America as of late is inundated with buzzwords surrounding the Asian economic crisis – “IMF, deficit, crony capitalism, instability, reform, markets.” One cannot escape the reality that the crisis and decisions regarding how it is dealt with will affect our society on all levels: form Wall Street right on down to individual American workers and consumers. Given the magnitude of this crisis, this paper attempts to offer some general background on the metamorphosis of the present situation of American relations with East Asia. First, the paper will present a historical perspective, roughly tracing the evolution of American economic and military involvement with Asia. This will provide the framework with which to then look at a contemporary Asian crisis. This shift in focus from past to present will then attempt to reveal the enduring role that issues such as economics, politics, and security play in shaping America’s policy and diplomacy toward Asia. Moreover, this paper while by no means an exhaustive analysis of the subject, will show that these defining issues are not mutually exclusive from one another but rather play a tandem role that will continue to be powerful in defining our future relations with East Asia.
Background and Foreground of American Relations with East Asia
The United States has always been characterized by the pursuit of progress and moreover by ensuring that its natural progress is not impeded. In the eighteenth and early nineteenth centuries, the doctrine of manifest destiny drove the U.S. government to look westward in its vision of developing a strong agrarian nation. This expansion allowed America the acquisition of land as well as the opportunity t cultivate that land for economic profit – profit which was deemed necessary to acquire the stability and power needed by a new nation. At this time, America had nothing to gain form relations with Asia because it too was primarily comprised by agrarian countries, which were more than adequately supplying Asian markets with the same exports America could provide. Essentially, the nonexistence of American diplomacy with Asia correlated with this absence of economic interests in Asia.
America remained quite detached, indifferent almost, to East Asia until industrialization took America by storm leaving domestic markets quickly saturated with manufactured goods. The realization that East Asia served valuable interests such as whaling, and coaling stations was facilitated by the development of steam navigation. Because Asian countries remained agrarian and far less technologically developed than Industrialized America, Asian markets seemed to be the solution to the problem of diminishing returns resulting from the American surplus: Asians would readily buy the manufactured goods that were not available in their own unindustrialized country. This alleviation offered by Asian markets made it a relationship worth developing.
The “opening” of both China and Japan was based on “unequal treaties” motivated strictly by the desire that the newfound, valuable, financial interests could be maximized. After acquiring access to these markets, America was able to maintain their interest without using the aggressive tactics which had for so long characterized other Western power. While this lack of aggression was due to both the reality that America had scarce resources as well as the luxury of minimal Asian resistance, its absence furthered the international American image of being harmless and friendly with regard to Asia. America was thus able to shamelessly ride the coattails of powerful nations that did engage in aggressive strong armed trade negotiations.
Obtaining the status of Most Favored Nation with China was particularly helpful in deflecting any accusations of American aggressiveness. The nature of the status allowed those nations already viewed as imperialists to impose trade negotiations which in turn would always equally benefit the U.S. This allowed the U.S. to maintain its popular yet misleading image as a “friendly, peace loving, unique” western country that was distinguished from other Western powers by its failure to display imperialistic designs on China.
America was also able to appear innocuous because of its efforts toward and support of the technological and educational advancement of Japan and China. It was easy for America t assume an encouraging posture because it appeared that manifest destiny was being realized as the East was slowly becoming westernized. Although these countries seemed too far behind to pose any real threat to American financial interests, the sentiment began to change when it was realized that East Asian spiritual development was not following Western suit. The threat that maybe East would someday conquer West is what forced the U.S. to finally act on its true economic intentions.
The trigger event was the Japanese victory in the Russo Japanese War – when Japan established itself as a Pacific power to be reckoned with. It is with the acknowledgement of Japan’s emergence as a new power, that the balance of power in Asia becomes precarious and thus American economic interests are more severely threatened than at any other previous time. This reality and subsequent fear that Japan may establish a stronghold in the Pacific and upset any existing balance of power motivated the U.S. to abandon its facade of isolationism and transition from a passive aggressive to an aggressive approach with regard to ensuring the security of their financial interests in Asia.
