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Commentary: 'Who is pushing the buttons?'
South Bay Post
9th February 1993
- By: Nicholas Klar, U.C. Santa Cruz
So you drive a Pontiac because it's an American car and not one of those Japanese things. You save your hard earned cash at the municipal credit union because it will help others to borrow for a home loan. In the morning you read your local newspaper over a cup of coffee before heading off to work. So, what would you do if you found out Honda was in reality employing more US workers than General Motors? What if your credit union is lending money to Brazil for military purposes? Do you realize your coffee might be grown and processed in Latin America by a company whose HQ is located in Amsterdam? The paper you read could be ultimately owned by an Australian or a Canadian.
Your employer is a well-known American company of course, but did you know that international investors through complex interconnected holdings can control up to 100% of the company stock? This is new global economy of the 1990's. The question is how much control does our government, or anyone else's, have over its own economic fortunes? How much has it changed since the boom of the 50's and 60's? With Americas debt pushing toward $4 trillion, who is responsible, whom do we owe it to, and is it now some faceless executives in Wall Street, Tokyo, or Bonn who are 'pushing the buttons'?
No firm answer can be made, but there can be no doubt that the world economy and financial structures are continually and irrevocably changing. The global economy is a web of interdependence that transcends the sovereignty of all states. In this steadily shrinking globe there are four major players in the new economy, capital, international institutions, multinational corporations, and national governments. How does each of these affect the running of our national government, and ultimately you and me?
In today's world of modern communications large amounts of cash can be transferred around the world in the same time as a telephone call or fax and much of this money is not controlled by any governments. By the start of the 1990's there was some $2 trillion of 'stateless' money circulating in the world. Entrepreneurs can move their money around the world like some giant dice game in order to gain a better rate of return in the way of interest or exchange rates.
They may also move it in support or disapproval of certain government policies. This can be a catalyst for certain treasury decisions who do not wish to offend large capital interests. For maximum benefit states have to make themselves attractive to this capital. Therefore the movement of capital, and not state macroeconomics, can control events. This can clearly be seen in the 1987 stock market crash. As investors pulled out the rug in Wall Street the rest of the world followed. It was more the pressure of international capitalism, and not George Bush, that eventually pulled down the Iron Curtain
This free movement of capital accelerated during the 70's. US dollars were used for oil purchases and other international exchanges. Many of these had not touched US soil for years as came to be commonly known as Euro or Petro dollars. The vast amounts of wealth being traded gave primary importance to these dollars and is seen as a major factor in the erosion of state sovereignty. Eurodollars are today almost an international currency, meaning that actors external to any state can create economic chaos. If Americas debts were called in to be settled the world economy could collapse overnight.
International institutions are another major factor. Intergovernmental organizations like the IMF have a major say in the running of third world governments. The UN is able organize trade embargoes to influence governments to change, such as South Africa, or institute policy forcibly if it wishes, as in the case of the Gulf War. Global trade unions can restrict a nations trade to protest treatment of workers or certain government policies. International pressure groups such as Amnesty or Greenpeace can force governments to rethink certain lines. Ultimately any of these actions affects a government's ability to control their own economy.
Multinational corporations can not be thought of as they once were. No longer is there a head office in New York or London with branches around the world. Today there are webs of interconnected companies with offices in any number of countries. As they grow they can monopolize trade, force privatization of public companies, convince governments to lower trade tariffs, and manufacture an 'American' car (or any parts therein) in many places around the world.
They can force governments to trade off for their favors. Such was an example in Australia where the government made an ex-gratia payment to Kodak of $60 million simply to sway them from moving operations to the Philippines. MNC's have been instrumental in the new theory of comparative advantage, where a country will tend to specialize in certain industries (the ones they are most efficient at), or the provision of labor.
We can see the damage that one nations policies can do to anothers economy. Subsidies by the EC and US are sending farmers broke in efficient primary producing countries like Australia, New Zealand and Argentina. They have also set commodity prices tumbling, reducing the export income of nations the world over. The formation of trade blocs like the EC and NAFTA can harm one the economy of one country, or boost anothers. The US, protecting what it perceives as the interests of the global free market, has instituted policies that harm the economies of countries like Cuba and Vietnam or boosted Mexico's.
International institutions are almost a growth industry. More and more are needed to facilitate the growth of the international economy. As each rises up more rise up in response to them. There is no turning back. In this ever shrinking world we must strengthen these institutions if we are to retain a say in our own economy. All four major players are interdependent on each other, and no longer is any one entity in control. Clinton and Bush may bluster and promise, but they can not control the economy in a way they would like us to think they do!
(Mock article only - written in line with specified course requirement)
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REF: Nicholas Klar, 1993, "Commentary: Who is pushing the buttons?" - http://klarbooks.com/academic/globalec.html + date accessed