Economic Growth: The Cases of Sweden and Japan

Today I want to discuss the matter of economic growth further. This time I want to talk about the cases of Sweden and Japan. Along with the United States, Sweden, and Japan all have very similar economic histories for the years of the 1930s through the 1970s. The details differ slightly but the trajectories are all the same. They all tell the same basic story.

Let's quickly review the theoretical formulation we created in "Economic Growth: A Meditation." First of all, what I say is that "growth" is not necessarily desirable, given the present social relations in the capitalist world. This is because elites tend to grab the bulk of the benefits of economic growth for themselves, as I will demonstrate concretely as we look at the case histories of Sweden and Japan.

The economy "grows" but, in my opinion, you almost invariably wind up with a twisted, misshapen, even monstrous growth --- that is hard to see from the inside looking out; but people on the outside looking in can see it.

In "Economic Growth: A Meditation" I tried to make this visible with the analogy of two misshapen, twisted, chronologically and genetically mismatched, patchwork, monstrous giants of "Bob" and his reincarnation as "Alan," as anthropomorphic conceptual personification of "The Economy."

I used that model to try to show that not only do the elites grab the bulk of the benefits of economy growth for themselves, in a capitalist economy --- but that the very "size" the elites attain to is directly, vampirically related to the comparative dwarf-ization of everyone else, in economic terms.

This is an odd way of simply talking about the disproportionate upward redistribution of income and wealth. In "Economic Growth: A Meditation" I also began to touch on the connection between this usual kind of economic growth, in a capitalist economy, and imperialism. I will go into that in more detail when I talk about the case of the United States.

Briefly the idea is this: As the "giants" (corporations, for example) get bigger and bigger, their appetite gets bigger and bigger --- that is to say, they get hungrier and hungrier. And as they get hungrier and hungrier, they eat up more and more market share (call this the tendency to monopolization, as I discussed in "Economic Growth: A Meditation").

As they consume just about all the market share ("food") there is to eat at home, in the domestic market, they demand that their federal government find them more markets ("food") to eat elsewhere --- wherever in the world that may be!

Source

Of course, not every capitalist country in the world has the geo-strategic profile of the United States. With that little caveat, let's get into the case of Sweden,

Industrialization came to Sweden about a century after England. Until the years following World War Two, Sweden remained an extremely poor nation; even its royal house came up rather short in the measure of magnificence compared to its European cousins. Famines were common and illiteracy was widespread (1).

Sweden's reform period started in the year 1932 --- not unlike that of the United States, with the election of FDR and the onset of The New Deal.

The Swedish Social Democratic Party remained in power from 1932 to 1976 (2) --- again, a very similar time frame to the reform period in the United States [you might call it 1932 with the election of Franklin Roosevelt to say, 1976-77, with election of Jimmy Carter; or extend it to 1980-81, with election of Ronald Reagan].

Anyway, the Swedish Social Democratic Party placed a high priority on full employment (3). Believe it or not, the American policy discussion group, the Business Roundtable, actually lobbied the U.S. Congress for the same thing in the 1940s (4).

Business grew up in Sweden that eventually became transnational firms. We talking about the likes of Volvo, Electrolux, Saab, and Ericsson. The government sought to encourage these firms to concentrate their operations in Sweden by making the real effective tax rate much lower for profits, generated in-country, than for those generated abroad (5).

"An alliance between major Swedish industrial corporations and organized labor," writes David C. Korten, "served as the party's political base and supported the centralized and peaceful negotiation of wages and working conditions by national union and employers' organizations" (6).

Once again, a very similar rapprochement was effected between employers and labor in the United States, in the 1940s (7).

At this point I need to review the second part of the theoretical formulation we devised in "Economic Growth: A Meditation." I'm talking about the way one should relate what I call the "financial-metabolism" to the "real economic-body."

What does that mean?

What is the relationship between the regular metabolism and body?

The body is composed of skin, bones, muscles, nerves, synapses, blood, organs, and so forth. To keep all of this functioning at optimal levels, it is advised that we get adequate rest, exercise, and an adequately "balanced" and nutritious diet. The mechanism that processes the food we eat is called the metabolism (as in: "She's so skinny even though she eats and eats and eats. She never gains no weight because she has a fast metabolism.")