By colonizing the Philippines and thus staking a claim in the Pacific, America implied it would not stand for an imbalance of power that left Asian markets and thus American financial interests vulnerable. Although it had for many years occupied Asian markets without overtly staking any exclusive claims that characterize itself as potentially imperialist. America was ready and willing t lay claim t what it deemed necessary to securing a stronghold in Pacific power politics. Further, America’s shameless exploitation of the Philippines reveals that eh posture of friendly peaceful non aggressive relations contingent upon the stability of economic interests in Asia. As soon as the threat of Japanese power became visible, the diplomacy of America changed drastically. So, from the Russo Japanese War onwards, the U.S.’s foreign diplomacy was in fact dictated by the security of American international economic interests (Iriye).
Prelude to WWII
The evolution of U.S. relations with Japan from the Russo-Japanese War through WWII was most significantly determined by three major factors: geopolitical considerations, economic interests and racial and cultural notions. These three factors were relied upon interdependently in efforts to create an American foreign policy that would ensure national security and economic security and thereby effectively serve the basic interests of the U.S. While economic and geopolitical considerations remained stable and identifiable forces in defining America’s interests and relationship with Japan, the defining role and interplay of racial and cultural notions were variable and progressive, becoming more salient only as the abstract fear of “yellow peril” escalated into the tangible conflict of WWII.
At the time of the Russo-Japanese War, America and Japan had a cooperative relationship that was primarily defined by economic and geopolitical considerations. America, impressed by Japan’s technological progress, had been fairly supportive of the idea of a Japanese empire. Japan viewed America as better intentioned than other Western nations and was grateful to the U.S. for its continued support including the financial support given to Japan in its struggle against Russia. There seemed to exist a compromise in which each country would generally recognize the other’s authority in different areas of the Pacific thus allowing both to maintain and cultivate their strategic positions of power within the Asian sphere (Iriye, 89). This compromise was also mutually beneficial in that both countries were afforded continued access to Chinese markets where Japan was allowed to pursue and cultivate its empire economically while American interests were secured both economically (in that it maintained commercial stability in China) and strategically (in that Japan’s presence would ensure a balance of power that prevented Russian domination of Asia).
Diplomatic friction between Japan and Asia began soon after Japan’s victory in the Russo-Japanese. This victory not only marked the first time that an Oriental nation had defeated a Caucasian nation but also served as a prelude for the future racial conflict between Japan and America (Iriye 113). With Japan’s emergence as the world’s newest superpower both nations began to perceive each other as imperialist rivals particularly within the Pacific arena.
Japan having gained confidence and momentum from their newfound prominence, began to regard the status quo of balanced power as a mechanism which merely allowed imperialist American hegemony within Asia to prevail. Many Japanese believed that the Open Door policy served to maintain American economic dominance. Moreover, Japan perceived the function of arms control measures implemented after WWI by the League of Nations to be another means of ensuring the status quo which rendered other nations helpless to resist American dominance. Having limited territory which was poor in natural resources and a small population providing only meager markets for manufactured goods. Japan believed that their only chance for national survival was by engaging in expansionism to overthrow the status quo which favored the Western imperialists (Fuminaro 12-14). These desires for self determination coupled with its growing prominence motivated Japan to expand into Southern China most notably into South Manchuria.
For the United States, Japan’s progressive advance into Southern China “become the cardinal factor in [defining U.S.] policy [toward Japan].” (Iriye 178). Americans were indignant that the Japanese were oppressing fellow Asians in the name of commercial interests and were appalled by the ruthless efficiency with which Japan proceeded to pursue such economic and strategic interests. “Yellow peril” – fear of the East/Asians taking over the West/Americans – escalated as Americans, taken aback by the atrocities of Japan’s expansionism, became nervous with the realization that Japan’s moral values were not undergoing the same Westernization process their technological transformation had followed. The deduction was that if the Japanese were willing to oppress fellow Asians they would have no qualms about overwhelming and subjugating Westerners. It is this fear of Eastern dominance which have led many to retrospectively characterize the Russo-Japanese War, specifically with regard to the impetus engendered by Japan’s victorious outcome, as a prelude to racial conflict between Japan and America.
This fear of yellow peril took root and manifested itself in American media and domestic policies. Racial and cultural propaganda was primarily utilized to rally support for the pro-Chinese sentiment. Moves like “The Good Earth” portrayed China as sharing some basic cultural similarities with Americans. This fostered a sort of kinship which dually enabled Americans to relate to the Chinese people and feel sympathetic for them in their plight for democratic freedoms while harboring negative feelings for the Japanese. This was evidenced by the fact that Japanese were often depicted in American political cartoons as relentlessly aggressive champions of dictatorship.
