Will Hutton and Anthony Giddens are playing leading roles in the British debate on globalization and the “third way.” This fall, their jointly edited book Global Capitalism will be published in the United States by the New Press. It begins with a vigorous dialogue between the editors, and we present excerpts from it here. We join them as they dispute the origins and implications of the Asian economic crisis of 1997–1998. Will Hutton is the former editor of the London Observer and the author of The State We’re In. Anthony Giddens is director of the London School of Economics and Political Science and the author, most recently, of The Third Way and its Critics.—Eds.
Will Hutton: I think you can trace the Asia crisis. . .back to the late 1980s and early 1990s when economic policies in Asia were dictated by the need to meet the agenda of Western capitalism, and American capitalism in particular. The Americans said, if you want Wall Street money then you must peg your currencies to the dollar and open up your financial systems to our banks and financial institutions, and that was all done under this technocratic umbrella term—capital market liberalization. I argue that the seeds of the financial crisis were sown not so much by crony capitalism but by the impact of this ill-judged capital market liberalization interacting with the speculative international financial markets who had these pegged exchange rates to speculate against.
The United States wanted price stability and it wanted less exchange-rate risk for its overseas investments, and the dollar pegs seemed a good way of achieving both. But there could not have been a run on these currencies unless they had been pegged to the dollar; and the dollar peg was established in part to meet inflation targets, and in part to ensure that exchange-rate risk was borne by the host country so that the inward investors—mainly the Americans but also Western Europeans—wouldn’t have to insure themselves so heavily against so much risk. So it was more or less inevitable that the whole policy nexus would become unsustainable as soon as the financial deregulation caused asset price booms—bubble economies really—property booms and all the rest of it. Japan’s economic collapse and China entering the world trade system did not help the declining growth in exports that were already uncompetitive; balance of payments deficits grew explosively.
So what really took place in the 1990s is a great power play: Asian capitalism versus American capitalism. U.S. capitalism wins, with the Asia crisis of 1997–1998 actually being the flashpoint, and the financial markets working in a way that furthers U.S. interests. That’s not the conventional view, and I think it puts an important question mark over globalization. There is a dimension of globalization that is about opening up the world to American interests in particular and Western capitali...
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