Dollar Diplomacy in Asia

...According to the CIA, China has more than a dozen ICBM's trained on American cities...

...The same small yet highly influential financial and corporate elites are warping America's national security policy and foreign economic policy throughout the world, but particularly in Asia...

...Within these regions, the potential hegemons are not Germany or Japan—both civilian commercial powers with aging, shrinking populations—but well-armed, populous, primitive countries on the periphery of the rich regions—Russia and China...

...Thus Washington's objective there must be to promote the short-term interests of U.S...

...National security considerations still apply—but only to countries that are of little interest to American investors and corporations, such as Russia and India...

...It is...

...Nothing could please GOP China Lobby types like Henry Kissinger more than a policy designed to prevent the Chinese government from retaliating against the U. S. by punishing American investors and multinationals...

...Amid the triumphalism there was a dissenting minority opinion in the U. S. It held that the Asian crisis illustrated the irrationality of the present pattern of international finance and production, not the flaws of particular East Asian economies (real as those may be...

...That makes a difference in an era in which the Defense and State Departments have been eclipsed by the Commerce and Treasury Departments...

...investors and companies), then it shall be treated as a potential military threat...

...Corporate mercantilism has been the paradigm justifying most of the Clinton Administration's major foreign economic policy decisions, including its support of the North American Free Trade Agreement and the World Trade Organization...

...Given its goals, which Congress has permitted the Clinton Administration to define, it has been a success...

...China, meanwhile, has reaffirmed its status as the Asian token in the white man's club of Security Council power politics (Japan plays a similar role in the white man's club of the G-7/8...

...fought three world wars in the 20th century (the Cold War was World War III) to prevent a single power from dominating either Europe or Asia—the only two centers of technological civilization outside of North America...

...Thanks to that fifth column, Beijing has been able to brutally crush all political dissent within its borders, with no fear of retaliation by the democracies...

...The reasoning would have gone like this: The U.S...

...The new conventional wisdom in the United States was that our model of capitalism had been vindicated...

...Like its predecessors, though, the Administration gave up the hopeless task of trying to force Japan to liberalize its market after being rebuffed in its first term...

...This explains the curious double standard that can be observed in the treatment of Russia and India, on the one hand, and China on the other...

...According to Sachs, "The IMF orthodoxy has been put to the test in Asia in the past nine months...

...Just as in the old days there was this "military-industrial complex,' nowadays there is a 'Wall Street-Treasury complex' because Secretaries of State [sic—aFreudian slip?] like [Robert E.] Rubin come from Wall Street...

...To be sure, Washington has not abandoned geopolitics altogether...

...American foreign policy treats China as an emerging market, not as an emerging and possibly adversarial military power...

...And the President who has allowed American foreign policy to be ceded to Wall Street and K Street is the first two-term Democrat since Franklin D. Roosevelt...

...The only resistance to "constructive engagement" (unilateral appeasement) comes from a few hawks, labor liberals and Christian conservatives...

...This makes some of the converts to the anti-IMF crowd all the more interesting...

...Instead of focusing on Japan or the European Union, therefore, the Administration's corporate mercantilists have concentrated on East Asia...

...The objective of economic nationalism is to use business to make the state stronger and more secure—not to use the state to enrich business executives and investors...

...The American corporate elite, mesmerized by fin-de-siècle visions of the China market, is solidly behind it, and the Clinton Administration is not solely to blame...

...imposes economic sanctions on India for testing atomic bombs (even though it has no missiles trained on American cities...

...In the foreseeable future, it will be easier for China to intimidate its Asian neighbors, including Japan, into deference than it would be for a revived Russia to do what the Soviet Union failed to do, incorporate all of Europe into its sphere of influence...

...During the second half of the Cold War, when the Soviet Union was America's sole major rival, it made sense for the U. S. to align itself with China and its ally Pakistan against the USSR and its de facto ally India...

...Most significant of all, China has been rewarded with recognition that it is not merely an East Asian power, but a power with a legitimate role in South Asia as well...

...pushes through the expansion of NATO to protect Europe from a purely speculative Russian threat...

...The business of America in Asia is business...

...A Republican administration—at least a country-club Republican administration—might well be worse...

...Clinton-style corporate mercantilism should not be confused with old-fashioned mercantilism, or economic nationalism...