American domestic behavior and policies also began to reflect the rising tide of yellow peril. As white laborers in California began to feel that cheap, Japanese labor was severely threatening their livelihood, anti-Japanese sentiment became more visible and prevalent. American perception of this racial threat manifested itself in national legislation passed to exclude new Japanese immigrants. That Japan continued to define its relationships with America largely on economic cooperation is evidenced by the Gentleman’s Agreement. By agreeing to limit the Japanese immigration to the United Sates Japan hoped to secure proper treatment of the Japanese who were already in America while simultaneously seeking to maintain economic cooperation by appeasing America (Fiichi2).
In spite of the pro-Chinese, anti-Japanese notions of race and culture that were shaping domestic sentiment and domestic policy, economic and geopolitical considerations continued to predominate American foreign policy. America, much like a Japan, sought to maintain Japanese-American business relations as long as possible. To achieve this, America delayed directly intervening on behalf of China until it was perceived that any further tolerance of Japanese aggression would severely endanger American financial and strategy interests in China (Iriye 180). At this point, America accepted that its economic relationship with Japan was not compatible with its publicly projected sympathy for and support of China. Furthermore, America realized that if it did not embrace its role as protector of China, it left its possessions in China in a vulnerable position to Japan’s expansionist agenda. Based on the economic threat posed by Japan’s relentless advance into Southern China as well as popular public and media support for China America engaged in economic warfare by imposing economic sanctions on Japan. Construed as yet another manifestation of the arrogant imperialism Japan so resented as hegemonic, Japan took drastic action to overwhelm the status quo once and for all (Fuminaro 14).
Characterized in FDR’s War Address as a “surprise, unprovoked, dastardly attack [that would] live in infamy,” Pearl Harbor unleashed racial and cultural notions as potent forces that shaped the face of American sentiment and policy toward Japan in WWII. Atrocities like the bombing of Pearl Harbor and other war crimes also played a major role in the propagation of racial and cultural stereotypes (Dower 13). Although many stereotypes existed prior to war, atrocities were perceived as both confirmation of the ruthlessness which characterized the enemy and justification for brutal retaliatory measures. For instance, the American belief that the Japanese had little respect for human life appeared to be affirmed by realities such as the bombing of Pearl Harbor and the threat of kamikaze missions. These affirmation in turn seemed t justify U.S.’s dropping atomic bombs on Hiroshima and Nagasaki. This “kill or be killed” mentality made it easier for Americans to pursue an all out war where the goal for national survival became conflated with the goal to completely annihilate the Japanese race (Dower 67).
At the core of WWII remained the same economic and geopolitical concerns that had been persisting sine the Russo-Japanese war. Both America and Japan ultimately desired the power in Asia that they felt was necessary to ensure continued national security and financial prosperity. So long as an imbalance of power did not prove to threaten these interests, Japan and America were mutually able to reconcile politics with the compatibility of their business interests and thereby maintain a two dimensional, cooperative relationship. In WWII, the transformation of the abstract fear of yellow peril to the reality of WWII with Japan served to heighten the importance and intensity of America’s earlier economic and geopolitical considerations. Directly threatened by Asian dominance America did not reconcile differences in race and culture with other interests. Rather America relied on those differences to justify the assertion of an all out war against Japan in the name of national survival.
The Korean War and the Vietnam War
After WWII, Americans fought two more wars for the sake of maintaining stability by achieving a status quo in the balance of power in the Asian Pacific region. The Korean War, the first of these wars, was largely related to Soviet perception that American military presence in Japan was fostering the potential of Japan to resurface as a military threat. Soviets believed that the unification of Korea would provide a formidable base of resistance but America perceived this effort as an act of aggression. In response, the United States thought it necessary to resist such aggression so as to prevent further acts of violence and expansionism. Americans sought to establish a counter offensive anti-communist regime in Korea so as to carry out a Cold War policy of Soviet Containment. This policy sought to protect American economic interests as well as maintain American access to Asian markets and ultimately ensure the viable existence of democracy.
Because the U.S. viewed the enemy as Russia, it was apprehensive to engage in forceful unification of Korea if it involved a large scale war with communist China who, fearing the vulnerability of Manchuria, openly declared its intention to come to the defense of North Korea. America felt the need t apply the same containment policy to communist China while recognizing nationalist Taiwan as a means to aid preservation of American trade markets in Asia.
