ustxtxb_obs_1991_08_23_50_00017-00000_000.pdf

PAW s nr,4_11.11, \\71: -va 1.111\ 1 n 70’v” ”ss tr c 1. -l. \\’Nvii s”\\11%.vo` Va 9 . Flo . ttii 4, . ‘ 03″i .;,,q’ ,N,S,. \\\\P ’74 AT,11,pn,1149…11′, .`’.c4 \\-\\*.& VIZ1- iff tlai fri 14,71\( grfe f id di gy i ti a . Mg*/ ga-Wo r ‘I ofirtaTiir… Invisible Hand, Fickle Finger U.S. Economic Issues in the 1990s and Beyond BY CHRISTOPHER CURRIN The End of Laissez-Faire: National Purpose and the Global Economy after the Cold War; by Robert Kuttner Alfred A. Knopf, 304 pages, 1991, $22.95; IN HIS NEW book, The End of Laissez Faire, Robert Kuttner recounts the failed attempt of corporate raider T. Boone Pickens, Jr. to bring the art if the hostile takeover to Japan. In Japan, a 28-percent ownership is no guarantee of a place on the board of directors or even a peek at the books, so T. Boone has taken to the lecture circuit with tales of Japanese unwillingness to play fair, This is one of the many examples cited by Kuttner of the American tendency to adhere to a utopian variation of laissez-faire ideals, even at the cost of blinding ourselves to profound changes in the world’s real economy. Thus, a Texas raider leaps onto the Tokyo stock exchange like one of Adam Smith’s paratroopers, expecting a hero’s welcome because he knows how price-auction markets should work. What he doesn’t understand is that, given the ties between Japan’s inflated real estate, equity and capital markets, plus that society’s characteristic group consciousness, a Westernstyle price auction could trigger the collapse of the entire Japanese economy. But understanding of that sort results from the kind of observation one is not likely to make while championing the abstract ideals of laissez-faire capitalism, or trying to make a fast buck through conventional speculation. Kuttner devotes much of this extraordinary book to considering aspects of U.S./Japan rela tions, and nowhere else is the appalling magni tude of America’s economic decline more ap parent. One of the many astonishing facts found in The End of Laissez-Faire suggest the possi bility of a leveraged buyout to end all buyouts. The abruptness of the shift in the relative financial standing of the United States and Japan is unprecedented in the history of the world. In 1980, the value of stocks traded on the New York Stock Exchange were almost double that of the Tokyo exchange; by 1990, the value of the Tokyo exchange was nearly triple that of Wall Street, and the Tokyo exchange traded an incredible 60 percent of all the world’s listed stocks. In prin ciple, by pledging collateral and leveraging the other 40 percent, Japan could buy the rest of the Christopher Currin is a Dallas writer and businessman. world’s industry and finance outright. Kuttner believes that how the United States deals with our growing financial dependence on Japan will be a key to world stability in the postCold War era. He sounds an ironic note in the chorus of national pride following the first conflict of this era by showing that it was not by the working of an Invisible Hand that so many of us watched the extraordinary success of our hightech weaponry in the Persian Gulf on televisions assembled by Japanese robotic fingers. Kuttner’s brand of economic journalism features clear and unhurried explanations of complex issues. This could be the book you’ve been waiting for if you’ve spent much of the past decade with an acute sense that something has been drastically wrong with our economy, but have had a tough time sorting out causes and effects. Kuttner begins the book by relating how, shortly before the Allied victory in World War II, Franklin Roosevelt brought representatives of the Western democracies together at Bretton Woods, New Hampshire, to begin the process of deciding how to restart the flow of credit and commerce after the war. The Bretton Woods agreement was based largely on the design of British economist John Maynard Keynes, who proposed the creation of a supranational currency and central bank as key components in a global finance system biased in favor of ample credit, full employment and worldwide growth. But the World Bank, the International Monetary Fund and International Trade Organization were given far less power than Keynes envisioned, largely because the war’s end made the United States less willing to cede sovereignty to international organizations. The Cold War prevented reversion to old patterns of European fragmentation and American isolation. Kuttner details the United States’ gradual adoption of its new role as leader of a Western military and economic protectorate held together by its opposition to the Soviet-led Eastern bloc. American hegemony fostered the economic recoveries of its European and Asian allies, whose mixed economies often made American apostles of laissez-faire uncomfortable, but were supported for “strategic” reasons. The ideological muddle created by our leadership role has made it difficult to understand what our international interests are, much less defend them. The costs of these embedded contradictions to American society have escalated dramatically. The end of the Cold War offers the United States an opportunity to redefine its purpose and arrest what Kuttner terms our, “dangerous spiral of self-deception and decline.” The ideological blinders hampering that process have also made us reluctant to admit uncomfortable details, such as the fact that the United States has increasingly promoted a mixed economy at home, in contradiction to its worldwide advocacy of laissez-faire principles. Since World Wart II, the Pentagon has been the de facto author of our industrial policy. Kuttner outlines the importance of defense spending to the private sector. He provides wonderful examples of its contradictory results: How deployment of the Pentagon’s “patient capital” helped bring about American dominance in computers and commer THE TEXAS OBSERVER 17