With the huge US export market made available to them, Japan, becoming a five trillion-dollar economy, pursued an aggressive export led growth. It followed its own brand of state guided capitalism steering clear of market capitalism and the command economy of the Soviets. Increasingly, it expanded its production capacity. What was hidden from economic planners was that Japan generated industrial over capacity that threatened the health of the economy. The over capacity reached crisis point when other Asian countries such as South Korea, Hong-Kong, Taiwan, Singapore, Malaysia, emulated the fast catch up strategy of Japan. ‘There were too many factories,’ writes Johnson, ‘turning out athletic shoes, automobiles, television sets, semi-conductors, petrochemicals, steel and ships for too few buyers.’ The ripple effect of the over capacity is the increased competition between American and European MNC. This has resulted in corporations cutting costs by transferring the high paid jobs from the advanced economy to low wage developing countries. The global demand is on the verge of collapse, as rich countries do not generate demand on account of market saturation or stagnant or falling income of its people. In countries like China, Vietnam and Indonesia the workers who earn low wages cannot buy the goods produced by them.
In East Asian economies financial capitalism spearheaded by the US played an important role in destabilising the economies. US played an aggressive role in making the East Asian economies to deregulate the capital market. The Wall Street Treasury Complex thrust the concept of capital mobility upon the East Asian countries. The nature of money pumped into the economy of South Korea, Thailand, Indonesia, and Philippines was hot money. The financial inflows were short term, speculative, highly liquid and could easily leave the economy. The US accumulated vast funds (around 3 trillion dollars) especially in the mutual funds. These pools of capital were invested and transferred out of the Asian economies. The result was catastrophic: East Asian economies collapsed. Big American companies bought factories and businesses for a song. Proctor & Gamble picked up several South Korean state of art Companies at a fraction of the price.
In Thailand, American Investment firms bought service, steel, and energy companies at throw away prices. The Carlyle Group sent Bush senior to Bangkok to evaluate opportunities to buy real estate at low prices. The economic meltdown resulted in the largest transfer of wealth in the history of the world. The smoldering anger of East Asians against US predatory capitalism is a potential source of retaliatory strikes against US interests in the region.