After WWII, the U.s. sought to make Japan an ally in their struggle against Communism. In exchange for a return to normal relations the U.S. obtained rights to establish a military presence in Japan. This alliance along with the alliances between Japan and South Korea were intended to perpetuate the status quo in the Asian region as well as to symbolize the U.S.’s resistance to a change in the balance of power.
Vietnam was yet another military issue involving the U.S. and China. Similar t Korea, America viewed the Communist forces in Vietnam as a threat to the balance of power and ultimately to democracy. If Vietnam were to fall under communist Chinese hegemony, the “domino theory” dictated that all of Asia would soon fall t Communism. South Vietnam which was trying to preserve its independence and concentrate on economic development provided America with a seemingly opportune setting in which to confront the Chinese threat to regional power.
Post Vietnam Economics
During the 1960s the global economy began t expand as international trade grew. The International monetary Fund aided this phenomena by granting credits to help nations whose trade was sluggish. At this time, the United States was the leading trade nation boasting a surplus that was used for investments and security costs overseas. By the 1970s, America’s superior position in world trade became threatened as the U.S. moved toward becoming a net importer for the first time since before WWI. At this time, Nixon introduced the concept of geopolitics which essentially recognized China as a world power. This led to a reduction in America’s military presence as Nixon looked toward a change in relations which would enable China, Russia, and the U.S. to maintain a balance of power without military force or threat. The U.S.’s reduction on military spending was symbolic of this hope.
America as a net importer manifested itself in the fiscal deficits of the 1980s. At the same time Asian countries that had previously been in disarray began to grow, showing real signs of prosperity referred t as “the Asian Miracle.” This was largely due t the fact that America’s military presence in Asia had allowed these countries t spend less time and money with military concerns and instead focus on developing industrialization and foreign trade – two of the keys to their success. Americans, as evidenced by the U.S.’s unfavorable balance of trade, were also purchasing a large amount of Asian goods in favor of domestic goods which were more expensive. Most of the Asian countries modeled their economies after Japan’s. While prosperity quickly ensued, the unsound practices inherent in the Japanese model ultimately led to the present Asian economic crisis which will be discussed in the next section.
What Is the Asian Economic Crisis and Why is it Important?
Recent economic turmoil threatens to undermine the tremendous economic growth and rising standards of living that Asia has undergone in the past two decades. Hormats of the Brookings Institute believes there are four main aspects to the origin of the financial crisis. First the miscalculation of risk in that there was an undue amount of confidence and optimism behind the investments in Asia. Secondly, this overconfidence extended to the exchange rate which many took for granted would be stable and/or guaranteed by the Asian governments. Third and last, Hormats points to the fact that the increased flow of money into Asian banks was not accompanied by good judgment of credit risk meaning discretion with regard t where the money ought to go. This absence of judgment led to huge structural imbalances in commercial real estate and industry (Hormats).
Former Vice President and U.S. Ambassador to Japan, Walter Mondale generally agrees with Hormat’s assessment. Mondale contends that the Asian crisis finally erupted due to prevalence of vulnerabilities within the economic and political systems of many Asian countries. These vulnerabilities included chronic over capacity in production, expensive but unnecessary infrastructure projects, rampant corruption, massive corporate and bank debt, and over dependence on foreign capital. Once these vulnerabilities were exposed, confidence in the Asian economies diminished rapidly (Mondale).
In an address delivered to Congress by Secretary of Treasury, Robert Rubin, Rubin identified close links between the government, banks and corporations as what led to the fundamentally unsound investments by corporations funded by unsound lending banks. The fact that these financial systems lacked transparency masked the extent of the problem and disabled anyone from seeing how precarious of a situation this was. Moreover, they had inadequate financial regulation and supervision. Because of the confidence mentioned above foreign investors invested an extraordinary amount of money into these unstable systems without evaluating the risks.
This massive amount of capital flowing into the banks was in turn extended in the form of unsound loans. These practices, referred to pejoratively as 'crony capitalism," culminated in the current crisis. Rubin identifies several reactions to the crisis: foreign investors withdrew capital, local Asian companies sought to minimize depreciation in their local currency by hedging practices, exporters stopped bringing their export earnings home and citizens moved their savings abroad to what appeared to be more stable markets.
