4. Capitalism is different: Asian inconsistent economic models
There is no such an economic model called capitalism: There are only three types of the economic system, the command economy, the free market (The laissez-faire) economy, and the mixed economy. The term called capitalism is rather political than economic. It is an awkward prejudice to frequently quote capitalism to describe about a national economic model.
The prejudice about the economic model has taken place since the Cold War broke out. The world was divided into the two sides, the (Soviet) socialist side and the liberal democratic side. The socialists and their sympathisers frequently called the liberal democratic side as the capitalist side so that the others have started using the term “capitalism”. So, even some mixed economies which are close to the command economy were categorised into the capitalist side as long as they oppose to the Soviet and its satellite nations.
Nowadays, there is an ultimately awkward expression that the socialist nations ruled by a communist party adapted capitalism, and some call its political economy as capitalistic communism. Well, this is just an ultimately inconsistent definition, and it does never sound natural at all. Then, the basic definition of economic models has to be recalled in order to prevent such confusion about naming a national economy. These communist parties have simply transformed from the traditional pure command economy to the mixed economy combining their totalitarian political economy with the market economy. This is that simple to explain when the basic knowledge of economics is remembered.
This kind of phenomena has frequently taken place in not only the former Soviet leaning nations but also the liberal democratic counterparts in Asia. Japan, South Korea, and Singapore are the typical examples.
In Japan, even before the Cold War period, there are many Marxists and their sympathisers in the political administration. They were not officially categorised as Marxists or the Soviet spies only because they supported either Japanese monarchy or the United States of America (The USA) and her liberal democratic satellites, or both. During the WW2, Japanese economy was a complete resemblance to the Stalinist Russian economy, and Japan was not regarded as Stalinist because it kept its monarchy. Then, Japan adapted the free market economy after it restored democracy (The market economy is an unavoidable essence of democracy). However, even though Japan politically adapted the market economy, its economy and culture are still far from those of the market economy. The collectiveness is still tremendously intense in both economic and cultural norms and values in Japan.
South Korean mixed economy has been very close to the command economy since its modernisation in 20th century. South Korean economy is controlled by the monopoly of few big corporations which are realistically under the control of South Korean government. So, the market competition mechanism hardly works because South Korean economic agents are not free from the monopolistic power of the corporations and therefore their authoritarian government. Actions and plans of all South Korean economic agents are severely constrained and controlled by the performances and the decision of these authoritarians.
Unlike Japan and South Korea, Singaporeans were much more eager to adapt the free market economy as their fundamental political economic principle. However, in such a geopolitically unstable region during the Cold War, Singapore could not let all people living in Singapore free, Singapore needed to unify all people’s political and moral decision and will in order to avoid the chaotic conflicts in Singapore. Thus, the contemporary Singaporeans thought that an intense paternalism was required to stabilise Singaporean politics as well as economy.
Singaporean political economy has been then called as the developmental dictatorship. The contemporary Singaporean government insisted that the political stability was their first priority to enable Singaporean economy to grow at the initial stage. After both the geopolitical situation is stabilised and all Singaporean citizens start identifying themselves as autonomous Singaporean citizens who are loyal to their own nation, Singaporean political economy should be decentralised to become close to the free market model, Singaporean government have planned to.
After the Cold War, Asian mixed economies from both the former Soviet leaning side and the liberal democratic side have been regarding Japanese political economic model based on the mixed economy as their role model for their economic development plan. Because Japan has been the only one developed independent Asian nation in the world for such a long time, these Asians started thinking that their nations could become like Japan when they imitate Japanese model. Even they promise to determine they are anti Japan, they are implicitly interested in imitating the Japanese model. On the other hand, both Japan and the other Asian emerging nations do not seem to have realised the critical failure and the expected long term instability of Japanese economy.
5. A digression: Marxism and Keynesian
Before talking about the political economics of Japan and other Asian nations, the belief knowledge and disadvantages of Marxist and Keynesian economic theories need to be revised. They are critically important to know in order to understand the nature of the Asian mixed economies.
The classical economic theories strictly warn that the supply volume is precious and difficult to increase meanwhile the demand volume is always fluctuant and easy to exceed the supply capacity. The supply volume is rigidly constrained by the resource and the technology available at the current moment. The notably low demand volume relative to the available supply discourages both discovery of furthermore extractable natural resources and the further technological innovation. But, the excess demand volume causes various negative impacts on economies such as the extinction of all resources and production inventories and the high price inflation which causes political havocs and decreases the real income of all the people. Therefore, the demand volume has to be repressed all the time not to exceed the supply capability.
