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17141. The Transmission of Productivity and Investment Shocks in the Asia Pacific Region

Author:
Warwick McKibbin
Publication Date:
12-1999
Content Type:
Working Paper
Institution:
The Brookings Institution
Abstract:
An important aspect of macroeconomic interdependence in the Asia Pacific region is the adjustment of trade and current account balances in response to changes in saving and investment rates in individual economies. Greater trade flows, reliance on imported intermediate goods as well as more integrated capital markets imply that shifts in private or public saving and investment rates in an economy in the region can potentially have large impacts on other economies. This paper explores the quantitative nature of these linkages by focusing on a number of shocks within the context of a new dynamic multi-sector global model called the Asia-Pacific G-Cubed Model (AP-GCUBED). This model integrates sectoral adjustment with macroeconomic interdependence including explicit treatment of capital flows to explore the implications of a variety of productivity and investment shocks in the Asia Pacific Region. The first shock considered is a permanent decline in private investment in Japan. The second shock is a temporary rise in total factor productivity growth in China. The fall in Japanese investment is found to have a significant effect on trade flows and financial flows in the region whereas the rise in Chinese productivity has a quite different effect on the region.
Topic:
Economics, Emerging Markets, and Globalization
Political Geography:
China, Israel, East Asia, and Asia

17142. North Korea: How Much Reform and Whose Characteristics?

Author:
Heather Smith
Publication Date:
12-1999
Content Type:
Working Paper
Institution:
The Brookings Institution
Abstract:
This paper is the first of a three part project on economic reform on the Korean Peninsula. In this first paper, I focus on the question which has been subject to considerable recent debate, namely whether collapse of North Korea is imminent. In accessing this question the paper discusses the three structural bottlenecks now thought to be severely constraining the North Korean economy following a series of external shocks in the late 1980s, food shortages, energy constraints and a limited capacity to earn foreign exchange. Much speculation has focused on the deterioration in the food economy and that a prolongation of current food shortages will see North Korea collapse. One contribution of this paper lies in its attempt to analyze North Korean agricultural production and food consumption patterns using data made available by North Korea to the United Nations Food and Agricultural Organization. Several anomalies are found between this data and recent World Food Program assessments of food conditions and estimates of nutritional requirements which suggest caution in drawing a too deterministic link between current food shortages and collapse. The paper then discusses the role of international and regional players in prolonging North Korea's economic survival. In particular, the terms under which North Korea signed onto the 1994 Agreed Framework, a return to favorable trading terms with China, and North Korea's attempts aimed at expanding economic ties with the international community, could sustain North Korea at subsistence levels for the next 5 years at least. If collapse is not imminent in the short to medium term, then the policy implications that emerge from such a scenario are clear: that the international community will need to continue to pursue a policy approach of managing tension reduction and the integration of North Korea into the international community. Whether the North Korea regime will embrace fundamental reforms needed to ensure longer term survival remains difficult to judge. In the final section of the paper, several reasons are advanced as to why the window of opportunity for North Korea to embrace reform is now greater than at any time in the past.
Topic:
International Relations and Economics
Political Geography:
Israel and East Asia

17143. The Macroeconomic Experience of Japan Since 1990: An Empirical Investigation

Author:
Warwick McKibbin
Publication Date:
12-1999
Content Type:
Working Paper
Institution:
The Brookings Institution
Abstract:
This paper outlines the macroeconomic experience of the Japanese economy since 1990. The MSG2 multi-country model is used to determine the extent to which the strong yen and growth experience of Japan over this period was due to underlying trends in the Japanese economy and to what extent shocks such as changes in the settings of monetary and fiscal policies in Japan and overseas, as well as the Kobe earthquake, played a role. It is shown that many of the key features of the Japanese economy over this period can be attributed to inappropriate macroeconomic policy settings in Japan as well as reflecting long term trends due to population changes and a maturing of the Japanese economy. In particular, it is shown that announcing expansionary fiscal policy in advance of implementation and exaggerating the extent of actual stimulus, tended to appreciate the yen and raise long term real interest rates which further reduced real GDP growth over the period. The extent to which macroeconomic policy rather than entrenched structural problems can explain the experience suggests that future prospects for the Japanese economy are not as bleak as sometimes predicted. Growth is unlikely to return to the high levels experienced in previous decades because of the maturing of the Japanese economy and low future population growth in Japan. This paper projects growth to be sustainable at around 2.5% per year over the next decade and a continual appreciation of the yen in both real and nominal terms.
Topic:
Economics and Political Economy
Political Geography:
Japan, Israel, and East Asia