The metabolism breaks down the food and distributes its constitutive elements throughout the body: sugars over here; fats over there; amino acids somewhere else. And so on.

If you get your rest and exercise and put good "fuel" into your body, your metabolism will work smoothly and efficiently to distribute that constitutive elements of that fuel throughout your body, helping the body function at its optimal level of health.

However, if the situation is thrown badly off-center, if the quality of the food you eat deteriorates for whatever reason, and/or you are only sleeping four or five hours a day, and if you start smoking and drinking excessively --- then your metabolism will have to work a lot harder to extract anything of value from the deteriorated quality "fuel" you are putting into it, in order to keep the body going, at all, in any form or fashion.

In a national capitalist economy, the role of the financial architecture is to provide funding support for what economists call the "real economy" of physical production. Therefore let us speak of the financial system as the "metabolism" and the real economy as the "body."

From this I derived the terms "financial-metabolism" and "real economic-body."

One more thing: If you stop eating entirely, the metabolism will desperately try to keep the body, by causing it to feed upon itself.

Similarly, when the financial-metabolism will desperately try to keep the real economic-body going, even in the absence of inputs (or "food," by which I mean new value, new technologies that create new, high-paying jobs with good benefits, etc.)

The hyperactivity of finance, then, should be thought of as the economic analog to what happens when you stop eating entirely over an extended period of time: the metabolism turns the body itself into food for the very same body. In other words, the body is forced to feed on itself.

During the Vietnam War there was a saying: We had to destroy the village to save it.

This is the maddening paradox we find ourselves in with the process, I'm describing, that is called "financialization." One can therefore say: We had to destroy the real-economic body to save it.

Destroying the real economic-body is simultaneous to saving it.

Saving the real economic-body is simultaneous to destroying it.

Now back to Sweden!

"The arrangement had important structural flaws, however," according to David C. Korten, "that eventually destabilized it. One was a tax system that subsidized larger firms that were expanding and investing at the expense of small-scale and family firms" (8) (Note: This is an example of what I mean when I talk about the real economic-body being forced to consume itself and how size, what mass that is added, is disproportionately channeled into certain elite sectors).

To continue quoting:

"This led to increasing concentration and monopolization of ownership of the Swedish economy. Although wage policies stressed equality within the working class, the gap between the working class and those who controlled capital grew substantially. At the time, this was considered the price of maintaining the industrialists' commitment to the coalition. In the end, it brought about the coalition's destruction" (9).

Now, there was the oil price shock of 1973-74. This resulted in an economic slowdown, which brought on a fiscal crisis, which triggered a popular resistance to higher taxes. At the same time, Sweden was opening itself up to the international capitalist economy, seeking to make its presence felt in that arena of "globalization," if you like. This move, in turn, loosened the bonds that had tied capital to local labor, and weakened national movements (10).

But during the early stages of Sweden's connection to the globalizing economy --- and we must stress the words "early stages" --- the expansion of Swedish firms created new employment domestically; and the equilibrium of the labor-employer coalition seemed to hold. Once Sweden's transnational firms began to define their own interests as global rather than national, however, the allegiance between blue-collar workers and the bosses began to fracture (11).

David C. Korten:

"The growing contradiction between government support for the global expansion of Swedish transnationals and the need to create employment and rising real wages at home could no longer be sustained. In 1976, the Social Democrats lost the election to a three-party center-right coalition government" (12).

Just like Democrat Jimmy Carter losing the 1980-81 election to Republican Ronald Reagan.

The Social Democrats returned to power in 1982, but they had changed. They were now intent on promoting policies that would allow Sweden's industrialists sufficient profit margins on domestic investment to keep them 'believing in Sweden,' a phrase coined by P.G. Gyllenhammar, then the chairman of Volvo (13).

Yet again, just like Bill Clinton and Al Gore in 1992 --- the vanguard of the so-called "New Democrats" in the United States.