This economic common-sense has been neglected since the two schools, Marxism and Keynesian, of economics emerged. These two schools of economics have completely replaced the previously mentioned common-sense of the classical economics with the dangerous witchcraft misleadingly regarding the demand volume determines the supply volume.
Marxism blames the rich individuals for their ultimate monopolising the right of extracting the available supply and enticing the rest poor individuals to work for the interests of these rich. Marxism affirms that the redistribution of the supply and the unnecessary desire of the rich is the key to stabilise the demand.
However, the problem is that Marxist model requires enabling one intensive autocratic government holding the monopolistic power to diversify the whole distribution flow. So, this implies that replacing the monopoly by few with the monopoly by one. Even though the autocratic government have initially pledged to keep the equal and fair distribution, the government officials can change their mind to deserve themselves more than others instead of deserving the all equally.
Marxism excessively arrogates the responsibility to the rich individuals and overestimates the morality of the poor. There is no guarantee that all the educated poor individuals become altruistic and humble. The fundamental problem is how to measure the feasible amount of want to lead to the optimised ideal distribution. The majority of human desire seems to be unlimited so that the poor individuals may demand more than they can afford when they start being able to interfere the entire distribution system to deserve for their will. This will thus eventually results in either the asymmetric distribution, which is more unequal than the free market economy, or equally impoverishing all individuals.
Keynesian theory and its followers Keynesians assume that the demand stimulus induces the increase in the supply capacity. They even claim that the excess demand is not always harmful because it encourages the eager economic agents to discover and/or improve the new way to constantly increase the supply capacity. These Keynesians insist on the different method of the redistribution from Marxist counterparts: Keynesians support the government intervention while maintaining the market mechanism itself. Keynesians attempt to control the climates of economy, instead of commanding the whole economy, by the positive intervention whose intervention method varies across the different climate situations.
Although the original idea of John Maynard Keynes was not straight-forward like their assumption, his theory has been over simplified since these self-proclaimed Keynesians interpreted Keynes’s analyses. Keynes only attempted to explain what the classical economists had not mentioned such as the various different characteristics of the investment motive, the various real causes of the economic stagnation, and the short term effect of the money supply. He could provide the articulately analysed diagnosis about the economic stagnation meanwhile he was still struggling to prescribe the effective and stable solution.
The government intervention was only one of his prescriptions, and he could have thought various other solutions. So, he was far more objective than these narrow minded simplified the fellow (self-proclaimed) Keynesians. Keynes only affirmed that it occasionally requires to stimulate the demand volume to match it with the supply capability to overcome from the economic stagnation. But, these (self-proclaimed) Keynesians misinterpreted it to be that the high demand is always required to keep the high supply capacity.
The common characteristic of Marxism and Keynesian is their pure materialism ignoring the ethical controversy about the involuntary force of the government economic intervention. Their goal purely focuses on the success in the material distribution, and severely neglecting the voluntary will and virtuous self-esteem individual human-beings.
Since Adam Smith invented economics, the high productivity can be achieved when individuals are allowed to think and act by means of their free voluntary will. When they are willing to do something by means of their own need and want, they are eventually doing better than being commanded. Furthermore, the full amount of information sets and the degree of individuals’ freedom are extended, they will be able to find their own way to improve and enrich their life.
The primary objective of Smith’s economic theory was to liberate people to live with a wide range of freedom of choices under their responsibility. This ethics retains the wisdom of encouraging individual human-beings to pursue in a virtuous way of life in which they voluntarily discover the true virtue themselves from Aristotle. The material well-beings such as the high aggregate productivity like Marxism and Keynesian regard highly of are important to provide individuals with more choices and more chance to acquire their virtuous life style. However, the high productivity is only one of the essential tools to achieve in an individual liberty and a virtuous life: Marxists and Keynesians have labelled the high productivity is the goal rather than the method/tool. Then, Asian nations have installed Marxism and Keynesian without knowing the wisdom retained from the classical economics and Aristotlean ethics.
