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Sunday, 27 July 2008

Capitalism and opportunity - Part 1


[This article I wrote is dedicated to all the Third World Nations regardless of their locations and ethnic background as long as they want to believe in the true potential of Capitalism and its holy endeavour in bringing wealth to close the gap of income differences between the “have” and the “have not”]

By: Ahmad Syah Ejaz Bin Hj. Ismail

Never before were the new developing nations or also known as the Third World Nations getting perplexed and confused on how to manage their economic resources for the betterment of their countrymen. These nations [Third World] were renowned as the main tap of natural resources which can be capitalized and exploited in bringing wealth to their citizens. But it is uncanny for the economist in explaining the failure of their managers i.e. the government in charge to mobilize these resources in bringing more wealth and decrease their interdependent on the core nations [developed] for productivity capital such as cash flow, technology know how and direct investment.

It seems that the interdependence of these new developing nations is infinite towards their former colonizers for survivability. The answers are not that such symbiosis between these two civilizations is a win-win situation but a foreboding. The essence of true Capitalism emphasize on the importance of mutual agreement and voluntary exchange, but with the implementation of WTO must abide rules, the new developing nations has no other options but to abide to the new trade regime just to remain alive. The West and the WTOs’ supporters have failed to see the latent problems this new economic regimes bring such as Free Trade Agreements (FTA) and Bilateral Trades (BIT).

Previously, more than 30% (sic) of the contributing factors of the developing nations success came from countervailing duties (CVDs) and anti-dumping (ADs’) measures not just for the sake of protecting domestic infant industries from harsh competitor of the established economic players but also from un-fair trades between giant business players that were backed up by billions of capital dollars, not to mention foreign hedge funds (which were unknown based). These profits which were gained from CVDs’ and ADs’ were used productivity capital for the government to create national players and funding the educations of their countrymen. It is true that Capitalism encourages maximum profits, but such total abolishment of CVDs’ and ADs’ among the new developing nations will only decrease the much needed funds for their development.

Eventually, their interdependent needs towards the core nations will be infinite and prone to be the subject of the trades’ players. It happened in Latin America when a sovereign nation heed to the instructions of business player [banana republic].

There are critics among academics on how the new developing nations need to scrounge for funds in developing their industries. The most important factor in Capitalism is intelligence. One must bear in mind that billions dollars of capital in central banks is not a guarantee of an economic success. There must be adequate intelligence for these funds to turn into a productive capital. In Capitalism, one can collect the needed funding through speculations. I believe almost 50% of world turnover and profits were based on just mere speculations. But the profits forecast and future perceived turnover must be followed by actions and physical development. The idea of perceiving profits with inaction will only create a disaster in the following bringing down the whole system of economic activities.

The success of speculation is an open secret. For Capitalism, the capitalist government can capitalize on these method in bringing wealth and opportunity. But one needs to be very being careful of not excessively miss abuse their intelligent and skills in speculating growth thus speculation can bring enormous wealth and also dreadful disaster. Not all good things will last and the planner must realize the importance of mobilizing the funds which he got from speculation to a productive capital. Discipline is the main essence in ensuring these enterprises to succeed.

To be continue...

Reference:

The Great Crash – 1929, by John Kenneth Galbraith. Mariner Books, 1997.

4 comments:

hassan amir said...

i once read an article written by a Japanese economist...Akamatsu, in which he talked about the Wild Geese Flying pattern of economic development. the basic concept of global economic development, according to him, and which he empirically proved was that the developing nations formed an inverted 'V' behind the developed or 'core' states, and the whole 'flock' developed as a whole. in the SEA region, he cited Japan as being the flock leader, and other countries as the followers.
the basis of this development was that the third world countries, which were the sources of raw material and cheap labour was developed as hetereogenous economies to the more developed economies of Europe. even present day US was such a colony, but they achieved a higher degree of homogenization, and thus, was able to develop into a flock leader of its own.
presently still, the third world countries are in the stages of homogenization. the bulk of the third world produce is still raw material, and cheap labor is still plentiful. the economies are not as organized as the Western economies. the crux of the matter is that the betterment of the economic position of any single third world country cannot come without a fundamental shift in their production and output. till then, they are doomed to remain stagnant in the stratified world system, subservient to the core states.
at the last Davos summit, Bill Gates challenged the conventions of modern day capitalism. he urged the global economic community to take on a more responsible role, or a more 'socialist' approach to capitalism. i guess capitalism has finally come full circles hasnt it?...or it would be more correct to say that its traditional nemesis Socialism has caught up with it. when 1/5 of the world population is using 4/5 of its resources, courtesy of the capitalist machinery, it does not say much about the system, does it?

Tun Teddy said...

that's a very interesting point you raised there... can you spell the book title, the author and the publisher.. I'm keen to learn more about the V flock shape..

I agree with you that capitalism had go around.. same goes in 1929, they say that it's sacriligeous to control market.. but FDR New Deal did just the very same thing.

I also read the book on kennedy where he emphasized the importance to inject a bit of socialims into capitalism.. but of course americans shunned to talk about these..

hassan amir said...

just a thought...again...

you dismissed the WTO regimes and all the accompanying neo-liberal trade policies such as Free Trade Areas and Preferential Trade Arrangements as being unfair and orientated towards creating better opportunities for the Western countries or the developed countries. but, if one observes the performance of the former Soviet countries like Poland, Hungary and Finland, WTO measures revived their economies, reduced massive inflation rates and promoted growth.
free trade areas are set up to promote volume of trade, and unless the third world countries learn to maximize their production and increase the output, they cannot gain the advantages of it.
innovation, ingenuity, technology and skill are still flowing from the West, with very little which is indigenous to the third world. the government, as managers of the economy, must promote indigenous innovation to boost volume, and also maintain production levels. the current trend is that, or what is going to emerge in the near future, is that the Asian and Latin American countries would no longer be able to compete even in their traditional industries such as agriculture. the developed world is developing self sufficiency through innovative application of technology to create better crops, hybrid varieties which can be grown year round in green houses or adverse climatic conditions.

i believe capitalism favor the brave, and that the developing world has been too lethargic. they are adapting to the WTO, but not fully committed. traditional dogmas still prevent them from subscribing to it, and they oft cite the example of Mexico...the financial crash.

Tun Teddy said...

I agree with you on this. But the problems of WTO and Bretton Woods institution is that they never regards black africans or yellow asian as their counterpart for progress.

I did actually summarize that point in my latest article in bahasa but i guess u can't read it. I shall try to emphasize it further on how we can together makes WTO and Brettons Woods institutions works for all.

Maybe you should read the latest Bill Gates writings in Times magazine on the creative capitalism.

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