...Why the disparity in treatment...

...It is potentially the major military power in Asia...

...appeases China, despite its having crushed Hong Kong, threatened Taiwan and used alliance diplomacy to encircle India, yet the U.S...

...Harvard economist Jeffrey D. Sachs, the proponent of East European marketization, wrote in the New York Times on June 4 that "the IMF has become the Typhoid Mary of emerging markets, spreading recessions in country after country...

...But the chief reason for awarding the Bismarck Prize for statecraft to the postDeng junta in Beijing must be the way it has handled the nuclear crisis in South Asia—which, by arming Pakistan, it helped to create...

...Think of what China has achieved...

...reaction to the Asian financial collapse...

...Never mind that this system is based on Depression-era New Deal laws the financial and business communities have been trying for years to have repealed—to permit a return to the very kind of House of Morgan linkages supposedly discredited in Asia...

...Here is Columbia University economist and proponent of free trade Jagdish Bhagwati, explaining to the Times of India last December 31 why the IMF attempted to pry open financial markets in the Third World: "Wall Street has become a very powerful influence in terms of seeking markets everywhere...

...It is also potentially the major source in Asia of cheap labor (in the short run) and the largest consumer market (in the long run...

...Thanks to that fifth column, China suffered no consequences in 1996 when it rained missiles near Taiwan, forced the U.S...

...The volatility of "hot" capital encourages countries to compete to attract investment by devaluing their currencies, impoverishing or repressing their labor forces, and/or jacking up their interest rates...

...Economic nationalists usually want to guarantee foreign markets for exports made at home...

...A connoisseur of geopolitics can only admire how brilliantly the Chinese dictatorship has played its cards...

...The difference, of course, is that China today is a subject, and not merely an object, of international politics...

...In my judgment it is a lot of ideological humbug to say that without free portfolio capital mobility, somehow the world cannot function and growth rates will collapse...

...Today our grand strategy in Asia can be described as corporate mercantilism...

...if, however, said country is a significant military power but not an important market (important, that is, to U.S...

...Its underlying premise is that the shortterm economic interests of Wall Street and footloose U.S...

...What was needed, the U.S...

...While the United States (at least for the time being) has abandoned geopolitics for geo-economics, China has been sticking to old-fashioned realpolitik...

...After a burst of initial enthusiasm, American investors discovered that they were not going to get rich by doing deals with Russia's mafiacapitalists (or for that matter by exploiting Russian labor...

...China's dual nature might have confronted the U.S...

...If that were not the case, it would long before now have identified China as the major threat to our position in the world...

...When neoclassical economists from the Ivy League like Sachs and Bhagwati join a radical like William Greider in denouncing the IMF and speaking of a "Wall Street-Treasury complex," it becomes difficult to dismiss the allegation that U.S...

...So China must be appeased...

...And what has been President Clinton's response to this demonstration of U.S...

...Thinking Aloud DOLLAR DIPLOMACY IN ASIA By Michael Lind A series of spectacular events— the Asian financial crisis, the Indonesian riots that led to the ouster of dictator Suharto, and the competitive nuclear tests by India and Pakistan—have led many in the U.S...

...The advocates of corporate mercantilism do not so much reject this old-fashioned realist logic as apply it selectively...

...foreign policy has become a plutocracy by other means...

...fleet to stay out of the Taiwan Strait, and, through a high official, asked the rhetorical question: How would the U.S...

...These are strange times...

...Following a divide-andrule strategy toward the barbarian powers, the Middle Kingdom has pitted the U.S., Japan and Europe against one another, threatening to withhold contracts from countries that are not cooperative...

...China's fifth column in the West consists today not of Maoists but of business executives...

...There all three major industrial centers—North America, Europe and Japan—are competing to win foot holds for their companies in a geo-economic reprise of the great-power competition of a century ago for zones of economic influence in China...

...It is really as simple as that...

...Thanks to the business-class fifth column, the Clinton Administration has turned a blind eye to the arming of Pakistan by China, and inconsistently (not to mention rather unfairly) punished Pakistan alone...

...That assumes the interests of the state are distinct from, and superior to, those of private enterprises...

...But thanks to corporate mercantilism, there is no dilemma...

