May 13, 1999
Mr. Clyde V. Prestowitz, Jr.
Congratulations on the extraordinary conference on Rethinking Globalization. Your organization and these meeting of leaders help move the world to economic common purpose, and away from the folly and violence that has dominated human history. You and Bob Glavin have my great respect for organizing and building ESI to its premier position during the last decade.
Bob Glavin opened the conference with the theme that the vision of a world of peace and plenty through free trade would not be reached without a willingness to "write new rules." There are two areas in which I feel new rules are urgently required for the mission to be accomplished.
One is broader distribution of the surplus consistent with the broader sources of capital in global capitalism. This was described by Jeff Gates in Ownership Solution. Application of profit-sharing and ownership opportunities can provide the spendable income to make free trade a universal benefit.
The second is new rules to make finance capitalism subordinate and accountable to the capitalism that builds and sells things. Most of the discussion at the conference was about damage control after economic disasters that should not have happened. There was little discussion of the root causes and solutions. There has always been a tension between those building business while providing social benefit and those whose motivation was making money on money. Now finance capitalism has dominated the process, destroyed economics, and civic order.
Global finance capitalism is in uncharted territory that is threatening the whole concept of free trade. Finance capitalism must be restructured and held accountable soon or the world will miss its best chance ever. This unique and dangerous situation has been caused by the lack of any currency stabilizing mechanism since the floating of the dollar in 1971, deregulation of finance capitalism at the same time market disciplines were abrogated, and the lack pf appropriate international banking standards.
These four areas need integrated action but the pressure has to come from outside the government- Wall Street nexus to do the following:
- Drastically reduce the amount of bank loans available to leverage speculation.
- Develop international standards to relate hot money properly to long term investment in countries.
- Reinstate market disciplines by eliminating subsidies, insurance and bail-outs.
- Develop an international agreement on a currency stabilizing mechanism.
The stabilizing mechanism could be the harmonizing and broad use of three currencies, the dollar, the yen and the euro. This will not happen unless there is pressure from those whose mission is the growth of free trade. It is perverse and tragic that free trade is hurt and protectionism stimulated by steel imports when the problem is world leaders unable or unwilling to stabilize currency.
As 90% of the $1.4 trillion traded daily on the world's electronic casino is speculation, it is clear that there is an enormous constituency with an interest in sustaining volatility. Judy Shelton has written on these matters in Money Meltdown. She recently took the Treasury Department and our conference speaker, Larry Summers, to task because of their timidity over the dollarization of North and South America. (WSJ 4/30/99 editorial page)
All of these matters are treated in a book that I will finish this year. Chapter 1 along with a table of contents are included. Let me know if any other chapters are of present interest to you or your staff and I will send you a draft. The Democratic Capitalism that I define in the book has a symmetry with free trade and the internet; all are interactive and interdependent, providing for the development of each in a harmonious whole.
As you can see from the table of contents of my book, I am trying to place economic common purpose in a full human context. It seems to me that most of your conference participants combined idealism and practicality. World progress, however, will be impeded if students are prevented from examining the end and the means in order to recognize their opportunity to contribute. Unfortunately, much of academia is attacking the very concept of idealism while the rest is sustaining its contempt for generic capitalism. While most of the people at your conference understand the synergy between democracy and capitalism, most of academia continue to describe, not synergy, but inherent tension.
The ideas expressed in my book have not had much opportunity for challenge and debate. i hope that they are of sufficient interest to you and your staff that I can meet with you for that purpose. My background and more on Democratic Capitalism can be found on the website: www.democratic-capitalism.com.
Thank you again for inviting me to the conference. It was an excellent opportunity for me to relate my work to the ideas of so many distinguished experts.
Raymond B. Carey, Jr.