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POLICY JOURNAL
ARTICLE EXTRACTS: Volume XV, No 3, FALL 1998 The Euro:
Why It's Bad for the Dollar But Good for America "When we examine the origins and development of the European single currency," writes Martin Walker, European editor of The Guardian, in "The Euro: Why It's Bad for the Dollar But Good for America," " we discern the deep roots of resentment over America's dollar stewardship. It is clear that the euro developed as a defensive mechanism against the dollar, as much as from a Europe-building act of will." And while a strong euro could lead to a massive and unprecedented shift in the world's financial resources from dollars to euros, this, Walker argues, is not a bad thing for America. "The coming of the euro, based on a European economy matching the U.S. economy in size and in share of world trade, should dampen the extraordinary currency fluctuations that have over the past two decades repeatedly seen 50 percent swings in the dollar/D-Mark rates. An end to these irrational gyrations will be good for the global economy, good for the United States, and good for the Atlantic Alliance. If the adjustment process is pursued with care and forethought, it will involve a sobering thought not humiliating decline in the dollar's prestige, a small price to pay for the economic and strategic benefits involved."
The Privilege
of Choosing: The Fallout from Japan's Economic Crisis In "The Privilege of Choosing: The Fallout from Japan's Economic Crisis," Masaru Tamamoto, who teaches law at Ritsumeikan University in Kyoto and divides his time between Japan and America, explores the social underpinnings of Japan's current difficulties. "For over seven years," he writes, "the Japanese government has been trying, without success, to reflate the sagging economy. What accounts for this political paralysis? Beneath the seeming indecision surrounding the formulation of a viable economic policy is a society remaking itself. Deregulation is the obvious path to economic revitalization. But revitalization cannot be accomplished by simply tinkering in the economic sphere." The author suggests that there is increasing recognition in Japan that the whole of hitherto heavily regulated Japanese life needs to be liberated. The cumulative effects of the seemingly discrete changes already taking place, are "likely to result in a fundamental change in the nature of Japan's social relations."
Waiting for
Justice: Aryeh Neier, president of the Open Society Institute, takes the Clinton administration to task for its opposition to the treaty establishing a permanent International Criminal Court, which was adopted by 120 governments this past July in Rome, in "Waiting for Justice." While the author admits there are glaring flaws in the treaty--mostly having to do with lack of jurisdiction and enforcement powers--it is, he argues, a historic achievement, the culmination of a decade and a half of effort on the part of the international human rights movement to establish the principle that those responsible for genocide, crimes against humanity, and war crimes should be punished. Unfortunately, Neier says, the Clinton administration permitted the Pentagon to obstruct the efforts by most of the world community to make advances for human rights "because of what appear to be fairly trivial or farfetched objections by the American military."
THE CONSEQUENCES OF ASIA'S FINANCIAL CRISIS The editors of World Policy Journal asked four distinguished commentators on economic issues to write about the causes of and possible solutions to Asia's financial crisis. Jeff Madrick, the author of The End of Affluence, criticizes the International Monetary Fund's approach to the crisis in "The Half-Learned Lessons of History," and warns of the risks of providing insufficient aid to the region. "A pragmatic solution in East Asia is still possible," Madrick writes, "although it will certainly require the major banks to take some losses. But a solution can be reached through debt rescheduling, debt-equity swaps, and lower interest rates." Alice H. Amsden, professor of political economy at M.I.T., and Takashi Hikino, who teaches economics at Kyoto University, contend, in "What Can an Activist Government Do?" that it is unwise for East Asian nations to meekly follow the advice or orders of foreign powers "because this is what got them into trouble in the first place." The Asian economic challenge to North Atlantic economic hegemony was mounted "by countries that were industrializing under an economic and business system that did not fit into the conventional economics framework. Ultimately, East Asia will rise again because of this very system, which involves more government activism to promote economic growth and more acknowledged business-government interaction to regulate market forces than in the North Atlantic economies." To James Grant, editor of Grant's Interest Rate Observer, the paradoxical underlying cause of the crisis was Asia's long-running, unchecked, debt-financed prosperity. In his essay, "The Illusion of Stabilty," he notes: "Expecting that the boom would never end, lenders and borrowers overdid it. By overinvesting, they distorted the architecture of the world economy." What is needed now? "Truer prices (and interest rates and exchange rates) in the service of better decisions." Robert A. Madsen, who is the author of The Economist Intelligence Unit's quarterly Japan Country Reports, takes a pessimistic view of the future in "Expect No Help from Japan." After outlining what Japan must do to recover, he concludes: "Japan will probably not regain its economic vitality for another four years, and the government will then retard growth by restraining its budget deficit. Worse still, the measures required to realize this future entail significant social trauma, including intensified competition between companies and less job security. With these costs in mind, one has to ask whether Tokyo has the political will to embark upon this difficult course of action."
The Changing
Face of Berlin In "The Changing Face of Berlin," Belinda Cooper, a senior fellow at the World Policy Institute who lived in Berlin from 1987 to 1994, takes the reader on a tour of a city still torn by the prejudices that are the legacy of 36 years of division and occupation. "It is impossible to predict," she writes, "where, exactly, Berlin's process of transformation will lead it. But the city's greatest strength and its greatest promise lie precisely in the interplay between the varied groups and forces that comprise it and contribute to its tensions--between its East Berliners and West Berliners, between its residents with 'foreign' backgrounds and its native Germans, and between its Prussian traditions of bureaucracy and authority and its ordinary citizens' skepticism and tradition of protest. With luck, this interplay will turn Berlin into a capital city worthy of Europe's strongest power."
Exporting
the Myth of Liberal America In "Exporting the Myth of a Liberal America," Benjamin Schwarz, a senior fellow at the World Policy Institute and a contributing editor of The Atlantic Monthly, suggests that "America's view of the world is hampered not by the reality of its harmonious, liberal past, but by the myth. We get the world wrong because we get ourselves wrong. Taken without illusion, our history gives us no right to preach--but it should prepare us to understand the brutal realities of nation building, at home and abroad." In thinking about America's role abroad and what we expect of other nations, we would do well, the author says, to cast a cold eye on our own history.
Fragmenting
Indonesia: Survival in Doubt In "Fragmenting Indonesia," French journalist Bernard Estrade, reporting from Jakarta, points up the fragility of this nation made up of more than 300 ethnic groups. With Suharto's fall from power in the wake of a severe and prolonged economic crisis, Indonesians of all stripes are beginning to question the legitimacy of the unitary state. Estrade details the long-held resentments over Javanese domination of politics and the economy, and the economic power of the Chinese minority, and the rise of political Islam, which have begun to eat away at the fabric of the state.
Two and Indivisible:
The Partition of India and Its Discontents Fouad Ajami, professor of Middle Eastern studies at the Johns Hopkins School of Advanced International Studies and the author of The Dream Palace of the Arabs, explores the origins of Pakistan in "Two and Indivisible," a review essay of, among other works, Jinnah, Pakistan and Islamic Identity, by Akbar S. Ahmed. In Mohammad Ali Jinnah, the founder of Pakistan, Ajami has a compelling subject for revisiting the origins and history of partition. He explores the twisted path that took the secularist Jinnah from membership in the Indian National Congress to the politics of separation, and delves into the nature of a man who "could only depict his creation and his work as a tale of triumph" but who left his heart in India.
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