And so it seems that "[m]aintaining a belief in Sweden meant increasing the share of the national product going to profits compared with wages so that Sweden's industrialists would find it worthwhile to invest at home. This was accepted as the price of maintaining full employment at home. This was accepted as the price of maintaining full employment at a time when unemployment elsewhere in Europe was running at 8 to 9 percent or higher" (14).

This policy pushed profits to previously unimaginable levels. "With so much more money in their pockets than could be absorbed by productive investments," according to Mr. Korten, "Swedish investors turned to speculation, driving up the prices of real estate, art, stamps, and other speculative goods" (15).

Again, these match virtually step-for-step the American and Japanese stories. But note the term speculation: [as production slows down, finance keeps churning].

The government loosened monetary controls --- (in other words, unleashed the finance-metabolism) --- with the result that the excess funds spilled over into Europe, where it pushed up real estate prices in London and Brussels to record highs. As the bubble of speculation fed on itself, the quick profits garnered drained money away from productive investment in Sweden. When the bubble finally burst, as all bubbles must, the Swedish banking system had lost $18 billion, which Swedish taxpayers had to cover (16)

Let's take stock of where we are.

Notice that the Swedish government was operating with a gun to its head: damned if it did and damned if it didn't. Stockholm "did" pursue policies that increased "the share of the national product going to profits compared with wages." This was meant to keep corporations "believing in Sweden."

The results were fantastically successful from the point of view of the corporate boards of directors.

The irony is that profits were so great that they could not invest them in Sweden. The profits far outstripped and outweighed any domestic investment opportunity. In other words, the mega-ultra-profits "earned" by Swedish corporations --- due to Stockholm's policy of keeping them "believing in Sweden" --- were looking to make further profits, of at least mega-ultra scale. Given that goal, it did not appear that there was any investment opportunity, at home, in Sweden, that seemed likely to be able to make that happen.

Does that make sense?

Anyhoo... What were the ultimate results of all of this?

Well, by the end of 1992, the richest 2 percent of Swedish households owned 62 percent of the value of shares traded on the Stockholm stock exchange, and 23 percent of all the wealth in the country. The average Swedish household grew poorer between 1978 and 1988; but the richest 450 richest households doubled their assets (17).

And furthermore, "[u]nemployment had been below 3 percent when the Social Democrats were first voted of office. It rose to 5 percent in 1992 and was projected to reach 7 percent, even though another 7 percent of the workforce was already engaged in countercyclical retraining programs and public employment projects" (18).

Well, let's look at the Japan scenario!

Source

The Japan Case

In my opinion, Japan's economic history mirrors that of the United States for two periods: roughly 1950-1975 and 1980-2000. Crudely put, for the first period both nations were, basically global manufacturing powerhouses; and for the second period, both nations were, basically, speculative finance powerhouses.

Anyway, here's the scenario. When we raise the curtain on Japan, in the mid-1980s, we find a nation whose share of world trade was over 10 percent, with its trade surpluses growing. Japan loaned money out to countries it had in the red (to cover what they couldn't directly match in trade with Japan). Japan's capital exports rivaled those of Britain in the 19th century. Japanese per capita income was approaching American levels (19).

Japan's industrial companies dominated new technologies in consumer electronics and a number of other areas. Japan's banks were the largest in the world in terms of assets and market value. Ronald Reagan's government produced enormous budget deficits, which Japanese investors were more than happy to finance by buying U.S. Treasury bonds (20).

Stay with me.

The First Move

In September of 1985 the U.S. Secretary of Treasury, James Baker, gathered the finance ministers of the world's leading economic powers, at the Plaza Hotel in Manhattan. The result of that meeting was that they all agreed to act in concert to push down the value of the dollar in relation to the other currencies, especially the yen. A few months later the value of the dollar sank to under 150 yen, from an earlier high of 259 yen (21).

This was good for American exports; and not so good for Japanese exports. American exports had now become cheaper; and Japanese exports had become almost prohibitively expensive. What we have here is an externally induced "weakness in production."

Understand that the "finance-metabolism" engine was revved up and economic "growth" did occur as a result. But since high finance is usually the domain of the elite, we can probably guess where the disproportionate share of the benefits from such "growth" will be directed.