Former economics advisor to the U.S. Embassy in Tokyo and a senior fellow at the at the Brookings Institution in Washington, D.C., Edward Lincoln concurs that the root of Asia's problems is imprudent use of borrowed money but he feels that this misuse of money occurred because many of the Asian countries now in crisis modeled their economies after Japan’s; Specifically they emulated Japan’s bank centered financial approach as their best hope for converting consumer savings into investment. Individual savers deposited their money into banks where it was then lent out to the industrial sector for new factories and equipment. Banks mainly favored manufacturing industries based on informal signals from the government. But in the 1980s when growth of the economy slowed, this lending style caused problems for Japan because the industrial firms needed fewer loans from the banks. Subsequently the banks increased lending to real-estate and stock market investors based on historical ties, government guidance or personal relationships rather than an analysis of financial risk (Lincoln". When what Rubin refers to as the resulting "speculative bubble" inevitably collapsed in 1990, Japan was left with a banking sector entrenched in debt.
What are the Implications of the Asian Crisis?
Because Asia has been such a growing market for U.S. exports, it is a region central to the future interests of America and the world over. Although the United States has many smaller, growing markets for their exports, Japan’s markets remain the largest importers with $35 billion in 1996- exports. Overall Asian markets accounted for $80 billion in exports in 1996. Given those numbers, it can be seen that Japan, with $35 billion in 1996 exports accounted for nearly half of the $73 billion in U.S. exports to all of Asia (Cleveland, 20). This fact alone illustrates why Asian woes have caused the U.S. deficit – meaning importing more than a country exports – to soar 10.5 percent in January of 1998 to a record $12 billion, with predictions that it could eventually reach $300 billion a year (Gill).
Due to the fact that East Asia is a key export market, many exporters who are daunted by the financial instability of the Asian-Pacific region, are turning their attention away from the east in search of more secure markets. But the crisis is also retarding growth in many other developing Asian countries, pushing economies such as Indonesia, Thailand and South Korea from hearty growth to recession. So these smaller markets who under normal circumstances could serve as markets to offset the drop in (other Asian countries’) imports, have also been affected and therefore cannot mitigate the drop-off in trade. If such a situation continues, this weakening in the global economy has the potential to result in rampant instability – a concern that takes precedence in the perspective of the United States.
According to Secretary of State, Madeleine Albright, “No region of the world is more important to American security and prosperity, or to the values we share with others, or to our effort to meet new global challenges [than Asia]… Misery can give rise to mistrust among nations; poverty can push desperate people across border; economic despair can lead to disillusionment with economic and political freedom.” Albright essentially believes that America has a vital security interest that is threatened by the Asian crisis in that the desperation and instability resulting from the crisis poses a serous threat of the possibility for war.
During an interview, William Perry, former Secretary of Defense, substantiated this belief stating, “There is a two sided relationship between economics and security. The first, and most obvious one, is that establishing security and stability in a region allows of the development of a healthy economy…so the maintenance of security is key to the health of the economy. Similarly, the reverse of that is also true: a healthy economy in the United States permits us to maintain the kind of defense capability we need.” In general, both Perry and Albright believe that America must do all it can to help Asia resolve this economic crisis, for America’s immediate trade interests and for the sake of security – that nothing be allowed to arise that would ultimately present a threat to the freedom and prosperity now existing in Asia and consequently in America. Perry referring to this approach as “preventative defense” contends that the big picture purpose is in resolving anything which may ultimately pose a threat to the ideal of American democracy.
How Can Preventative Defense Be Accomplished?
The Case for Taiwan as a Model
To achieve this preventative defense, many are looking to rejuvenate ailing Asian countries using Taiwan as a model. In spite of the crisis Taiwan has remained the most resilient with a healthy macro economy including $83 billion in official foreign exchange reserves, little foreign debit, and a significant trade surplus. The predicted GDP growth for 1998 is 5%, only 1.8% lower than its growth of 1997 (“In the Year…”). Many believe that Taiwan has succeeded while others have not because, as a country, it is more open, more competitive, and more mature economically and politically than its Asian neighbors. According to Engbarth, bankers and economists feel that the reasons behind Taiwan’s sustenance are specifically related to the fact that the small size of the island of Taiwan provides a more flexible base of small and medium sized manufacturers, strong electronics and information imports and more effective financial sector discipline. Moreover, Liao Kuang-sheng, National Security adviser, claims that the concurrence of economic reform and political reform are what enabled Taiwan to withstand the crisis. Supplementary to that reason is the reality f Taiwan’s transition to a more open and democratic political system which allows the people to elect representatives who will continually push for economic and political reform.
