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JAMES GALBRAITH “Sell Everything” That is in fact what I said to my wife before leaving for a week in China. But of course we didn’t And so I spent the early Beijing mornings checking CNN for the latest disastrous news from Hong Kong and then from New York Luckily, I had with me two excellent books. One was Doug Henwood’s Wall Street look at sharp financial practice. Henwood, editor of the New York-based Left Business Observer, has studied the markets for years without making a single friend that he will admit to. There are plenty of “bad apples” books about Wall Street. This one goes after the reputation of everybody, in detail and by name, not for criminal transgressions but for the corrupt character of the legal core of the business, and not exempting the “social investors” who exist to make liberals feel good. But the larger merit of Wall Street is as a guide to financial economics. Want to know about the follies of efficient market theory, the capital asset pricing model, the BlackScholes formula for options that just won the Nobel prize? Curious about Jensenism and other scholarly celebrations of downsizing and predation? Henwood covers them all, the loons and their critics, in clear English. He also provides inspiriting discussion of the two greatest financial economists of all time, Marx and Keynes, just in case you were tempted to think that there is anything in life that can’t be discovered in old books. Want to know how the money power got its death-grip on our political culture? Check out Goldbugs and Greenbacks, by U.T.’s own Gretchen Ritter \(Cambridge count of the rise of corporate America under the hard-money Republicans from U.S. Grant to William McKinley \(and fall of Populism, the greenback question, and the people’s struggle against monopoly power. Ritter argues powerfully that the rise of corporate capitalism was not inevitable, not inherent in the superiority of that system. It was a political battle that they might have lost, but didn’t. Which brings me back to China. China is the last great growth economy. Real wages have quadrupled in China over eighteen years; they have gone up 45 percent since 1993. Casual observers speak of market reforms, but in fact China’s surge was kicked off by the largest land reform in history, in 1979, and it was sustained by public investment on a colossal scale. People speak of capitalism in China, but most of the tens of thousands of new enterprises fueling Chinese growth are owned by provinces, townships, villages, cooperatives and sole proprietors. And there remains a huge core of stateowned enterprises, inefficient to be sure, but providing jobs, housing, and welfare services to many millions. China today has a market system. But it is a soft-money, mixed economy. It lacks the stock markets and the stagnation of corporate capitalism. So far this formula has worked brilliantly for China, raising mass living standards almost for the first time in the history of that country. In one generation, rations and quotas have disappeared, life expectancies have risen by more than twenty years, and a visibly middle-class society now exists, at least in the cities. For the West, China’s distinctiveness has been obscured, partly by our focus on politics and human rights, but also by the larger “Asian miracle” of capitalistic rapid growth, something China resembles only superficially. That miracle is now collapsing in waves of financial chaos, leaving a huge question mark over the future of the region. Will Asia’s collapse pull China down? The crash of the Hong Kong stock market and its many China-based “red-chip” firms is not a good sign. The fall of currencies and wages from Thailand to Indonesia will hurt China’s exports. On the other hand, though, Chinese households are insulated from most of the turmoil. They are flush with cash savings and free of debts. Unlike Americans, they won’t go under when the markets tank. And the Chinese central bank has already moved to bolster investment by cutting interest rates by a full point and a half. This is an example I defyno, I imploreAlan Greenspan to follow. On my return, of course, I suffered through the great sell-off on the New York stock market. It’s amazing how trite these events are, right down to Robert Rubin announcing that the “fundamentals are sound.” But of course our fundamentals are not soundnot with a recovery that Clinton, Rubin & Greenspan based on slow growth, stagnant wages, rising debts, balance-the-budget fetishism and high interest rates. Is there a bright side? Sureif the crash continues, everyone associated with this policy will fry in Hell. And if not, I promise to sell everythingjust as soon as the Dow gets back up to 8,000. James Galbraith is a passive investor. He is also a technical adviser to the Chinese government on macroeconomic reform. TAI-KEN’ ANION Labor Intensive Radio Radio of the union, by the union and for the union. Hosted and produced by union members dedicated to bringing the voice of labor to the Austin airwaves. Tuesdays 6:30-7:00 p.m. K0.0F 91.7 FM P.O. Box 49340 Austin, TX 78765 NOVEMBER 7, 1997 THE TEXAS OBSERVER 13