6. Japanese economy, the model of Asian emerging economies, fails
There was the high political reason that Japanese government could be concentrated on stimulating their rapid economic growth: During the Cold War period just immediately after the WW2, because Japan was under the military protection of the USA, Japanese government was allowed to be concentrated on only economy and rarely take the military pressure from abroad and foreign diplomatic concerns into the consideration. But, at this essay, the low politics such as economics and cultural aspects are the main topic to be debated so that it focuses on the low political analyses. Also, it has to be remembered that the Marxist and Keynesian economic theories were dominant in the Japanese academics and the politics so that the contemporary Japanese mainstream economic policy makers were the interventionists encouraging the government interventionism into Japanese economy.
The remarkable rapid economic growth in the post war Japan has astonished people of the world. Nobody had predicted that an Asian nation could achieve in its gross domestic production (GDP) level surpassing all the European nations and then becoming the best next to the USA. Even the after the two decades recession from 1990s, Japan still keeps its high GDP. Many people have been believing that the intense government interventionist economic model of Japan is the key factor of succeeding in its rapid economic growth. So, many Asian nations from both the former (Soviet) socialist side and the liberal democratic side have admired this Japanese economy as their role model, and believed that they would be able to achieve the same rapid economic growth as Japan.
Nevertheless, the free market economists and the classical liberalist political philosophers have argued that the post war Japanese economic growth has rather been artificially, than naturally, stimulated. Because its artificiality of the growth stimulus, the negative side effect severely affected Japan after the economic bubble burst in 1990s. Of course there was a natural cause of the economic growth such as the remarkable technological innovation and the growth in the number of the diligent educated labour force. By contrast, the economic growth was too rapid to be recognised as natural.
The huge public work projects and the bankruptcy rehabilitation policy heavily fund by the government expenditure unnaturally over-stimulated the post war Japanese economic growth. The consequence after the bubble burst is the notoriously high national fiscal deficit which is almost twice as much as the current Japanese GDP. The government intervention perpetuated the private sectors’ reliance on the government fiscal assistance without rationalising their own fiscal management so that their management became inefficient.
In addition, the reliance of Japanese economy on the government intervention has enlarged the bureaucracy of Japan, which incurs the high public sector administration cost. As long as the size of the national bureaucracy is kept at the minimum optimum size, it helps the public sector economies and various other public administrations to run smooth and stable. But, the bureaucracy is a monopolistic structure, which is not under the pressure of competition, and is not competent to increase the economic productivity and activity alone by its nature. So, when the size expands larger than the optimum size, then its total cost exceeds its total benefit. Because the bureaucrats in Japan have secured their charisma and political authority, the heavy bureaucratic structure is severely difficult to diminish. Therefore, this costly bureaucracy still remains, and requires the government to spend a lot for sustaining it.
While the natural resource supply is abundant and there is a sufficient demand for the production supply, this interventionist policy continues stimulating the rapid economic growth. By contrast, when both the natural resource supply and the demand for the production supply go down, both the financial revenue goes down and they lose the opportunity for new projects. Then, the high fixed cost incurred by the inefficient management and the excess bureaucracy have caused a severe financial loss, and then the unemployment and the sunk cost incurred by the closing industries increase. This results in a huge loss of the government tax revenue and then the huge deficit.
The old Marxism which claims for restoring the pure command economy has been no longer convincing for majority citizens of the world since the USSR economy collapsed. This has meant that the experiment of the command economy of the old Marxism failed. Even almost all former socialist nations have installed the mixed economy, i.e. partially installed the market economy to their originally command economy, to improve their national economy. The experiment of the command economy has been proven that the market economy is essential for all national economies to sustain their economy especially after that experiment. Therefore, there are no longer many of those who claim for installing the command economy in Japan. Most of those who are in charge of Japanese economy are various different interventionists supporting the mixed economy. The voice of the free market economists for liberalising Japanese economy is still neither popular nor influential yet.
The hard-core interventionist economists have argued that this was the cyclical shock so that the government has been responsible for re-stimulating Japanese economy once more again. They believe that Japan can repay their national debts back when the tax revenue starts going up by the economic recovery. Their calculus indicates that the tax revenue and the international credibility of Japanese economy will be high enough to cover the extra cost incurred by the intervention programme.