The International Monetary Fund Debate
Many believe that supporting the International Monetary Fund (IMF) by contributing financial support to Asia is the most viable solution that has been proposed with regards to restoring Asian economy ad achieving an economic system comparable to the success and stability of Taiwan’s. The IMF was established under the initiative of the United States over fifty years ago with its mission being to promote financial stability, trade and economic growth. Robert Rubin feels that U.S. support of the IMF is critical and necessary on several levels. Generally, he feels aid from the IMF will help immediately stabilize the immediate crisis and subsequently restore financial stability and economic growth to Asia. As thirty percent of U.S. exports go t Asia, those markets afford Americans benefits such as more and higher paying jobs as well as higher standards of living via low inflation. Hence Rubin believes this Asian economic restoration will allow the US’s economic interests to be protected and a state of reasonable prosperity to be maintained.
Although the U.S. trade deficit was widely expected to increase by about $50-60 billion in 1998 due to reasons Rubin heralded as justifying U.S. contribution to the IMF, the trade deterioration ensuing the crisis did not immediately hurt the U.S. economy’s overall growth rate. That booming economy led many members of Congress to vote against the U.S.’s $18 billion of funding to the Asia – likely because the continued prosperity seemed to diminish the concern of Asia’s impact on foreign trade and on the American economy (Hale). Essentially many Congressmen saw no reason to bail out the Asian countries when the crisis was not and has not been projected to significantly affect our economy.
Rubin maintains that inevitably the crisis will have ramifications for the American economy. He points out that the fact that forty percent of our exports go to developing economies around the world. He believes this reality alone merits that America needs to look beyond the affected Asian countries t these smaller, emerging markets that are vulnerable to debilitation in the quagmire of this crisis. The reality and nature of the global economy dictates that we cannot hope to forever be insulated from this crisis. The IMF provides the most pragmatic proactive action we can take to safeguard our economy from feeling the effects of the crisis.
Dealing With the Deficit
Another point called to the attention of those complacent with the situation as it now is the reality that America’s deficit appears to be growing and therefore the U.S. economy is not economically problem free. Consumer spending, usually the gauge of American economic performance, is usually more active when inflation is low and interest rates are high – a situation that follows importing more than that which is exported (known as deficit). Supporters of the IMF remind that running a trade deficit is not entirely beneficial because it means that sine interest rates are high, foreign goods are cheaper than domestic goods. Because Americans will tend to consume those foreign gods more, there is often loss of American jobs.
As of late, Rubin calls for proactivity may be being met with a greater degree of receptivity. In late October of 1998, the Commerce Department reported that overall U.S. exports had dropped to their lowest level since January of 1997. This decline has resulted in exacerbating the U.S. trade deficit which has reached $109.9 billion for the first eight months of the year. It was only $12 billion in the early part of 1998. The August 1998 gap alone is the worst single month since 1985. By year’s end the trade deficit is expected to be the largest in U.S. history (Cohen).
Yet, while a deficit threatens the loss of American jobs and high standards of living, opponents of contributing to the IMF feel that implementing the IMF may have a greater risk of the same effect. They base this largely on the experience of Mexico whose economic problems are claimed t have been solved with the intervention of the IMF. Essentially the IMF had to destroy their economy to save it - wages dropped, jobs were lost, small businesses went belly up and the middle class was crushed. Americans fear that in order to avoid a similar fate, the Asian countries will be forced to export largely and cheaply to survive. This would cause American wages to drop as well as jobs to be lost – essentially the same situation that is being presented as justification for IMF intervention in Asia (“Waterloo in Asia?”).
Many question why America should help Asian countries survive when they refuse to cooperate with America (i.e. Japan continue to maintain closed markets and China continues human rights abuses). Rubin responds t such questions by explaining the plan and its general aims as follows: “By reestablishing financial stability and economic well being, thee [Asian] countries will once again be strong markets for American goods, will have stronger currencies that will help the competitiveness of our goods in world markets, and will enjoy the economic conditions conducive to political and social stability.”