Suddenly, the Japanese yen had 40 percent more buying power. After the Plaza Accords --- as the understanding that emerged from that meeting was called --- Japanese goods in the International market were almost twice as expensive. In early 1986 Japanese economic growth fell to 2.5 percent, which caused talk of endaka fukyo, the so-called "strong yen recession." There were warnings of a "hollowing out" of the economy, as the yen rose against dollar (22).

Moving Forward (Consequences)

The Japanese government did certain things to facilitate the finance-metabolism as a result of the strengthened yen. Japanese corporations did certain things, on their own initiative, as well, as a result of the dramatically strengthened currency.

The first thing to say is that in the second half of the 1980s, capital investment in Japan amounted to $3.5 trillion, two-thirds of the country's economic growth. This capital investment helped Japan through this period when the stronger yen was causing both lower growth rates and falling returns on capital (23).

"Some commentators have suggested that the Ministry of Finance deliberately called into being the bubble economy in order to supply cheap capital for Japanese industry at this critical time," according to noted financial historian, Edward Chancellor (24).

Japanese industry did not use that "cheap capital" for production, of course. With Japanese exports so expensive, Japanese industrialists, apparently, saw little incentive to pursue that course.

What Japanese industrialists did with that "cheap capital," instead, was to intensify their engagement with something known as zaitech ("financial engineering"). In fact by the end of the 1980s, most of the non-financial, industrial companies listed on the Tokyo Stock Exchange were engaged in "zaitech." As for organizations like Toyota, Nissan, various computer electronics firms, Matsushita, and Sharp, over half their reported profits were derived from speculation (25).

As we shall see in our next installment, a very similar situation prevailed in the United States, with American firms at the same time.

Moving Forward (Consequences, continued)

Here comes the bubble:

By August 1986 the Nikkei Index reached 18,000, which was up almost 40 percent since the start of the year. Against this background, the government launched its 'floatation' of Nippon Telephone and Telegraph (NTT), the national telephone company (26).

In October of 1986, 200,000 shares were offered to the Japanese public (at this time foreigners were not permitted to own shares. Within two months, nearly ten million people applied for shares, even though the government had yet to announce its share price (27).

February 2, 1987: NTT's shares floated freely on the Tokyo Stock Exchange at a price of 12 million yen per share. In the first two days after trading, their price jumped by 25 percent (28).

Moving Backward (Anticipation)

The Japanese central government seemed to make moves which, certainly in retrospect, seems to have anticipated a state of affairs of the decline in Japanese industrial production and rise and intensification of finance.

The first thing to say here, is how Edward Chancellor notes that Japan was unavoidably pulled into the speculative environment, which was prepared when Richard Nixon took the dollar off the gold standard in 1971. Interestingly, Nixon blamed this action on his administration's belief that Japan was "chronically" undervaluing its currency; and this "manipulation of currency" was thought to undermine the system (29).

  • In 1980 Japan liberalized its exchange controls, which they needed to do in order to "recirculate" the excess capital accumulate by its rising trade surpluses and sustained by a high savings rate (30).

What does that mean?

Remember, Japan was dominating global trade. It was shipping out more goods to other countries, than those countries were shipping to Japan. Japan had a trade surplus on these other countries. The other countries that found themselves in a trade deficit with Japan, made up the difference by borrowing the money from Japan to pay for the extra Japanese goods.

From the United States, Japan got U.S. Treasury bonds, for example. Also, the Japanese people had a high savings rate; the Japanese public did not tend to buy a lot of stuff. This extra capital needed somewhere to go, something to "capitalize." Therefore Japan got in on the international currency speculation, that had been unleashed by Nixon's action in abolishing the gold standard for currency.

Does that make sense?

You see, it really was not necessary to re-invest this excess capital back into "production," since Japan already had a hammerlock on international trade.

Stay with me.


Moving Backward (Anticipation, continued)

In 1984 Japan agreed to allow foreign banks to deal in Japanese government bonds and enter the trust banking business. Controls on foreign exchange trading were removed. For the first time Japanese banks, themselves, were allowed to set their own rates of interest on large deposit accounts (31).

