The Asia philosophy for socio-economic transformation and balance - Democracy and prosperity, which one should come first?

By Shahab Sabahi

Energy and Environment - Policy analysis research group

It is worth to note that the collective experience of countries in which intelligent economic development originated from the top in a highly authoritarian setting. It is striking to note that once the economy becomes successful it creates pressures for democratization and free market. (Z.B. Brzezinski 2008)

In contrast, neoclassical economists claim the collective economic success across the world, has been a result of FREE MARKET. They believe, democracy and leaving- all- decision-making occurs in market places will solve the problem of poverty and fair distribution of resources. So the questions are: Should both democracy plus free market be initially placed and then they would automatically guarantee economic growths and prosperity? Or are democracy and free market the products of economic growth and successors of discipline?  
  
In our fresh memories an unsuccessful model happened in very far East- EU in the 1990s. However it is not the sole story of unsuccessful economic transformation. The Russia initially embraced
democracy that produced chaos and near economic ruin. The Russians first modernized their political system, made it more democratic and as a result they had insufficient focused power to force transformation of the economy.

It makes me believe discipline and stringent policies intervention initially shape societies and put them on the economic growth path. The evolution of these new societies over the course of time will converge to democracy and the free market economies.

Conversely Asia’s growth can be a good example for successful model for societal and economic growths. It has taken place within the past three or so decades.  

China’s growth caught the eyes of observers. The world looks at China as a symbol of authoritarianism. In contrast the Chinese development model has backed with a strong authoritarian government through which China has done a great job modernizing their economy. However the China model has not finished working itself out.

India is another interesting case that is becoming an economic powerhouse but they are doing it almost in spite of themselves. In its early years, many of the Indian governing elite were educated in England in Marxist economics. They had a socialist orientation. As a result the government still continues some residual suspicion of entrepreneurship. And yet they are doing reasonably well.

South Korea’s experience, it was hardly a democracy until about twenty years ago. And yet its economic success paved the way for an established democracy. Confucius culture values set a great deal of discipline, order and force to guide initial stage and bumpy phase of growth and transformation.

The Japanese experience, in a different way, is even more interesting. The Meiji restoration was a highly mobilized system of economic and technological innovation organized from top down. It created the preconditions for what later on USA did in Japan after World War II and then produced a democracy that is now constitutionally well-established.

Taiwan also started as an authoritarian system, not very different from the Chinese in terms of economic development. The government promoted a fair amount of free enterprise in rural areas, low-scale business then liberalization. Economic development took off and democracy followed.

One of the advantages of the EAST capitalism system and growth model is that economies can grow at a breakneck pace, and turn down the growth speed when it turns out that is about to go into some harmful directions by imposing the policy correction without any problem of losing face.

My key point is that discipline and in some high degree policy intervention are essential when

• Economic and societal transformation are about to take off. Early and raw democracy without institutional enforcement, will be derailed and ended up to its failure 
• Economies move on bumpy roads and crisis. There is no particular sense of anxiety about the US and EU to emulate the EAST capitalism model, in order to move out from their crisis.

A Green Emperor, a lesson for policymakers

By Shahab Sabahi

Energy and Environment - Policy analysis research group

A year and so into my vegetarian diet, I now feel further discipline in my life. My temper is under control and I can deal with daily affairs much better than before.

So it seems that is the time to share one of the interesting historical facts which describes how vegetarianism strategy changed the structure of a society and caused peace and prosperity.  (My research work on society development and evolution in EAST)

Agra, a city in India, sits on the banks of the river Yamuna and surrounded by eyes-delighted green landscape. The city is well known for the Taj Mahal, a magnificent architecture that built during the Mughal Empire reign in the sixteen century. However it is not the only historical landmark over there.

Agra reflects the history of the South East Asia’s golden age when people of that part of the world lived in peace and prosperity.

Akbar, the greatest of the Mughal emperors had significant share in the golden age development. His effective policies brought social development and economic growth for his kingdom. He left behind a rich legacy of tolerance and cooperation that had been strikingly demonstrated in his own days’ policies. During his reign, the nature of the state changed to a secular and liberal one, with emphasis on cultural integration and human values. What really influenced his behaviour?

To control his aggression and mind, out of sensitivity to Hindus, he became a vegetarian, gave up hunting a sport he greatly enjoyed and forbade the sacrifice of animals on his birthday and any holy rituals. This move made available a plenty of food for younger generation and also as an environmental benefits sustained the exploitation of natural resources for the future generations. Furthermore vegetarianism gave Akbar a sense of ethical treatment of tolerance for humankind.

