28 October 1997

Thoughts on "One World, Ready or Not"

William Greider's seminal book, "One World, Ready or Not: The Manic Logic of Global Capitalism" did not require affirmation beyond that which he provided through the weight of his arguments and the substance and breadth of his reference citations.

Needed or not, the affirmation has come swiftly and powerfully over the past few days in the form of substantial corrections in stock markets around the world. The fact that the fundamentals of the world's major markets had not changed dramatically prior to the corrections shows both the power of panic and the logic of the arguments to be found in Greider's book.

What Greider says is that the world's economy is now global. What affects one of the major players in this global interdependency can affect all of the major economies. If one major economy goes soft, others may follow, because of the intertwining. In fact, even relatively small units-such as the Hang Seng stock market in Hong Kong-can create havoc, as the world decline in stock market indexes has so dramatically illustrated.

The Hang Seng market in Hong Kong had spun completely out of control over the past couple of years. The correction that started there in August was a reflection of the fact that the fundamentals were unacceptably bad. The Hong Kong market was and still is too heavily weighted with real estate investment and bank issues. Real estate mania controlled the rise in the market. Common sense was adjusting the market downward.

Then, a not so funny thing happened: The "one world" characteristic of the world's stock markets-large and small, sound and shaky-took over. The panic began and spun out of control. The Chinese leaders in Hong Kong, new to their responsibilities since the transfer of control this past summer, were not equipped to understand or to effectively deal with what should have been a normal adjustment. Neither were those in control of the major markets around the world.

Unfortunately, the Greider book is long and weighty. It makes for heavy reading. Many important works share these characteristics. Greider's credentials are those of a careful researcher and a writer, rather than the credentials of a world-class economist. This means that the book will not be widely read by the reading public and will be little understood by many who do take the time and make the sizeable effort to read it. Because he is not in the professional economic arena, the work has been and will continue to be scoffed at by many economists across the spectrum of that little understood discipline. Such scoffing will further erode wide interest in the book.

The book deserves to be taken seriously. The panic of the last few days in the world's stock markets shows why. If stock market behavior was based on reason rather than on emotions stemming from greed and fear, little or no correction would have occurred in markets other than the Hang Seng in Hong Kong, because the fundamentals are generally good in many of the major markets.

Both speculators and investors (there are vast differences between the categories of market operatives) let the emotion of double panic from greed and of fear take over. The markets plunged, in what can only be termed a fierce over-reaction.

When reason returns, the markets should be expected to recover. Some of the exuberance will be missing. Even better market fundamentals should be in place. The smart money is already scooping up the bargains that the panic selling has left in its wake. As I write this at 2:30 p.m. on October 28th, the U.S. markets and major indexes are moving away from panic and back to cautious optimism.

The long-range picture is not so bright. World population growth, pollution of various kinds, destruction of the world's forests, energy consumption levels and patterns and-very importantly from Greider's perspective-the growth in excess productive capacity around the world in relation to the growth in consumer demand, will mean grave social and economic problems lie ahead, perhaps in the next ten to twenty years (maybe sooner). Greider is not a doomsayer. Neither is he a Pollyanna. He has marshaled a thoughtful case for concern, one that deserves wide spread scrutiny, debate and understanding, before this most recent stock market correction is eclipsed by deep and long-lasting collapses.

Sincerely,

Hal Mansfield, 1138 C. R. 302, Durango, CO 81303-8050

Phone: 970.259.1324

E-mail: mansfield_h@fortlewis.edu