million factory jobs vanished, including
Shumaker's. For the first time, the government announced in January, most union
members are government employees, not private-sector workers.
One-horse towns such as Ravenswood risk losing their reason for
being, says Juravich, who teaches about labor at the University of
Massachusetts. Without a hospital or university campus or county seat, "they're
one plant shutdown from oblivion."
Sometimes oblivion is a ghost town with tumbleweed blowing down
Main Street and the doors of the Last Chance Saloon swinging in the desert wind.
But most 21st-century ghost towns will not be deserted.
People, many unemployed or underemployed, will fill the bars,
stoops, corners, clinics, jails and social welfare offices.
An industrial town makes products that bring wealth into a
community; a post-industrial ghost town has a zero-sum economy - people in
marginal jobs, "serving and paying each other," Bronfenbrenner says.
At best, the new industrial ghost towns become places for
low-rent homes for long-distance commuters. At worst, they slowly empty
(New ghost towns: Industrial communities teeter on the
See Ilyce Glink, CBS News January 12,
2012, Foreclosures hit lowest level since 2007, for discussion of
the foreclosure difficulties still facing homeowners across the US:
Foreclosure filings dropped in 2011 to their lowest level since
2007, according to a new report released today from RealtyTrac. Unfortunately,
the lower number of foreclosures doesn't mean fewer people are going to lose
Just the opposite. According to RealtyTrac's Year-End 2011 U.S.
Foreclosure Market Report, the number of foreclosures declined because lenders
stopped processing foreclosures and created a huge backlog in the foreclosure
According to RealtyTrac's report, some 2,698,967 foreclosure
filings -- which include default notices, scheduled auctions and bank
repossessions -- were reported on 1,887,777 U.S. properties in 2011, a decrease
of 34 percent from 2010. About 1.45 percent of all U.S. housing units (about 1
in 69) received a foreclosure filing last year.
That's the good news, but the time it took to process those
foreclosures increased 24 percent over the same time period. This increase in
foreclosure processing time has largely been caused by the robosigning
controversy, which triggered lenders to perform a massive review of foreclosure
This review of the foreclosure process caused lenders to hold
off on beginning many new filings, which is a big contributor to the lower
number of foreclosures in 2012. According to Brandon Moore, CEO of RealtyTrac,
"Foreclosures were in full delay mode in 2011, resulting in a dramatic drop in
foreclosure activity for the year."…
The time it takes to process a foreclosure will probably remain
high through 2012, and it is likely foreclosure filings will increase in the
coming year. "The lack of clarity regarding many of the documentation and legal
issues plaguing the foreclosure industry means that we are continuing to see a
highly dysfunctional foreclosure process that is inefficiently dealing with
delinquent mortgages -- particularly in states with a judicial foreclosure
process," Moore says.…
For a full review of the study and a map of foreclosure activity
nationwide, see RealtyTrac's full Year-End 2011 U.S. Foreclosure Market Report.
(CBS News January 12, 2012 7:00 AM )
One can only hope that, should the US revert to its former practices, US
politicians will finally find a less belligerent justification for internal
economic stimulus than ‘external threat’.
Unless, like Germany, they have managed to avoid or substantially reduce
the various welfare imposts of the pre-globalization era.
See The emergence of welfarism: Social costs are Production Costs
for a brief outline and explanation of the emergence of coherent sets of minimum
working/living and welfare conditions for Western populations.
Edward Chancellor (Financial Times, Nov. 1, 2009) explained:
Japan’s national debt is fast approaching 200 per cent of GDP.
The debt mountain is the result of prolonged economic weakness and successive
fiscal deficits since the bubble economy collapsed in 1990. These problems are
compounded by the fact that Japan’s population is now shrinking. The economy’s
trend growth rate has fallen and tax receipts are shrinking, while welfare
payments for pensioners are rising. Japan’s debt trap, it seems, is structural
rather than cyclical.…
Tokyo has shown little serious intent on getting its public
finances under control. The newly-installed DPJ government didn’t even mention
the deficit in its election manifesto. This passivity brings to mind David
Hume’s comment that “when a government has mortgaged all its revenues… it
necessarily sinks into a state of languor, inactivity and impotence.”…
Other countries with oversized national debts, such as Sweden
after the Scandinavian banking crisis of the early 1990s, were able to generate
growth by devaluing their currencies and boosting exports. The yen, however, has
Interest rates in Japan have been low for so long that all the
gains from low cost financing have already been spent.
