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Last week the National Association of Securities Dealers (NASD), operator of New Yorks Nasdaq exchange, announced it would open a new "electronic stock market" in Tokyo in the last quarter of the year 2000, in alliance with Japans Softbank Corporation. This new extension of the worlds financial markets around the clock and across the globe, using the latest high-tech tools, comes hard on the heels of speculation about extended hours at the New York Stock Exchange and the entry of old-line brokerage firms such as Merrill Lynch into the online investment field.
The new market, said a corporate press release, will follow Nasdaqs "screen-based approach to trading equity securities and will include the Internet as a key conduit to provide a state-of- the-art electronic stock market." The exchange, offering around- the-clock electronic trading, will allow Japanese investors "the opportunity to invest in the worlds leading high-tech and high-growth stocks, and will provide enhanced access to equity capital for emerging Japanese firms."
Its fitting that this link between the worlds two biggest industrial powers, and their piles of money, should happen through Nasdaq and not the older NYSE, as the former is dominated by the stocks of virtually all publicly-traded high-tech firms, such as Microsoft, Intel, Amazon, and Cisco Systems. Just as fittingly the announcement came the same week that software industry leaders announced their sector was on the verge of becoming the largest in the U.S. as measured by total revenues.
NASDs partner in the deal, Corporation of Tokyo, is also no piker in this field. Described in the press release as "a leading provider of information and distribution services for the digital information industry" and "Japans largest distributor of software and computer technology publications," the company has stakes in more than 60 Internet- related companies, with at least a majority ownership in the Japanese arms of Yahoo, Geo-Cities, ZDNet, broadcast.com, ONSALE, CarPoint, InsWeb, and e*Trade Japan. In the United States, Soft- bank owns majority stakes in high-tech stocks, Ziff-Davis and Kingston Technology, and over a quarter each of Yahoo and e*Trade.
Frank Zarb, chair and Chief Executive Officer of the NASD, claimed that "we will utilize the power of the Internet to create an equity market that stimulates job creation and economic growth." In the press releases explanation of how the market will do so, flowing, watery metaphors abound. The market is expected to offer, for both Japanese and U.S. investors, "a transparent, liquid, efficient, easily accessed and well-regulated market" and "access for issuers to pools of capital linked on a global basis by creating seamless electronic access between Nasdaq Japan and financial interests in other countries." Workers will benefit too, said Zarb, as the "dual listings of companies on both Nasdaq Japan and the Nasdaq Stock Market" will contribute to "job creation and economic growth in Japan through an efficient market that links investors and entrepreneurs."
Its far more likely, however, that neither Japanese nor U.S. workers will benefit from the creation of Nasdaq Japan, that rather than floating on a seamless, flowing stream of capital, workers will butt their heads against the same stony walls separating them from better jobs and higher wages that have been erected as part of the broader globalization process. If anything the rivalries which pit U.S. and Japanese workers against each other will be worse at the end of the day, as capital adds this new conduit allowing capital to flow most smoothly to wherever labor can be most easily exploited.
This has been the clear result of the globalization of manufacturing. The investment across countries in auto, steel, garment, and toy factories, supposedly designed to create more jobs, has instead meant lost jobs, lower wages, and harsher working conditionsand more antagonism between workers of different countries (dont forget that the "seamless" flow of capital into Eastern Europe played no small part in reviving competition for resources between nationalities, and thus ethnic hatred, in Yugoslavia).
Zarbs claim that the market will more efficiently find investment opportunities for capital, across broader geographic reaches, ignores the plain fact that capital under the current setup has too many places for productive investment already. Under current levels of world demand there are already too many factories. Thats why the stock market mania of the last two decades represents money chasing money in an irrational speculative orgy. Nasdaq Tokyo will only lend this orgy a new high-tech gloss and a quicker pace.
A good explanation of this absurd situation was carried in an article by New York Times economics correspondent, Louis Uchitelle, in "Global Good Times, Meet the Global Glut" (11/16/97). Writing at a time when everyone feared global catastrophe growing out of that falls Asian financial crash, Uchitelle said: "The Asian financial turmoil may be the first stage of a developing worldwide crisis driven mainly by a phenomenon called overcapacity: the tendency of the unfettered global economy to produce more cars, toys, shoes, airplanes, steel, paper, appliances, film, clothing and electronic devices than people will buy at high enough prices. There is excess global capacity in almost every industry, Jack Welch, chair of General Electric, said in a recent interview in the London Financial Times. Whether its Airbus jets in Germany or sneakers in the United States, goods have a tendency to pile up in todays global economy."
"The problem arises," says Uchitelle, "because the global economy sucks businesses into building too many factories . The danger is that at some point this house of cards must tumble down. In an open-border global economy nearly every car manufacturer, for example, is trying to have a presence in every market. But when factories crank out more cars than people can buy, down come car prices. Down go the profits of car companies. Out go the workers. And down go the number of people who can afford to buy cars. Economies can spiral downward toward recession, or worse. That is what is beginning to happen in Asia now."
Uchitelle then points to the role of globalization in worsening rather than alleviating this situation: the global market produces "more and more goods even as it suppresses wages at both ends of the world, in industrial as well as developing countries . You cannot do that foreverproducing more and cutting the wages of those who buywithout some collapse."