17144. Drug Trafficking on the Great Silk Road: The Security Environment in Central Asia

Author:
Martha Brill Olcott
Publication Date:
12-1999
Content Type:
Working Paper
Institution:
Carnegie Endowment for International Peace
Abstract:
To address drug proliferation and trafficking in the context of non-traditional security threats and to try to find ways out of the potentially explosive situation, the Carnegie Endowment for International Peace sponsored a meeting of representatives of the five Central Asian states, Russia, Azerbaijan, Turkey, the United States, the United Nations Drug Control Program (UNDCP), the Organization for Security and Cooperation in Europe (OSCE), and the Aga Khan Development Network, held in Bishkek, Kyrgyzstan in May 1999. This paper analyzes the situation in the region based on the conference proceedings and aims to raise international awareness of the seriousness of the problem. It also advocates the need for a concerted effort within the region and without to help these countries fight this evil.
Topic:
Security and International Law
Political Geography:
Russia, United States, Turkey, Asia, and United Nations

17145. Strengthening the Biological Weapons Convention: Illusory Benefits and Nasty Side Effects

Author:
Eric R. Taylor
Publication Date:
10-1999
Content Type:
Working Paper
Institution:
The Cato Institute
Abstract:
The Biological Toxins and Weapons Convention—signed in 1972—prohibits signatory nations from developing, possessing, employing, or transferring biological weapons. The convention does not contain any protocols for its enforcement, however. There is now an international effort under way to develop such protocols.
Topic:
Arms Control and Proliferation and International Cooperation
Political Geography:
United States

17146. Corporate Welfare for Weapons Makers the Hidden Costs of Spending on Defense and Foreign Aid

Author:
William D. Hartung
Publication Date:
08-1999
Content Type:
Working Paper
Institution:
The Cato Institute
Abstract:
The defense and foreign aid budgets are the largest single source of government funding for private corporations. More than half of U.S. weapons sales are now being financed by taxpayers instead of foreign arms purchasers. During fiscal year 1996 (the last year for which full statistics are available), the government spent more than $7.9 billion to help U.S. companies secure just over $12 billion in agreements for new international arms sales. The annual $7.9 billion in subsidies includes taxpayer-backed loans, grants, and government promotional activities that help U.S. weapons makers sell their products to foreign customers. Also, the provision of low-cost facilities and extensive subsidies for research and development and mergers and acquisitions to major contractors fosters a “risk-free” environment in which weapons makers have little economic incentive to produce effective systems at affordable prices. Furthermore, a portion of the $120 billion the Pentagon spends each year on contracts with U.S. defense contractors is being wasted on defense pork—that is, redundant or unneeded weapons systems. Such subsidies and spending for defense pork can interfere with the fulfillment of legitimate security needs.
Topic:
Defense Policy, Arms Control and Proliferation, Climate Change, Government, and Industrial Policy
Political Geography:
United States

17147. Replacing Potemkin Capitalism: Russia's Need for a Free-Market Financial System

Author:
Kurt Schuler and George A. Selgin
Publication Date:
06-1999
Content Type:
Working Paper
Institution:
The Cato Institute
Abstract:
On August 17, 1998, Russia devalued the ruble and stopped payment on its government debt, creating a financial crisis that continues today. Some observers have blamed the financial crisis, and the poor performance of the Russian economy generally, on government policies that they claim are rigidly laissez faire. However, a closer look at the Russian financial system reveals that it remains fundamentally socialist, though it has superficial capitalist features.
Topic:
Debt, Economics, Government, and Financial Crisis
Political Geography:
Russia, Europe, and Asia

