Jay Hanson:
>
>>>Lee that Asia's crisis was fundamentally a banking crisis with its
>>>roots in "crony capitalism", leading to excessive borrowing which
>>
>>"crony capitalism" -- it fits! But what other kind is there?
Ed Weick:
>
>I interpret crony capitalism to mean that transactions are not at
>arm's-length. It involves giving special deals to your buddies and your
>family - deals that people who are not your buddies or your family cannot
>access.
Surely, the whole point about Asian crony capitalism was not cronyism per
se. Cronyism -- known over here as "The Old Pals Act" or "The Old Boy
Network" -- has always existed the whole world over and always will.
What happened in Asia (and still does, no doubt) is that their cronyism ran
seamlessly through government, banks, business, academe, regulatory
agencies (if they exist at all) and whatever else that was important. They
still have hierarchical societies and there is hardly any separation of
functions (something that only began to struggle into life during the
course of this century in the West).
>It would appear that obligations among friends and families are of
>much greater importance in SE Asia and Japan than in the west.
I really don't think there's any essential difference. If there is a
difference, it's mainly due to the fact that families are much smaller in
the West than in S-E Asia and are thus less important within the cronyism
network.
>It is also
>probable that laws governing transactions are less rigorous. What appears
>to have happened in Asia is that too many buddies asked for too many favours
>from too many banks, resulting in too many bad investments and bad debts. A
>considerable proportion of this debt was based on foreign borrowings.
>Anyone who could, got their money out - fast. Those who did not, or could
>not, lost a great deal of money as currencies became devalued against the US
>dollar.
>
>One should not lay all of this on crony capitalism. Wherever capitalism has
>existed, it has had elements of cronyism. Other than unfairness, there is
>probably not too much wrong with cronyism if it leads to sound investment
>and increased productivity. It does not appear to have done so in Asia, and
>it therefore proved unsustainable.
Yes, cronyism is benign as well as malign. (Many critical jobs are filled
on the basis of honest private opinion that could not be expressed publicly
for fear of libel or embarrassment.) But cronyism can only exist if favours
are returned. You could say that cronysim is only a pejorative way of
saying that all transactions need to be balanced -- that is, transparent
free trade.
What happened in S-E Asia is that, in their precipitate rush to get into
the glamorous exporting industries (rather than, say, the domestic retail
sector), cronyism sunsequently needed to stretch into non-national
businesspeople in the West. However, if the latter were prevented from
investing in the glamour industries of Asian countries, or if their
investments produced too low a return, or if private backhanders were
likely to be exposed by the Western media, then the network could not
extend further.
Thus, with hindsight, we can see that there was no Asian "miracle" in the
last few decades and that their particular form of Asian cronyism could
only have a limited lifetime within a limited number of sectors. This has
now been reached. I think it's going to take Japan most of a generation to
extend benign cronyism into the general population (that is, efficient free
trade in all sectors from which all get benefits), and a generation more in
the case of countries like Thailand, Burma, China, etc. It would be nice to
imagine that the latter could do this peacefully, but I fear that most of
them are going to experience many more bloody civil wars and revolutions
before they finally throw of the yoke of their heirarchies.
With luck, we've had our fill of these, though there's always the danger of
backsliding into Asian-type cronyism such as Clinton's election subsidies
from Asian sources, Blair's friendship with Murdoch, etc. We should not be
complacent and have not yet fully learned that once governments get
involved in matters that should not concern them, then there's danger of
economic deterioration.
_______________________________________________________________________
Keith Hudson,6 Upper Camden Place, Bath BA1 5HX, England
Tel:01225 312622/444881; Fax:01225 447727; E-mail:[EMAIL PROTECTED]
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