Edward Chancellor:

"As a result of these reforms, Japan's capital markets were filled with the detritus of the financial revolution: Canadian and Australian twofers, reverse dual-currency bonds, samurai and sushi bonds, square trips and double-dip leveraged leases, European bonds, and hara-kiri swaps" (32).

The early-1980s was when Japanese companies began to supplement their ordinary earnings by way of "financial engineering," zaitech (33).

In 1984 the Ministry of Finance allowed companies to run special accounts for their shareholders, known as tokkin accounts; tokkin accounts allowed companies to trade securities without paying capital gains taxes. Brokerages offered 'semi-legal' service management, special speculative accounts for companies, known as eigo tokkin, on which they guaranteed a minimum return above the current rate of interest (34).

In 1985, just under one trillion yen was invested in tokkin funds; by 1989 it was 40 trillion yen ($300 billion in U.S. dollars). Zaitech was facilitated by Japan's access to the Eurobond markets, the offshore capital market based in London (35).

In 1981 the Ministry of Finance gave Japanese firms permission to issue warrant bonds in the Eurobond market. Warrant bonds combined conventional corporate bonds with an option (or "warrant") to buy shares in the company at a specified price before the expiry date (normally set for five years after issue (36).

This sounds a lot like American-style "stock options" to me. In a footnote (page 291) Dr. Chancellor noted that the "valuation of Japanese warrant bonds created an absurd circularity: the faster Japanese shares rose, the more warrant bonds were worth -- and the more warrant bonds could be sold for, the faster shares rose" (37).

One important point about warrant bonds.

Warrant bonds were issued mostly in dollars, that were subsequently exchanged in the swaps market for yen. Because the yen was expected to appreciate (rise) over the life of the loan, swapping a dollar liability for a yen liability could result in a negative intererst payment by the company issuing the warrant bond (38).

"In other words," as Chancellor clarifies for us, "Japanese companies were actually paid to borrow the money to finance their speculations" (39).

Total corporate gains from tokkin accounts rose from 240 billion yen ($2 billion U.S. dollars) in March 1985 to 952 billion yen ($7 billion U.S. dollars) two years later. "Few cared that during the same period ordinary operating profits actually declined" (40).

As we are going to see in the next installment, American economic history follows this trajectory, almost to the letter over the course of the same period.

"A steel company named Hanwa," as a for instance, "known as 'the Gnome of the East,' raised over 4 trillion yen (italics mine) in the late 1980s for zaitech and its profits from speculation grew to exceed its earnings from ordinary trading activities by twenty times" (41).

The Japan Case (continued)

Moving Forward... again (Consequences)

At the end of February of 1987, the Group of Seven Finance Ministers met again, at the L'ouvre in Paris, and agreed to stop the dollar from falling against the yen. Consequently, Japanese interest rates were cut to two-and-a-half percent, where it stayed until May 1989. The effect on Nippon Telephone and Telegraph (NTT), the state telephone company, was "electrifying." Within a few weeks it went to 32 million yen, valuing it over two hundred times its annual earnings (42).

The Property Market Boom

"Punitive capital gains taxes," according to Edward Chancellor, " -- designed by bureaucrats to encourage 'long-termism' -- taxed short-term property gains at 150 percent of profits. By discouraging the sale of land and creating an illiquid property market, the fiscal system actually stimulated land speculation" (43).

In other words, when you try to prohibit something, that tends to make people want it more.

Between 1956 and 1986 land prices rose 5,000 percent, while consumer prices only doubled. It looked like land prices would never fall again (sound familiar? Italics mine). Japanese banks, therefore, provided loans against the collateral of land rather than cash flows (44).

In other words, Japanese banks were issuing business loans, not based on how business was going for you, or looked like it would go for you in the near future --- but based on the value of the land on which your business sat.

Indeed, "[i]n such circumstances, normal business activities were considered an irrelevance or, at worst, a drag on stock market value" (45).

