Globalization

[Jane Sweet]

How did Japan grow its economy at an astoundingly high rate
(the so called miracle economy) for nearly 20 years? In 1960
Real GNP was 13.6%
That's incredible. But in 1961 11.9%, 8.9 in 62, 8.4 in 63,
11.6 in 64, 5.9 in 65, 10.7 in 66, 11.1 in 67, 12.8 in 68,
12.5 in 69, so on. There are many reasons why Japan was able
to grow the economy. But by far, the most important factor,
is investment as a percentage of GNP. The Japanese invested
an equally astounding 30% of GNP. The highest percentage in
the same period in the US was only 17%, a very high number
as well. particularly since the US is a very mature
economy.  Where does a developing nation get the capital,
the money needed for investment to grow? Debt. Money doesn't
grow on trees.
If the domestic terms are not as favorable (and this very
complex stuff) as foreign terms, economics, and not
politics, will drive the economy to fund growth by floating
debt in the international arena. 

Another point, there are advantages to "backwardness" and
"catch up." One advantage is the so called leap frog. A
mature economy like the US may can develop the latest
technology, for infrastructure, bridges, power plants, but
it's too expensive to replace the old, but a Nation that
doesn't have the old plant or sewage system, or
transportation system, can leap over the "industrial
revolutions" and take advantage of the latest and best, but
of course to make such an investment, the developing nation
will have encumber that new power plant or telephone system
with debt. AT&T will build it, but they want to get paid.
Now. Of if not now, at least, if AT&T or the US government,
both of whom have better credit ratings than all developing
nations and can therefor structure the debt on more
favorable terms than a domestic bank, finances the project,
they want to get at the very least IO, interest only,
amortization. Although, many of the loans made, don't even
require these interest payments. In any event, this is very
complex stuff, for example, if AT&T hold the mortgage on the
brand new power plant in Brazil and again, Brazil is free to
finance this plant domestically or anyplace it can get the
most favorable terms, AT&T carries the mortgage on its
balance sheet as an Asset. So, this is just an example that
tries to demonstrate that the numbers you all are posting
here are worthless, because the financials have to be
scrutinize and we will need some very fancy calculations to
make sense of them. Well, this is the P list.