The benign interventionist economists support the quantitative easing i.e. increasing the money supply to inject it into economy. They support purchasing the national debts and the company bonds with the extra money supplied by the central bank. Instead of the government expenditure requiring the tax revenue and/or incurring the national debts, supplying extra money suffers less from the political controversy because the taxation directly confiscates citizens’ income meanwhile the money supply does not directly. It may cause the depreciation of the currency value so that it may cause the high price inflation. But, these interventionists claim that the depreciation of the currency value will encourage the international demand for Japanese exports so that it will stimulate Japanese economy.
On the other hand, the estimation model of the interventionists is only based on their subjective assumption and logical inference. Unlike pure mathematics, the logical inference does not have an objective measurement, such as an axiom in mathematics, to be able to self-contradict itself. So, the base judgement for its validity is simply their belief. Therefore, the prediction based on their logical inference is more likely to be not objectively reliable. Furthermore, as it has been mentioned already, the demand, which affects the average revenue of enterprises, is fluctuant and unpredictable meanwhile the supply side factors such as the various costs are rigid and certain.
The optimistic aspect of Japanese is that some economists and academics have realised that Japanese economy needs to install the free market (the laissez-fare) economic policy. They insist on the free market economy to transform Japanese economy to the self-sustainable economy without the controversial government intervention. However, it takes a considerably long time length and Japanese people’s patience to overcome from the stagnation caused by the still haunting costly assets retained from the past interventionist economic policy. So, the interventionists putting emphasis on the quick short term solution tend to be popular among Japanese citizens even though it will repeats the same negative consequence in the longer term.
As mentioned in the previous chapters, Japanese lack individuals’ own voluntary will and the objective reasoning skill born in the virtue ethics invented by Aristotle and developed by various philosophers in the Western and the Middle-Eastern world. Individual’s motivation encouraged by voluntary will is essential to sustain and develop the free market competition. The objective reasoning skill is required to maintain their individuals’ virtue to be self-governable as well as to admit the autonomy of other individuals. Meanwhile the Western nations have matured individuals’ own voluntary will and the objective reasoning skill through the long time period, Japan and Asia are still not familiar with it.
The current Japanese stagnation is also caused by the lack of these previously mentioned cultural and spiritual backgrounds. Japanese mass expect their authorities to sort their political and economic problems all the time, and lack the consciousness of respecting for individual autonomy. They are not culturally and spiritually enlightened enough to become proactive to overcome from this stagnation. Then, they overly rely on their authorities, such as government politicians, bureaucrats, and entrepreneurs of big corporations, for solving this problem. They have not realised that, under the democracy, citizens have to be proactive to be responsible for the government’s and other authorities’ decisions. Instead, they expect their obeying authorities to be altruistic to be responsible for their life.
Who else can be a saintlike enough to be altruistic especially when this person gains the monopolistic power to control over distribution of resources and wealth? The probability of such a person comes into this world might be once thousands years. So, when this monopolistic power is held by several human-beings, they can take an advantage of using this power for their own interests, and it is generally the innate characteristics of human-beings.
Moreover, whenever some courageous autonomous individuals attempt to change this situation to expect a significant progress, these Japanese mass simply think of this courageous ones as deviants and hardly understand their progressive mind. Because they lack the notion of respecting individual autonomy, the unique individuality is the target of condemnation and individuals severely struggle to be free from any cohesive peer pressure. This typical characteristics of the tyranny of mass dominates not only in Japan but also many parts of Asia. Thus, it encounters with various tough challenges to evolve these Asian nations to the further progress.
7. Rise of the Nihilism in the West
Lack of both voluntary will and objective reasoning skill is crucially disadvantageous for the healthy stable economic growth. The virtue ethics, which was invented by the ancient Greek philosophers, most notably Aristotle, innovated by Aquinas and the enlightened European modern Liberalist philosophers, and preserved by Libertarians in the U.S.A., has encouraged both voluntary will and objective reasoning skill. This was the essential qualities required to fuel the growth of the market economy, the self-sustainable political economic system securing and promoting individuals’ autonomy, freedom of choice, and material and spiritual prosperity. Because Asia does not historically and ethnically retain the philosophical root of seeking in this kind of the virtue ethics, Asia experiences the inevitable stagnation.
Nonetheless, this sort of the stagnation taking place in Asia is also recognised in the entire post-WW2 Europe and the rest part of the current Western world. Majority of the Western individual citizens have lost their aspiration for seeking their individual liberty as well as their pride in their own self esteem. Then, they have become more reliant on the collective cohesive force which promises to take responsibility for these citizens’ life security at the sacrifice of their individual liberty.