Toward the end of the 1980s, in Japan, rising land values became the very motor of credit creation in the whole economy (46).

"By 1990, the total Japanese property market was valued at," 200 trillion yen, "or four times the real estate value of the entire United States" (47).

Something else I should mention...

I should also mention another source of circularity, which further pumped up the property market, which, in turn, further pumped up the stock market in general. I'm talking about the system of cross share holding.

All that means is that Japanese banks also owned a large number of shares in other companies. These banks' ability to increase the extension of credit became linked to the level of share prices in the Tokyo stock market. Everthing else being equal, if the banks increased their property lending, the value of land and shares (Japanese companies were increasingly valued according to their property assets, not operating profit) would rise; and rising share prices would, in turn, increase the value of the banks' cross-share holdings, which would inflate their capital and enable them to lend more (48).

A tiny indication of a social class differential

Since it is always important to keep our eye on class, let's take a quick look-in at how the average small investor fared during all of this frenzy.

Well, according to financial historian Edward Chancellor, "[d]espite the inexorable rise of the market, the average private client made little money. He remained an outsider, fodder for the brokers and their favored clients" (49).

Still quoting:

"Many private investors placed their money in investment trusts run by affiliates of the large brokerages. The trusts were churned mercilessly for commissions and produced average annual returns of less than 4 percent in the late 1980s, at a time when the market was rising by over 20 percent per annum. The only reliable way to make any money during the bubble was to be on the inside" (50).

And...

"Favoured clients -- bankers, bureaucrats, politicians, rich individuals, and even yakuza (gangsters) -- were informed beforehand which stocks the brokers intended to push" (51).

"The only reliable way to make any money during the bubble was to be on the inside." Again, this situation turns out to be perfectly routine.

I'm going to start to wrap up. But its wortth quoting Dr. Chancellor directly on the situation of the peak of bubble, before a new Governor of the Bank of Japan stepped in to implement measures to pop the bubble.

"Rising asset prices (producing what economists term the 'wealth effect') combined with the stronger yen to stimulate a craze for foreign luxury imports," (52), wrote Edward Chancellor.

Still quoting:

"Cuts in income taxes increased personal spending power. Encouraged by low interest rates, people took out fresh loans against the equity of their homes. Credit card circulation increased almost threefold, and consumer debt per head rose to American levels" (53).

Desperate measures undertaken by the Ministry of Finance to try to deflate the bubble:

  • Early February: Margin requirements on stocks reduced from 70 to 50 percent (54)
  • Ordered the BIg Four brokers not to make any further issues of shares or warrant bonds until the market recovered (55).
  • Brokers ordered to purchase stocks when the Nikkei fell below 20,000 in September 1990; margin requirements reduced to 30 percent (56).
  • Life insurers ordered to stop selling shares; and the ban on new share issues was extended (57).
  • Funds diverted from public pension and "postal savings" accounts into the stock market (58).

And so on. These measures did not work.

Aftermath of the crisis

  1. In 1991 it emerged that several brokers had avoided reporting losses by shifting them from one client's account to another, a practice known as tobashi (59).
  2. Summer 1991 --- The Fuji Bank was implicated in a forgery of certificates of deposit scandal worth 260 billion yen (60).
  3. One notorious speculator was arrested after it came out that she had obtained 342 billion yen ($2.6 billion U.S.) worth of forged certificates of deposit from an employee of a small Osaka bank; and that she had used the forgeries to obtain loans from the Industrial Bank of Japan (61).
  4. By the time one "web of speculation" was unraveled, "... a high-ranking politician had been sent to jail, the presidents of two leading banks had been forced to resign, and several dozen others --- among them politicians, gangsters, company directors, and stock market operators --- had been implicated in criminal operations" (62).