17148. Blunder in the Balkans: The Clinton Administration's Bungled War against Serbia

Author:
Christopher Layne
Publication Date:
05-1999
Content Type:
Working Paper
Institution:
The Cato Institute
Abstract:
The Clinton administration has made one miscalculation after another in dealing with the Kosovo crisis. U.S. officials and their NATO colleagues never understood the historical and emotional importance of Kosovo to the Serbia n people, believing instead that Belgrade's harsh repression of the ethnic Albanian secessionist movement in Kosovo merely reflected the will of President Slobodan Milosevic of Yugoslavia. The administration's foreign policy team mistakenly concluded that, under a threat of air strikes, the Yugoslav government would sign a dictate d peace accord (the Rambouillet agreement) to be implemented by a NATO peacekeeping force in Kosovo. Even if Milosevic initially refused to sign the Rambouillet agreement, administration leaders believed that Belgrade would relent after a brief “demonstration” bombing campaign. Those calculations proved to be disastrously wrong.
Topic:
Conflict Resolution, International Relations, Foreign Policy, NATO, and Ethnic Conflict
Political Geography:
Russia, United States, China, Europe, Eastern Europe, Asia, Kosovo, Yugoslavia, Serbia, Balkans, and Albania

17149. Old Wine in New Bottles: The Pentagon's East Asia Security Strategy Report

Author:
Doug Bandow
Publication Date:
05-1999
Content Type:
Working Paper
Institution:
The Cato Institute
Abstract:
To contain Soviet-led communism and, secondarily, to prevent a militarily resurgent Japan, Washington established a network of alliances, bases, and deployments throughout East Asia after World War II. By the 1990s the Soviet Union had imploded, China had become a reasonably restrained international player, and other communist states had lost their ideological edge. At the same time, the noncommunist nations had leaped ahead economically. Despite such momentous developments, however, U.S. policy remains fundamentally the same.
Topic:
Security, Foreign Policy, and Defense Policy
Political Geography:
United States, Japan, China, Washington, Israel, and Soviet Union

17150. Is Readiness Overrated? Implications for a Tiered Readiness Force Structure

Author:
James L. George
Publication Date:
04-1999
Content Type:
Working Paper
Institution:
The Cato Institute
Abstract:
Readiness, the capability to respond quickly to a conflict with the appropriate force, is considered one of the most important elements in defense planning. From one-third to well over one-half of the defense budget goes toward maintaining readiness. Few people questioned the need for readiness, especially after the attack by North Korea against South Korea in 1950 and during the Cold War, when the Soviet-led Warsaw Pact was poised to quickly thrust into Western Europe without much warning.
Topic:
Security, Defense Policy, and Cold War
Political Geography:
United States, South Korea, North Korea, and Western Europe

17151. In Praise and Criticism of Mexico's Pension Reform

Author:
L. Jacobo Rodriguez
Publication Date:
04-1999
Content Type:
Working Paper
Institution:
The Cato Institute
Abstract:
The privatization of Mexico's government-run pay-as-you-go social security system, which went into effect in July 1997, is the Ernesto Zedillo administration's most important structural reform. It is a measure that, if successful, will help bring much-needed social and economic stability. The Mexican peso crisis of 1994–95 underscore d the fragility of Mexico's economy, its need for independent institutions, and its need for a large pool of long-term domestic savings. An increase in the rate of private savings in Mexico, which this reform will promote, would make the Mexican economy less dependent on short-term fluctuations of international capital flows and, thus, more stable. More important still, the privatization of social security will erect one of the basic pillars of a free society by turning Mexico into a country of property-owning workers.
Topic:
Economics, Government, International Political Economy, and Privatization
Political Geography:
Latin America and Mexico

17152. National Missile Defense: Examining the Options

Author:
Charles V. Peña and Barbara Conry
Publication Date:
03-1999
Content Type:
Working Paper
Institution:
The Cato Institute
Abstract:
To date, the debate surrounding national missile defense (NMD) has been dominated by political rhetoric. Supporters (usually conservatives) often paint a “doom-and-gloom” picture, pointing out that the United States is vulnerable to an attack by ballistic missiles. Critics (usually liberals) defend the Anti-Ballistic Missile Treaty as the cornerstone of deterrence and stability and argue that any defensive deployment would upset the balance between the offensive strategic nuclear forces of the United States and Russia.
Topic:
Defense Policy
Political Geography:
Russia and United States

17153. U.S. Assistance for Market Reforms: Foreign Aid Failures in Russia and the Former Soviet Bloc

Author:
Janine R. Wedel
Publication Date:
03-1999
Content Type:
Working Paper
Institution:
The Cato Institute
Abstract:
Since the fall of the Berlin Wall in 1989 and the subsequent breakup of the Soviet Union in 1991, the governments of the United States and other Western countries have provided massive aid to promote a transition to the free market in Central and Eastern Europe and the former Soviet Union. But aid for market reforms in the region has been largely ineffective. Whether provided in the form of technical assistance, grants to political groups or nongovernmental organizations, loans and guarantees to the private sector, or direct financial aid to post-communist governments, that aid has been plagued by a number of problems. The failed $22.6 billion bailout of Russia by the International Monetary Fund in July 1998 only confirmed the flawed nature of the aid-for-reform approach.
Topic:
Economics and Emerging Markets
Political Geography:
Russia, United States, Europe, Eastern Europe, Asia, and Soviet Union

