The Wisdom of Asia №18

Part Ⅱ：The Future of Taiwan，Japan and Asia

Chapter Four
The Wisdom of Asia Opens the Future

                                                             　　　　 元台湾総統　　李登輝               

1．Expansion of the World Economy and Real Goods

　　　　Malaysia’s former Prime Minister Mahathir reacted strongly toward the U．S．at the time of the Asian monetary crisis of 1998．The first reason was his belief in limitlng the free movement of capital．Mr．Mahathir’s thinking，though it appeared wrong at the time，was not wrong．Since the Malaysian economy had suffered severe damage by the movement of short-term capiltal，as represented in hedge funds，the government，coping with the crisis instead of relying on the lMF，established its own response system．That solution was to establish a system to prevent large inflows of speculative short-term capital from overseas．Malaysla suffered damages from the financial crisis because domestic measures did not work wel1．
　　　 1 wrote in my book The Road to Democracy； that Asia，as a whole， should consider a common “Asian currency” in the future．At that time Japan should be asked to play an important role．The Euro has been born in Europe，and North and South America are about to be unified by the U．S．dollar．But Asian countries still maintain very unstable exchange rates，causlng their economies to undergo ups and downs and suffering to the people．Once a common currency is born and stabilized，there will，at worst，be no economic deterioration caused by short-term rate exchanges・
　　　　Controlling the free movement of international capital is in keeplng with the origlnal prlnciples of the IMF．The Bretton Woods system of 1944，which became the basis of the IMF，was established in response to a reflection that the Second World War was caused，among other things，by selfish competitive devaluation of currencies among countries bent on
favorlng their own national exports －that is，by competitive export of recessions to other countries．That is why Keynes and others tried to adopt a system of fixed exchange rates to ensure currency stability．When a country suffers a serious payments deficit，the IMF extends loans to help stabilize the exchange．The IMF has changed the Bretton Woods’spirit，now not
concerned about exchange market stability，and is imposing no control on the movement of international capital．That is why Prime Minister Mahathir has called George Soros，boss of the hedge funds，“an evil fellow" and prohibited his entering the country．
　　　　Taiwan does not regulate the movement of short-term capital because what is required is a prior determination of policies on what is to be done toward the process of liberalization and internationalization．Attention to the growth process of the international economy and adaptation to it is required today．Times have changed．
　　　　The volume of money flows in the world today has expanded about thirty times the total volume of real goods and services．Some claim fifty times，but it is probably thirty．Over one trillion U．S．dollars move across the world every day．But genuine  trade－that is，total trade in real goods and services－amounts to only ＄30 billion a day．The cause for the big increase in monetary flow is computer money，fundamerntally by the U，S．　                                              The important things to know in the current situation，When large volumes of currencies move，are，first，how to stabilize exchange rates，and second，how to raise the long-term capital required for very important investment in infrastructure and other needs．lt is better to start with a method of preventing the escape of capital overseas．Simple rejection in the form of " No, No "will result in seperating one's national economy from the world currencies and the world economy．Solutions will be difficult．

"The Wisdom of Asia" Translated by Alexander K. Young 　　　　　　　　　　　　　　　                             Akita International University Press

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