While the supply of Japanese government bonds looks set to
increase, the outlook for demand is not encouraging. As the population ages,
Japanese pension funds are more likely to be selling bonds than buying them. The
household savings rate is plunging towards zero.
As Reinhart and Rogoff observe, sovereign debt crises have often
been anticipated by governments being forced to borrow at ever shorter
maturities. For the moment, Japan’s savers seem content to lend to their
government at very low rates. One day they might start demanding more for the
risks they are running.
(Japan sovereign debt crisis looms)
For a comparison of holders of sovereign debt in various countries, see
International Monetary Fund, World Economic and Financial Surveys: FISCAL
MONITOR September 2011, Addressing Fiscal Challenges to Reduce Economic Risks (p. 12,
As can be seen from Figure 6 of the above IMF
publication, while non-resident and foreign official holdings in the US (which
still has a relatively healthy — though rapidly deteriorating — ratio of
external to internal debt despite its recent past) are at 31%, for Japan, those
holdings comprise a mere 5% of Government Debt.
Over the past twenty years mainland Chinese have, in increasing numbers
(possibly in their millions, though no accurate figures are available),
relocated and developed business enterprises in other regions of the world —
chiefly in areas formerly recognized as 'developing' regions under Western
control. While some commentators are now suggesting that this is part of some
Chinese government plot to surreptitiously take over the 'developing' world,
this needs to be put into historical perspective.
Throughout the colonial period, Chinese traders
followed in the wake of Western European colonial expansion. The 'Chinese
trader' was an accepted part of the landscape of the colonial world, tolerated
and regulated by colonial authorities. See Carl Trocki (2004) (Chinese capitalism and the British Empire. In
International Association of Historians of Asia Conference, 6-10
December 2004, Taiwan, Taipei) for a description of this. As Trocki says,
Because Chinese traders and migrants came without the support of
their government, and in most cases were not seen to be organizing political
domain over the region, they have not been portrayed as the frontiersmen of
empire. There is likewise, little evidence that the Chinese involved, at least
at the beginning, had the intention of forming an empire.
Nevertheless, if we look at what had come to be in Southeast
Asia at the end of the nineteenth century, it is clear that a Chinese empire of
sorts had been created.
…Chinese relied on the European umbrella of security and found
it possible to exploit the global reach of the European infrastructure.
Europeans found they needed the Chinese to produce wealth for them and to manage
the mundane tasks of retail and second-level wholesale trade.
Neither could have prospered without the other but each was
guided by their own aims. Each was capable of taking measures to frustrate or
divert the projects of the other. We could say that Chinese and Europeans were
sleeping in the same bed, but were dreaming different dreams.
(Chinese capitalism and the
It would be nice to believe that Chinese
government authorities are willing (and able) to accept some sort of
responsibility for the wellbeing of peoples around the world who currently find
themselves at the exploited end of a resurgent Chinese small business expansion
into the Third World.
However, not only does the Chinese government
accept little responsibility for the activities of these migrants, it has, to
date, shown itself unable (possibly unwilling) significantly to protect Chinese
migrants into its industrial regions as they find themselves in similarly
exploitative working/living conditions.
A recent exchange with a friend (Japan/China historian, Lincoln Li) puts
this into perspective:
Just as the $ is used as a common denominator for the AU$, US$
etc., the three East Asian countries concerned have been using a common
nomenclature. The Yuan, the Won, and the Yen are but different pronunciations
for the same ideograph.
All three countries have practiced parallel economic policies:
feeding the insatiable consumer needs of the advanced countries (or should one
say lazy and retarded countries) to "enrich the country and strengthen the
military". And yes, they actually used the same medium of exchange in the days
See China and Japan have agreed to start direct trading of their
currencies for more on this.
See In Search of Utopia for more on this.