So Nasdaq Japan is designed to solve a problem that doesnt exist. Given the way our system functions, the problem isnt that capital cant find places to invest; the problem is that capital cant invest in new goods- or service-producing facilities whose output can find a market. Yet if anything this leads capital to search more desperately for investment opportunities, both real and intangible, to make up for declining profits. And the more it does so the less chance it has of making a go of the newest investments. So new stock markets only increase the fury with which capital chases its own tail.
This description of capitals dilemma may not seem to match todays headlines, and Uchitelles worries could all too easily be written off as the momentary panic brought on by the fall 1997 crash. But recently new evidence of the thin ice on which the worlds economy skates could be heard. Many economists and businesspeople still worry that the rest of the worlds economy will drag down the U.S.and the economy of Japan, stagnant now for decades, will be one of the biggest drags. Gretchen Morgen- son, in "U.S. Shoppers Shoulder the Weight of the World" (New York Times, 6/20/99) quotes a banker who told her "a slowdown in consumption here could stop the improving economies elsewhere dead in their tracks: If he [the American consumer] slows down at all, were going to feel the world weak again." Like Uchitelle, this banker also points to the role of low wages in weakening demand and thus preventing the use of existing factory capacity: "Perhaps most important, annual growth in real wages has fallen from about 3 percent early last year to around 1.5 percent." So, he concludes, if the U.S. consumer doesnt continue to fuel world consumption, "there is nobody out there to take his [sic] place If it [the global economy] really slows down and gets into a more scary scenario, then the whole stock market gets into trouble." And, I would add, more efficient, more global stock exchanges such as the newly global Nasdaq, will spread that trouble all the more quickly and "efficiently."
Almost no one of any political or economic persuasion would deny that the world has too many factories for the given level of demand. Not for the potential demand, of course, but for the existing demand. (Note that Uchitelle says there are more factories for the number of carsand toys and shoes and paperwhich people can buy, not more than they need.)
But society is not equipped to deal with what should be a relatively simple problem, how to match the capacity of its factories with the needs of its people. Yet the kind of computers that will keep Nasdaq Japan running can perform millions of calculations per secondfar more than is needed to run the equations required to match production and consumption even on a global scale (for a concise proof of the mathematical, technical and organizational possibilities of doing so, see Cockshott and Cottrells Towards a New Socialism, Spokesman, Nottingham, 1993).
The real problem is that our market economy forbids us from even posing the question this way. Were forbidden by social, not technical, barriers, from doing the relatively simple math needed to figure out how many hours the worlds workers need to work to produce the number of goods the worlds consumers want. Yet we can take the most sophisticated computers, and the mathematical skills behind them, plaster the newest web interface on top of them, and create stock exchanges that can figure out in seconds how to match billions of trade orders by millions of investors.
But at the heart of this irrational situation lies part of the solution. On the 150th anniversary of the Communist Manifesto last year, even mainstream writers, made nervous by the previous falls global economic crisis, worried that perhaps Marx and Engelss prediction of the inevitability of systemic crises was being proven true again. Left out of such commentaries was any mention of the fact that these two authors also saw within the institutions set up by capital the potential for a more rational society. Capital had socialized production, investment, even consumption, but control and ownership remained in the hand of wealthy individuals. All that remained, they wrote, was for workers to end this contradiction by socializing these institutions, by putting control and ownership in the hands of the worlds workers.
Nasdaq Japan is just the latest example of this contradiction. For stock exchanges are nothing but the socialization of investment: used, however, not for the benefit of society, but to provide a technique by which individual investors can seek to enrich themselves by out competing each other.
In the U.S. alone there are many Nasdaq groups joined together in one "seamless" electronic networkthats 5,600 brokerage firms and more than half-a-million registered brokers. What if this network was taken over by unions and community groups and turned into a mechanism for rationally calculating societys needsand for providing democratic input from those affected? What if, that is, this socialized investment tool, and the computers that make it go, was for the first time drafted into serving society as a whole?
The same could be said of the computers run by the other key players in Nasdaqs new arm. What if Softbanks affiliate e*Trade was converted from a high-tech exchange for rich people into a computerized gauge of production, registering the activities and wishes of hundreds of millions of workers instead of the greed of millions of coupon-clippers?
Another of Softbanks affiliates is Microsofts Carpoint, an online automobile market. This website alone could become the technical centerpiece of rational, democratic planning for world auto production, matching consumer needs with factory capacity, and thus eliminate the cyclical layoffs, speed-ups, wage and benefit cuts that come from an unplanned industry. (Given the historic tensions between U.S. and Japanese autoworkers fostered by their bosses and politicians, this seems like a good place to start expropriating the bosses technical toys.)
Needless to say nobody at Nasdaq Japan or on any of the rest of the worlds exchanges is going to politely relinquish their seat and turn over their laptops or mainframes to representatives of the worlds working class; their bottoms are going to have to be forcibly removed from those seats.
You can agree or disagree as to whether this removal would represent social progress. But with the creation of global, "user-friend- ly" cybermarkets, to argue that democratic social planning is technically impossible is becoming less and less plausible every day. Z
Andy Pollack is a computer instructor and author of "Information Technology and Socialist Self-Management" in Capitalism and the Information Age: The Political Economy of the Global Communication Revolution, (Monthly Review Press), and a member of the New York Metro Chapter of the Labor Party.