>From Chalmers Johnson: Regardless of the latest poison pen e-mails from the Choir Boys for Neoclassical Economics and other sophomores of SAIS,there is something much more interesting in the latest (May/June 1998) issue of FOREIGN AFFAIRS than Ed Lincoln's piece. Ed Lincoln's article is terrific. It shows that he is not part of the "mutual understanding" industry and is prepared to analyze a very serious foreign policy problem for many countries (including the US), namely Japan's failures as a superrich ally. It is to be expected that this break with American imperial ideology would set off the choir boys and mobilize them to attack Ed Lincoln for daring to be critical of "the linchpin of the Pacific." The triumphalism of Mortimer Zuckerman in the same issue is on a par with Khrushchev's "we will bury you" speech (Jim Mann in the Los Angeles Times has already exposed Zuckerman very nicely). And Paul Krugman, for once talking about something he is at least capable of doing research on, is highly credible and persuasive. But the bombshell is Bhagwati! When you get an article in the ultraestablishmentrian FOREIGN AFFAIRS from the reigning prince and defender of free trade ideology entitled "The Capital Myth," something is going on. The worm is actually turning. I was reminded as I read his piece of that line from the Manifesto where Marx notes that laissez faire capitalism collapses every historical tradition and aspect of freedom "into that single, unconscionable freedom--free trade" (Japan today compared with Japan in the 1950s is a perfect illustration of this). Jagdish Bhagwati, Arthur Lehman Professor of Economics at Keidanren East (formally known as Columbia University), economic policy adviser to the Director-General of the General Agreement on Tariffs and Trade, the man who never met a Japanese trade surplus he couldn't defend in impeccable neoclassical terms, has now invented a new concept: "the Wall Street-Treasury Complex," the modern equivalent of the military-industrial complex. He says that the "Wall Street-Treasury complex is unable to look much beyond the interest of Wall Street, which it equates with the good of the world." He goes on to argue: "And despite the evidence of the inherent risks of free capital flows, the Wall Street-Treasury complex is currently proceeding on the self-serving assumption that the ideal world is indeed one of free capital flows, with the IMF and its bailouts at the apex in a role that guarantees its survival and enhances its status. But the weight of evidence and the force of logic point in the opposite direction, toward restraints on capital flows. It is time to shift the burden of proof from those who oppose to those who favor liberated capital." The great B says further: "freeing up trade is good, why not also let capital move freely across borders? But the claims of enormous benefits from free capital mobility are not persuasive. Substantial gains have been asserted, not demonstrated, and most of the payoff can be obtained by direct equity investment. . . . These assertions [Bradford De Long, Roger C. Altman, et al.] assume that free capital mobility is enormously beneficial while simultaneously failing to evaluate its crisis-prone downside. . . . After all, China and Japan, different in politics and sociology as well as historical experience [the first time Bhagwati has ever used those concepts!], have registered remarkable growth rates without capital convertibility. . . . That brings us to the myth that crises under capital account convertibility can be eliminated. We have, of course, heard this assertion before as each crisis has been confronted, and then we have been hit by yet another one. Like cats, crises have many lives, and macroeconomists, never a tribe that enjoyed a great reputation for getting things right or for agreeing among themselves, have been kept busy adding to the taxonomy of crises and their explanations. None of the solutions currently propounded can really rid the system of free capital mobility of instability." I submit that this is a trifle more sensational than the U.S. Embassy, Tokyo's former chief economist, now out of office, daring to write in public on Japan the same way we write about every other economy on earth. If anyone has earned the right to open his mouth on neoclassical economics and particularly its manifestations in international trade it has to be Professor Bhagwati. His new article is the equivalent of every single tobacco industry physician standing up and saying, "Of course our product will kill you. Any fool knows that." This is real apostasy and a sign of the growing ideological crisis of the American empire. For those who would like to read further, let me also recommend the brilliant review by Marshall Berman of the Communist Manifesto on its 150 anniversary in THE NATION, May 11, 1998. The Pensioner of Cardiff Chalmers Johnson President, Japan Policy Research Institute E-mail: [EMAIL PROTECTED] Fax: (760) 944-9022
