> -----Original Message----- > From: [EMAIL PROTECTED] > [mailto:[EMAIL PROTECTED]] On Behalf Of Rex Wycherley > Sent: Tuesday, October 12, 1999 3:01 PM > To: Multiple recipients of list OK-SUSTAINABILITY > Subject: US economy > > The following article was published in an Indian(the Asian > kind) newspaper. Just another possible scenario of what will be the > crash of capitalism. > > Note: "Zamindar" means landlord. > > Rex > > ----------------------------------------------------------------- > > Limits of growth in the US (Hindustan Times, October 7, 1999) > (Bharat Jhunjhunwala) > > THERE ARE limits to the present growth of the United States economy > because it is predicated on a corresponding decline in other industrial and > developing countries. Its present growth is akin to a zamindars who has > first grabbed all the land of the village, and then forced others to sell > their vegetables cheap to him. > > The zamindars prosperity is then but a reflection of the poverty of > others. So also for the United States. This is the conclusion one is led to > from the Trade and Development Report recently released by UNCTAD. The > revival of the world economy today is entirely dependent on increased > consumer spending in the US. The buoyant stock market has created a sense of > euphoria among the American people: Encouraged by their greater sense of > wealth, households have increased their net indebtedness to the financial > sector; consumer credit rose by four per cent in 1997, five per cent in 1998 > and six per cent thereafter, says UNCTAD. But this buoyancy of the stock > market is, in part, a result of inflow of global capital into the US > economy. UNCTAD says that capital flows from Japan and Europe favour > developed markets, notably that of the United > States. Normally, such an inflow of foreign capital should overheat the US > economy and lead to inflation. But this is not taking place because the > price of imports is declining; For the developing countries as a whole the > terms of trade fell by more than five per cent per annum during the 1980s. > The more favourable trend around the mid-1990s has been more that offset > by large losses since 1996. > The stable prices have enabled the US to maintain low interest rates and > this has further buoyed the economy. The present state of the economy, > therefore, is based on (1) the willingness of US consumers to incur debt; > (2) inflow of global capital into the US; and (3) declining terms of trade > against the developing countries. Can this formula be replicated by other > countries? The answer appears to be in the negative. The Japanese and > European people do not appear as inclined to borrow. > Secondly, a buoyant stock market in Japan and Europe will require an > inflow of global capital. If that were to indeed take place, Japans gain > would be Americas loss. If stock prices and consumption increases in > Japan, it will fall in the United States. There will be no global revival. > The developing countries cannot help either. An important reason of the > recession in their economies is that their terms of trade are becoming > adverse. If this were to be reversed and the prices of their exports were > to rise, then there could certainly be a revival in their economies. But > in the same breath the terms of trade of the US will become adverse and > growth will suffer there. The gain of the developing countries will be > loss of the United States. > The conclusion is that the US economy is more like that of the zamindar. > It is buoyant precisely because Japan and Europe are depressed (due to > outflow of their capital to the US); and developing countries are > depressed (due to fall in their terms of trade). Nor is the present US > growth likely to be sustained. First, the declining of prices of commodity > imports cannot go on indefinitely. Second, the flow of Japanese and > European wealth into the US cannot take place indefinitely and > consequently equity prices in the US cannot remain ever buoyant. > In this circumstance there are two alternatives. One, we can persevere > with the present strategy of free trade which has led to declining terms > of trade. This, as pointed out by UNCTAD, has not yielded results for the > developing countries. Two, we can reject free trade, resort to the > formation of cartels and try to improve our terms of trade. Cartels would > be our answer to the non-tariff barriers erected by the industrial > countries. > Our gain then will be the United States loss. And, according to UNCTAD, we > will get four times the capital that we are presently securing from > foreign investment. The increase in annual foreign exchange earnings from > removal of non-tariff barriers in the industrial countries could be at > least four times the annual private capital inflow in the 1990s. > Once this truth dawns on our economic policy makers and we succeed in > jacking up the prices, we could embark on a long term revival while the > United States economy will come crumbling down >