Something like an epidemic disease castrating their mind seems to have stricken since the 20th century. Since then, they have started thinking of having their own objective reason to pursue their liberty as hypocritical and nonsense. In addition, they have become more reliant and overprotective of themselves rather than being self-confident and free. This tragic phenomenon is not ignorable in not only Asia but also the large part of the Western world especially Europe.
The nihilism is the name of this epidemic disease spread among the Western nations in the postmodern world. In 20th century, the inventive but dangerous ethics was established by an eccentric philosopher called Immanuel Kant stimulated the radical criticism of reasoning in Europe. This was a radical reaction against the virtue ethics regarding highly of individuals’ free voluntary will and their objective reasoning skill.
This Kantian ethical Reactionism firmly contradict individuals’ freedom of choice based on their autonomous voluntary will because these choices and will have to be assessed by the absolutely true ethically correct universal moral principle (subjectively determined by Kantian ethics) before putting them into practice. Moreover this ethical Reactionism also defies objective reasoning process because there is no purely objective ration without fulfilling the ethical axiom (subjectively determined by Kantian ethics). Afterward, the objectivity has been interpreted as the hypothetical and the free voluntary will and individuals’ self-esteem have been seen as vice.
The ethical principle of Kantian and the others influenced by Kant was too abstract to define what it actually is as well as too hypocritical to define it as universal. It is an extremely arrogant attempt to hypocritically define what is absolutely universally valid and plan everything by following their believing absolute principle as though human-beings had become God. They were tremendously sceptical about the inevitable nature and its spontaneity so that they suspected they would be able to control the nature without admitting the inevitability and the spontaneity.
The characteristics of Kantians is resemblance to the pre-Aquinasian Catholics and any fundamentalist Christians. In spite of the characteristic that Kantians deny the existence of God, they believe in something equivalent to the monotheistic God, and their devotion is a complete resemblance to the fundamentalist monotheist. They have simply replaced the traditional theisms with a Godless monotheism, and replaced genuine liberty with their claiming alternative liberty. Since then, the charismatic authorities, such as academic peer groups, political pressure groups, and financial specialists, have been more likely to have their cohesive peer power pressure to convince the rest.
Kantian ethics influenced to create the modern idealism (Basing socialism and Rawlsian political liberalism) and the postmodern nihilism (includes not only the Existentialism but also the Pragmatism and the Logical Positivism). These two categories are significantly different from each other: The former insists on the absolute and universal ethical principle as the only reason for all individual humans. The latter denies the existence of ethical principle and then affirms moral is relative to different time, places, and occasions. The common characteristic of them is that both are sceptical about each individual’s own free voluntary will and objective reasoning process based on it. The former philosophy does not provide the freedom for the voluntary will and the latter rejects the notion of the free voluntary will itself. The former, the modern idealism, used to be strong in the earlier 20th century whereas the latter, the postmodern nihilism, has gradually become more influential than the former since the mid-20th century.
The “planning” had been the boom during the age of the modern idealism as they overestimated their artificial power of their subjective determination meanwhile they underestimated the spontaneous power of the nature. They were called the collectivists or the old socialists. These collectivists had an intense faith in their abstract absolute universal moral principle defined by their subjective prejudice, which caused the dreadful political fanaticism in the 20th century world. With their faith, they put their intensive command economy under the intolerant undemocratic totalitarian politics, which eventually failed due to neglecting the inevitable spontaneous nature of the market mechanism. These events have highly disappointed the world.
This disappointment has encouraged the nothingness of seeking something despite Kantian wish for accomplishment of fulfilling the universal morality. Kant and the other modern European idealists discouraged the freedom for individuals’ voluntary will and self-reasoning skill. Then, after their collectively determined political and ethical reasoning process based on their believing moral universalism failed, the human-beings started thinking that any objective reasoning process, based on either free voluntary will or collective duty, is nonsense. Then, the idea to care about fulfilling the objectives which are more achievable in the short term and less abstract principle has become more epidemically influential in the Western world especially in Europe than it used to be.
* Ref:
The Objective Standard:
Aristotle Versus Religion
http://www.theobjectivestandard.com/issues/2014-spring/aristotle-versus-religion/
