On My Mind; Lessons of the Asian Collapse

By A. M. ROSENTHAL
The New York Times, 23 December 1997

Maybe it is the arrogance that comes from power, maybe some other intellectual disease, but
governments, politicians and particularly capitalists of the West are not getting the real messages
that come from the collapse of Asian economies.

The lessons are that they themselves, these Westerners of economic and political might, helped
speed Asia to its disasters — and that unless that truth is accepted, waves of collapse will come
crashing again and again.

All over the West, government bureaucrats, politicians and journalists are telling us, with almost
unbearable smugness, that Asians finally are understanding that democracy, openness in business
dealings, non-favoritist rule of law, all are essential to the practice of capitalism. But don’t worry,
they say, the computerized global economy will make sure everything turns out jim-dandy.

A few things are wrong with those sermons. First, capitalism has shown itself flexible enough to
have worked for the security of rulers, and the profit of investors, under governments based on
fascism, religious fundamentalism, slavery, internal terrorism, apartheid, absolute monarchy,
militarism — the whole nasty menu of non-democratic regimes. Now, backed by Western billions,
it helps maintain a Communist Government in China.

The real lesson is that openness and freedom are essential not to capitalism in all its incarnations
but to a specific form of capitalism. That is, democratic capitalism — the combination of a free
political society and an open economic system, without control by government-business
conspiracy or partnership.

Democratic capitalism is what Westerners want for themselves but did not think was important
for Asians. They invested hundreds of billions in forms of capitalism that destroyed democratic
capitalism. If ever an economic attitude was racist, there you have it.

As Kim Dae Jung, South Korea’s President-elect, has said, “Asian values” never precluded
democracy. He said that long ago, when he was under house arrest by South Korean dictators and
ignored by Westerners doing business with his captors.

Take a quick look around. American capitalists race European capitalists to sink money into
China’s economy, knowing a great chunk goes to the Chinese armed forces. French, Russian and
German investors line up in Iraq for contracts with Saddam Hussein — effective only if sanctions
are lifted. So at the U.N., that becomes the goal of investors’ nations.

In the Mideast, Western investment goes almost entirely into despotisms that have no intention of
permitting political, religious or business freedom. Russia, supposed to be a developing capitalist
partner, helps Iran build missiles that will be able to reach U.S. troops in the Mideast. For the
story in detail, read the special report by Kenneth Timmerman, an American expert on Iran and
weapons proliferation, in the January Reader’s Digest. Then, if you have a child with U.S. forces
in the Mideast, relax; try.

Now back to Asian countries floored by their own systems of capitalism: capitalism based on
cronyism, familism and corruption, and ruled by economic combines. Their members are
government, bank and business cliques that get together to decide who gets contracts and how
they are split. Also: who gets loans, at what rate, and with what collateral, excuse the thought.
For what they do every day, in America they would all be in jail.

Foreign investors knew what they did. They knew they were not investing in democratic
capitalism but in secretly run systems that perverted the techniques of capitalist marketplaces until
they destroyed them.

But Western businessmen and governments did not think it mattered, bottom line. When they
found out that they were oh so very wrong, they and the Asian governments peering into the
chasm of default got the International Monetary Fund to pull them back.

Even political democracy is no guarantee of creating democratic capitalism if its leadership is
fragmented and foolish enough — see India. Cosmetic changes in places like Indonesia or Malaysia
will not do it either.

Western investors and governments themselves cannot guarantee Asia what it needs — capitalism
prospering in and for democracy. But they can help — by not giving the fruits of democratic
capitalism to governments that destroy the tree.