When an emperor could be in command of his internal forces thus his subjects would follow him and consequently the whole society would enjoy.   

The point is not to correlate vegetarianism and development. The message of the story is that vegan is not just a diet. In effect vegetarianism grants discipline and balance, where balance in lifestyle and discipline in bahaviour lead to stability, openness and dynamic resource allocation which are necessary for advancing society. 

Civilization can lead to universal peace when a generous, liberal society is created by policymakers who believe to discipline and practice it and check everything in balance

Neo-Capitalism requires stringent regulations in financial markets

By Shahab Sabahi

Energy and Environment - Policy analysis research group

In theory, free-market, globalization and free capital mobility are welfare-enhancing. Theory says that they promote better and more efficient allocation of financial resources worldwide. But the history of globalization is witness to large and volatile short-term capital flows, complicating macroeconomic management, destabilizing weak financial systems, and disrupting growth in emerging economies. It poses a question “why did capitalism work for the west but fail when it exercises in a global scale?”, “Should It be altered?

Globalization compelled financial markets integration. Rapid financial liberalization did not allow financial market regulators came up with effective and sound market rules, therefore short term capital flows for touch & go investments turned to become the taste of investors. Historically, short-term capital flows are absolutely volatile compared with long-term alternatives like foreign direct investment.

The recent global economic crisis in Europe and the US demand a stronger political momentum for significant capital market development and regional integration. Now financial stability is the foremost challenge of policy-makers’ to address. It requires a wise approach as I list below. 

Financial market liberalization must now be managed by mechanisms to ensure the effective use of capital. Conditions should be imposed for rendering capital flows more stable and long-term to economies. Macroeconomic policy reform should be set as top priority with emphasize and effective control in high level of financial sector and market development; and effective institutions and good governance. (Iwan Aug 2011). 

New macroeconomic policy and regulatory frameworks should allow only longer-term investments. Capital markets must be made more liquid, more diverse and innovative regional financial products should be created. This can help unlock capital to meet those regions and sectors that seek huge infrastructure financing needs.

It is equally important to ensure financial sector and market development benefit the wider public, with inclusive measures to broaden access to finance for families, small- and medium-sized enterprises, and other traditionally underserved market segments.

Please do not forget free market should not be as free as a bird. Without stringent regulations in financial markets, they will come short of maximizing the benefits of all. A new framework for Capitalism is needed.

Neo-Capitalism – Answer to Janet Daley

By Shahab Sabahi

Energy and Environment - Policy analysis research group

The Telegraph Aug 9th 2011 Janet Daley posted a piece titled “If we are to survive the looming catastrophe, we need to face the truth”.

Her piece was quite lucid and attracted some 1700 readers who commented back. She expresses her idea that a capitalist economy cannot support a socialist welfare state. BUT it is not a fair conclusion whereas she built her argument based on this belief that existing CAPITALISM model, legacy of Reagan and Thatcher’s era, still works and is legitimate.

To get a reasonable perspective and insight, we should take a political economy view. In effect Capitalism in its old fashion and in global scale is not an effective model to fulfill needs of society and cannot provide security.

The existing capitalism went wrong when U.S. president Ronald Reagan and British Prime Minister Margaret Thatcher adopted and implemented the financial market deregulation policy some two decades ago. The 90s the financial market deregulation became synonymous with economic growth and prosperity in Asia which ended in the great Asia financial crisis in the late 90s. Asia wisely managed the crisis and started to regulate the currency exchange rate where P. Krugman and G. Soros did not advocate it for the west.  It was thought that free market would turn to become a gateway to global socio-economic stability and economic growth. However, the economic collapse of 2008 - the result of that shortcoming in west-capitalism - shook the old fashion capitalism from its glorious and thought-perfect position.

In fact a social welfare USED to be a product of a regulated free market and a capitalism thought which faded away a decade ago. 

Time passes and brings changes. Now it is time for western countries to look at the Neo-Capitalism which is practicing by Brazil, China and to some extend the Latin Americas such as society safety net (Chicago 2011, Francis Fukuyama). There is something can be learnt and incorporate into the old capitalism model in order to make it more functional. A new form of relationship between government, regulation, and the free market on a global scale must be conceptualized to live up society’s expectations.

Certainly this Neo - Capitalism can support a welfare state, Ms Janet Daley.  