Business fallout

  • By late 1992 property prices in central Tokyo had fallen by 60 percent from their peak (63).
  • Banking crises abounded and property prices kept falling throughout the middle-1990s (64)
  • August 1995 saw Japan's first run on the banks since the end of World War Two; depositors withdrew 60 billion yen from the Tokyo credit union, Cosmo Shinyo (65).
  • A run on the large Osaka credit union; and the collapse of Hyugo, a small bank in earthquake-struck Kobe --- the first listed bank to fail in 50 years (66).
  • Toward the end of 1995 the Japanese government had to bail out several housing loan companies, such as Jusen, whose losses were 6.4 trillion yen ($48 billion U.S.) (67).
  • November 1996: The government allowed the Hanwa Bank to fail (68).
  • A year later, Sanyo Securities became the first Japanese brokerage firm to fail since World War Two; next came Hokkaido Takushokoi Bank, which had been the country's tenth largest bank (69).
  • November 21: Moody's rating agency downgraded the debt of Yamaichi, one of the Big Four brokers. The broker lost the confidence of the market and could no longer rollover its debt (70)
  • Novermber 23, 1997: Yamaichi shut its doors for good, with estimated liabilities of 3200 billion yen ($24 billion U.S.) --- the largest bankruptcy in the history of Japan (71).
  • September 1998: Standard and Poor's estimated that there were around 150 trillion yen ($1.1 trillion U.S.) in bad loans in the Japanese banking system, despite write-offs totaling billions of yen in the intervening years (72).

Financial historian Edward Chancellor sums up this way:

"As the stock market declined, the bank's capital base, composed in part of profits on their shareholdings in other companies shrank" (73).

Still quoting:

"The resulting credit contraction threatened to deprive firms of working capital" (74).


One Very Quick Last Word

The point is not to ask the reader to remember all the details. I just want you to remember a general story that I am telling; and how true to form it is of a basic conceptual model I have been developing.

The rest of the analogy is this: "Bob" or "Alan," the misshapen, twisted, chronologically and genetically mismatched giant, thinks he is a stud god rather than a freakish monster. His delusion is facilitated by the fact that he swallows amphetamines by the bucketful. The feeling is euphoria.

But in time, after a while, the amphetamines wear off. "Alan" "comes down" with a thud and realizes that he is a freakish monster, rather than a stud god. It is this shattering realization that precipitates an economic crisis.

Remember, "Bob" and "Alan" are, by analogy, personifications of a "growing" national economy.

There are still a few things missing. We will fill them in as we go along, with our treatment of the American case, in, perhaps, two or three parts.

Thank you for reading!

References

1. Korten, David C. When Corporations Rule the World. Berrett-Koehler Publishers, Inc., & Kumarian Press, 1995. 93

2. ibid

3. ibid

4. Reich, Robert B. Supercapitalism: The Transformation of Business, Democracy, and Everyday Life. Alfred A. Knopf, 2007. 46

5. Korten, D.C. When Corporations Rule the World. 93

6. ibid, 93-94

7. Reich, R.B. Supercapitalism. 32

8. Korten, D.C. When Corporations Rule the World. 94

9. ibid

10. ibid

11. ibid

12. ibid

13. ibid

14. ibid

15. ibid, 94-95

16. ibid, 95

17. ibid

18. ibid

19. Chancellor, Edward. Devil Take the Hindmost: A History of Financial Speculation. Farrar, Straus, & Giroux, 1999. 287

20. ibid

21. ibid, 295

22. ibid

23. ibid, 292

24. ibid

25. ibid, 291

26. ibid, 296

27. ibid

28. ibid, 296-297

29. ibid, 289

30. ibid

31. ibid

32. ibid, 289-290

33. ibid, 290

34. ibid

35. ibid

36. ibid

37. ibid, 291

38. ibid

39. ibid

40. ibid

41. ibid, 291-292

42. ibid, 297

43. ibid, 293

44. ibid

45. ibid, 303

46. ibid, 293

47. ibid, 301-302

48. ibid, 294

49. ibid, 305

50. ibid

51. ibid, 305-306

52. ibid, 310-311

53. ibid, 311

54. ibid, 318

55. ibid

56. ibid

57. ibid

58. ibid

59. ibid, 320

60. ibid

61. ibid

62. ibid

63. ibid, 323

64. ibid

65. ibid

66. ibid

67. ibid

68. ibid, 324

69. ibid

70. ibid

71. ibid

72. ibid

73. ibid

74. ibid

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