[The issue of bank nationalization as a solution to the economic crisis is hotly debated in specialized circles. David Goldman, whose articles at Asia Times and Inner Workings have been popular links here at World Report, adamantly opposes bank nationalization. Taggart Murphy argues here that
"...senior officials of the Federal Reserve, the US Treasury, the Comptroller of the Currency, and the SEC as well as the chairs of the House Financial Services and Senate Banking Committees and their top staffers"could
"temporarily nationalize the banks, break them up, fire their managers, bring in new ones, and re-impose regulation that would consign financial institutions to their properly modest place in a healthy economy as handmaidens of genuinely productive activity and stewards of savings."But, Taggart Murphy says, officials like Summers and Geitner are incapable of doing so because
"their personal fortunes – not just the money in their bank accounts but their prospects for future earnings and stature, their webs of personal associations, and above all the mental constructs that govern what they see as possible, prudent, realistic – no longer permit them to distinguish the well being of Goldman Sachs from that of the country that they theoretically serve."-jlt]
Any serious observer of the Japanese economy follows the work of Richard Katz. In two closely argued, well-documented books, Japan: The System that Soured (M.E. Sharpe, 1998)and Japanese Phoenix: The Long Road to Economic Revival (M.E. Sharpe, 2003), Katz set out the view for which he is best known: that Japan once had an economic system that worked brilliantly but no longer does. Katz continues to elaborate this thesis in his writing for The Oriental Economist where he serves as Senior Editor. Katz argues that Japan's failure to overhaul its political economy has led to the emergence of “two Japans” -- a hyper-efficient export sector and an inefficient, backwards set of companies that primarily serve Japan's domestic market. He maintains that it was these companies, protected by rigid, obsolete political arrangements, that pulled the entire country down into a trough of stagnation and keep it from fulfilling its potential.
Katz's “system that soured” take on events forms an immediately attractive alternative to the once- dominant paradigms of thinking on Japan: the increasingly threadbare reculer pour mieux sauter school that persists in seeing Japan’s recent difficulties as grossly exaggerated bumps on what remains a well-planned road to global economic dominance; Eamonn Fingleton is perhaps the leading representative of this view. And, on the other side, the “rational choice” ideology of observors such as J. Mark Ramseyer who dismiss as a “myth” any notion that there was ever anything distinctive about Japan's economic methods. Katz's take on things, by contrast, seems like common sense, allowing one simultaneously to acknowledge that at one time, Japan really did pull off something remarkable, but that things in the past two decades have not gone well. And that the poor performance of recent years can be traced directly to a failure to overhaul the political framework that once fostered something close to an economic miracle but that now acts to block reform.
| If Wall Street has a veto over potentially the most effective measures – nationalization; regulation with teeth – then any real difference between all the buzzing out of Washington and the distracted, ineffectual responses in Japan to the first signs of that country’s crisis back in 1990 may not amount to very much. |
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Richard Katz's Foreign Affairs article, "The Japan Fallacy" is here =>Recommend this Post
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