Readers' comments
| Author | Dr. N.A. Sarma/Felipe Santos Reyes |
| Position | Hyderabad, India/Economist Consultant Farm Producer and Union Organizations Santo Domingo, Dominican Republic |
| Pages | 56 |
Page 56
The substance of the theme "Asia adapts to global change" in the September 1997 issue of Finance & Development is negated by the turmoil sweeping across Asian economies and the near crisis now facing Japan's financial system.
Fundamentals characterizing these economies-sustained GDP growth of 6-8 percent a year, high savings, and human resources development including technology-have failed to prevent the closing down of banks and businesses. A partial explanation is in political uncertainties of one kind or another; the other relevant factor is rampant corruption enveloping financial institutions, business houses, and political establishments. Nor have we heeded the caveats entered by such distinguished observers as Amartya Sen and Paul Krugman. One should hope the large support packages being put in place by the International Monetary Fund and the World Bank will prove effective.
The situation in India and China is similar, though neither country is engulfed as yet. Any complacency based on so- called fundamentals is misplaced. In India, the liberalization process is flawed because of failure to deal with corruption and illiteracy.
I share some of the views put forward by Stephen S. Golub ("Are International Labor Standards Needed to Prevent Social Dumping?" Finance & Development, December 1997), such as the argument that weak labor standards are partially a consequence of low productivity and poverty. However, the article does not distinguish between real comparative advantages and artificial comparative advantages, the former referring to the position of the product on the market by reason of attributes such as practicality and harmlessness to the environment and health, and the latter to cost attributes, i.e., which product is cheapest. Many companies are combining the two types of comparative advantage by means of international specialization in terms of labor and technology, made possible by computerization and advances in electronics. This enables multinational corporations to reduce their high costs and create real advantages, combining them with artificial comparative advantages by promoting export processing or free zones. In this...
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