Rubin further delineates the program’s four key pursuits of action: 1) Supporting reform programs in individual nations that will serve to strengthen financial systems, improve transparency and supervision, eliminate the “crony capitalism” of interrelationships between banks, the government, and commercial entities, open capital markets, and appropriate monetary and fiscal policies. 2) Providing financial assistance through the IMF, that will provide countries the leeway they need to implement these reforms thereby establishing the conditions needed to restore economic confidence internally and externally, thereby attracting capital and resuming growth. 3) Encouraging industrial companies to strengthen their own economies and take the necessary steps toward promoting a global economic environment that can contribute to resolving the crisis in Asia. For instance, Japan, as the second largest economy in the world would be strongly urged to open its markets which would help Japan, Asia, and the world overall. This reform, via implementation of the IMF program, would actually change Japan’s exclusive practices rather than tolerate them as Americans fear. 4) Encouraging other emerging markets to make policy adjustments t decrease their vulnerability to the affects from the countries now in crisis. This would include promoting structural, financial, and macro-economics policies believed t be critical to stability – similar t the systems that enable Taiwan to survive the crisis.
Role of Security Interests Inherent in the IMF
The growing deficit along with the threat the Asian economic crisis poses to economies all over the world is heralded as reason enough to implement the IMF. In addition to the straightforward issue of the global economy there is also the incentive of maintaining international stability and security. Taking this into consideration would heed William Perry’s assertion that promotion of a healthy global economy also provides for international security. Although many are disenchanted with the notion of giving money to nations like China who continue to dishonor our requests by failing to discontinue their human rights abuses, much of the security rationale behind the IMF support is similar to the reasoning behind the case for continually granting China Most Favored Nation (MFN) status.
MFN is simply ordinary tariff treatment – a status we extend to most all countries in the world. The overlooking of human rights abuses is often touted as a necessary precautionary measure that is extended to ensure the prosperity and security of the future. Because China shares borders with approximately fourteen countries and has unresolved issues with several, China plays a key role in the maintenance of security in the Asian Pacific region (Lind). This fact, along with its primary importance to American economy as a collective, lucrative market, prompts Stuart Eizenstat, the Under Secretary for Economic and Business Affairs to contend that it is important that we engage with not isolate China. He claims this is the only way to serve and provide for American interests overall – generally what is best for American workers (some 170,000 American jobs are created because of our trade relationship with China), American business (America annually exports $12 billion to China), American consumers, and American foreign policy interests.
A normal trading relationship with China is perceived to be that which will ensure that all these interests are entertained. Moreover, while undesirable practices such as suppression of political and religious expression are acknowledged and denounced, proponents of granting China MFN status contend that China is more likely to reform these flaws if engaged with a democratic country such as the U.S. instead of being alienated from it. Also, it is views as more likely that engagement with China is the way to reduce our deficit instead of discontinuing trade altogether.
Madeleine Albright concurs on all accounts, believing that “the strategic significance of China [includes] the key role it will play n determining whether the Asia-Pacific remains stable.” While she asserts that engagement with China as well as other Asian nations is necessary so as to rehabilitate their economies, she strongly states that engagement is not the same thing as endorsement of the practices with which America disagrees. The most important thing to recognize in the opinion of Madeleine Albright is that ultimately, be it in granting MFN or extending help via the IMF, the United States is vested in rehabilitating Asia for the purpose of protecting our own interests.
Conclusion: A Historian’s Perspective on the Future of
U.S. – East Asian Relations
Professor Gordon Chang, a scholar of Asian history in Stanford University’s History Department, believes that East Asia will only continue to grow in importance in its relations with the U.S. He believes this relationship will be three dimensional including issues of politics, security, and of course economics. Chang points out that prior to the Russo Japanese War, East Asia really only appealed to rich U.S. merchants who had enough money to invest in foreign markets. At that time most Americans did not even know where Asia was. Now Asia affects nearly every aspect of American life. This is especially evidenced with the volatility of Wall Street in response to the Asian economic crisis. This reality suggests that it is in the best interest of America to take the precautionary measures necessary to ensure the stability of Asia. In the future Chang believes that East Asia will control their own destinies. America will no longer be able to unilaterally impose change on Asia as it has in the past. In this regard, America should do what it can now to provide for sound relations with Asia. This will be a proactive measure that can only help to ensure the future of American security and prosperity.