...Answer: There is no India Lobby in the U. S. Russia and India could be strategic partners of a United States determined to prevent being displaced by China in Asia and perhaps, in time, in the world...

...But American business does not see dollar signs when it looks at Russia and India, the way it does when it gazes at China...

...American schadenfreude surpassed American concern...

...Morgan Stanley and all these gigantic firms want to be able to get into other markets and essentially see capital account convertibility as what will enable them to operate everywhere...

...If the U. S. were to adopt policies designed to thwart the growth of Chinese military power, there would be serious consequences for American manufacturers and investors...

...Sachs concludes that the Clinton Administration and other governments "should insist that the IMF's free run of the international financial system be brought to an end...

...The culprit in the East Asian crisis was "crony capitalism," the network of cross-cutting corporate ties and informal guanxi, or connections, that characterized the financial-industrial systems of all too many East Asian countries...

...So the IMF finally gets a role for itself, which is underpinned by maintaining complete freedom on the capital account...

...Their rule may be stated as follows: If a country is both a military great power and an emerging market, it shall be treated as an emerging market...

...investors and multinationals—even at the expense of purely national U.S...

...China hints darkly about nuking Los Angeles, and the U.S...

...The sacrifice of geopolitics on the altar of geo-economics could not be more blatant...

...businesses and American and Asian workers...

...The new American corporate mercantilists want to guarantee foreign sources of cheap labor that will export products to the United States...

...Assuming, that is, we are still living in a world where preserving one's rank in the global pecking order is worth not merely the sacrifice of profits of a few corporations, but the taxes and blood spent in wars large and small...

...The LMF lends its client governments money to repay foreign investors, with the condition that the government also jack up interest rates, cut the flow of credits to the banking system and close weak banks...

...with difficult choices...

...The opposite alignment—the U.S.-India-Russia—makes sense now...

...multinational corporations are identical to the long-term interests of the American people, and indeed of the human race...

...impotence and irrelevance in Asia...

...None of the countries that have taken the IMF's harsh medicine have grown as it predicted they would...

...He actually praised China's chairing the fivepower conference: "This is further evidence of the important role China can play in meeting the challenges of the 21 st century...

...In this view, the International Monetary Fund (IMF), by conditioning aid on the liberalization of financial and other markets, has acted as the gendarme for the West—not the workers or consumers of the West, but the bankers and speculators and multinationals...

...triumphalists declared, was something like the American system of arm's-length relationships between lending institutions and corporations, supervised by a strong regulatory authority...

...The U.S...

...and overseas to question whether America's Asia policy is succeeding...

...One might think that American corporate mercantilists would concentrate on breaking into Japan's still protected domestic market or forestalling European economic integration...

...India is now, or will soon be, vulnerable to atomic attack by both China and its ally Pakistan...

...Answer: There is no Russia Lobby in Washington and New York...

...Scarcely had the radioactive dust settled than it was announced that China (not "the world's only superpower") would chair a five-power meeting on June 4 in Geneva to discuss tensions in the subcontinent...

...There is an inherent contradiction, it was pointed out, between making a fetish of the mobility of capital and functioning in a world where industrial plant and labor are not mobile...

...Appeasing China may not be wise, but it is a consistent elaboration of corporate mercantilism...

...As for the idea of a transatlantic common market, it has gotten nowhere with the Europeans and the U. S. has had to settle for the ceremonial role of chief of an expanded (and diluted) NATO alliance...

...Not since the Soviet Union, while keeping the North Vietnamese going, offered with a straight face to provide its good offices, has a great power gotten away with volunteering to adjudicate between a rival and one of its own satellites...

...In addition, instead of being treated as a country equal to China that deserves a seat on the Security Council, India is being treated as a third-rate regional rogue state on the level of Pakistan...

...The President made those remarks during—guess what?—a speech outlining the need to renew Most Favored Nation status for China...

...If there were a Nobel Prize for Cunning, there could be just one candidate this year...

...Having identified China as the major potential rival, a United States government guided by realist logic would have tilted toward Russia and India, in the spirit of the maxim, "The enemy of my enemy is my friend...

...CORPORATE MERCANTILISM also informs the peculiar U.S...

...In the past, critics of capital mobility and IMF policies, like critics of the Federal Reserve, tended to be Leftists or cranky Right-wing populists...

...feel if a nuclear missile hit L.A...