Shortcomings of Capitalism – A new framework ought to be sought

By Shahab Sabahi

Energy and Environment - Policy analysis research group

BBC program, Dateline London on August 7, 2011, made a short debate on global financial crisis.  One of the program’s guests went in his way to question capitalism’s ability for solving the crisis. Although his argument contained rather the elements of emotions than critical reasons, it recalled me one of my fundamental question in our current research work.  Is the Capitalism framework powerful enough to provide guide for globalization OR must an alternative be sought?   
  


The recent US credit downgrade was the second wakeup call for political economists to profoundly review and adjust the capitalism theory in a way to address our today’s globalize economic problems. Yet, admin of one of the worst financial crises ever, policymakers, both side of Atlantic continue to adopt failed policies and weak strategies based on the obsolete capitalism theory  that threaten to curtail recovery efforts. Furthermore keep on this way, pushes policymakers to grow more solid in their ideology and irrationality that will result in dogmatism.  Joseph Stiglitz, in his book “Free Markets and the Sinking of the Global Economy”, considered the western capitalism – are bound for economic failure if they choose to undertake “another costly experiment with ideas that have failed repeatedly.”

Inevitably globalization has caused a shift in economic activity and increased per capita GDP across the world. Yet measuring poverty remains one of the most contentious issues. Poverty and the recent financial crisis pose the most challenging question to the capability of the capitalism theory to guide an integrated global economy. 

Capitalism fails to address the externality of the emission of greenhouse gases, the loss of domestic jobs and the leakage of energy and labor intensive industries of the developed countries to developing countries. Capitalism is short to guide any formulations, regulations and legislations that are undifferentiated across the globe.

A powerful ideology is needed.  Western-style deregulated capitalism brought greater material well-being only to riches (Shell, BP, Exxon, Apple, etc have made profit since the early 2011). Indeed, with this ideology over the course of last thirty- year average Americans income declined (my earlier post on August 2, 2011).

I strongly believe that the way out of this financial crisis rests on

1.      greater equality,
2.      stronger regulation,
3.      a better balance between the market and government.

As we recently saw, a rigid ideological friction and special interests in the US house and the white house detoured the US traditional path of decision (a pragmatism and realistic ground to super dogmatism).

These ridiculous decisions will likely occur again, unless a fresh capitalism ideology is outlined. 

The Essentials

By Shahab Sabahi

Energy and Environment - Policy analysis research group

 

This is thirtieth post onto my blog. So I intend to share the principles of what I’ve subscribed. They may work out your lifestyle, if so apply them　 Eastern philosophy

1. Be who you are. Listen to others and balancing confidence with wisdom,
2. Be disciplined with yourself to be a creative person who adds value to its life and others’,
3. Aim high, quality beats quantity every time. Understand and keep understanding until you become the expert.
4. Expand your horizons by stretching yourself. Solidify contacts and seek people you can work with to expand your realm. Think leverage.
5. Plan and act and act and plan. In other words take the offensive. Seek the life you want for it will not come to you.　
6. Develop a sense of urgency. Remember how quickly a week goes by these days.　
7. Get the odds on your side by developing the mismatch.　
8. Know when and when not to fight,
9. Understand how to handle both inferior and superior odds,
10. United teams win every time,
11. Success is when preparation meets with opportunity,
12. Do not interfere with trusted subordinates or helpers

Eastern Philosophy

Post WWII and its legacy for the US economy

By Shahab Sabahi

Energy and Environment - Policy analysis research group

It is very much in the air that Reagan's economic performance was
astonishing. It is weird, although our brains are wired and evolved for
exploring reasons of every event; we have never asked ourselves "what legacy
did the post WWII, US presidents leave behind for Reagan?" In reality, the
hero who made American's heydays was not Mr. Reagan. Do you know WHY?

The US economy had long started to grow before, the Reagan administration
came to the office. Thanks to the great jobs and policies of the
predecessors of Reagan, employment, GDP and productivity hit record high.
For evidence, below is a chart that displays median family income in
constant dollars in the US since 1947 to 2009 (source:
http://www.census.gov/hhes/www/income/data/historical/families/index.html )

The income grew about 70 percent between the late 40s to the mid 70s. The
increase owed to high-tax, strong-union postwar generation, effective
foreign policy, productivity improvement and clear, free-party and
national-wide vision which set by REAL leadership.
The 80s, the US economy got flat however the US citizens enjoyed themselves
with more cash in packets (from previous generation) to spend rather saving.

YES Mr. Reagan did nothing but made fame.