17154. Tilting at Windmills: Post-Cold War Military Threats to U.S. Security

Author:
Ivan Eland
Publication Date:
02-1999
Content Type:
Working Paper
Institution:
The Cato Institute
Abstract:
Serious military threats to U.S. security have diminished dramatically since the end of the Cold War. The threat from conventional Russian military forces has all but disintegrated and would take many years to reconstitute. China would take 20 to 30 years to transform its bloated and obsolete military into a major threat to U.S. vital interests. The militaries in both nations should be watched, but they may never develop into credible threats.
Topic:
Security, Defense Policy, Arms Control and Proliferation, Cold War, Nuclear Weapons, and Terrorism
Political Geography:
United States

17155. The Comprehensive Test Ban Treaty: The Costs Outweigh the Benefits

Author:
Kathleen C. Bailey
Publication Date:
01-1999
Content Type:
Working Paper
Institution:
The Cato Institute
Abstract:
The Comprehensive Test Ban Treaty (CTBT) is now before the U.S. Senate for its advice and consent. The treaty bans all explosive testing of nuclear weapons. Advocates of the CTBT make several arguments in support of the treaty. The reasons reduce to two points: the ban will constrain the modernization and development of nuclear weapons by the nations that already possess them, and it will help prevent the spread of nuclear weapons to additional nations. Both objectives are set out in the CTBT's preamble.
Topic:
Security, Arms Control and Proliferation, and Nuclear Weapons
Political Geography:
United States

17156. Japanese Entrepreneurship: Can the Silicon Valley Model Be Applied to Japan?

Author:
Katsuhiro Nakagawa
Publication Date:
12-1999
Content Type:
Working Paper
Institution:
Walter H. Shorenstein Asia-Pacific Research Center
Abstract:
Since 1992, the Japanese economy has been utterly stagnant, with signs of weak performance at every turn. Since 1997, Japan's economy has experienced negative growth, a situation unprecedented in the postwar era. Most large Japanese corporations have engaged in extensive restructuring during this period, which has in turn contributed to 4.8 percent unemployment—higher than rates in the United States. Further, in 1998, the closure rate of small companies (3.8 percent) exceeded the start-up rate of new business ventures (3.7 percent).
Topic:
Security
Political Geography:
United States, Japan, and Asia

17157. Accessing Venture Capital in India

Author:
Rafiq Dossani
Publication Date:
10-1999
Content Type:
Working Paper
Institution:
Walter H. Shorenstein Asia-Pacific Research Center
Abstract:
In the 1970s, IT exports from India began with “body-shopping,” also known as contract programming. In such contracts, the amount of code was specified in the contract and there was relatively little risk. Until 1991, this was the main form of IT exports, and it was per- formed exclusively by Indian firms. Foreign firms were deliberately excluded as a matter of government policy. It was a difficult business environment. Indian firms that were exporting bodies, as well as firms that operated only in the domestic market, found themselves operat- ing in a closed economy, featuring high tariffs on hardware imports and non-tariff barriers on software imports. Quite by accident, this situation led to a growth of skills that would be of great value to India a few years later. India's UNIX talents, now globally in demand due to the growth of the Internet, developed because the country's closed economy forced Indian computer makers to develop their own hardware and software design skills. Sridhar Mitta noted that, in 1983, the United States used an Intel 386 microprocessor as the base for a simple personal computer, whereas India employed the same microprocessor with the UNIX operating system to power mainframes that controlled large enterprises. India's closed environment also spurred the country's IT industry to develop advanced skills in system design, architecture, protocol stacks, compilers, device drivers, and boards.
Topic:
Security
Political Geography:
United States, India, and Asia

17158. Assessing U.S. Bilateral Security Alliances in the Asia Pacific's "Southern Rim": Why the San Francisco System Endures

Author:
William T. Tow
Publication Date:
10-1999
Content Type:
Working Paper
Institution:
Walter H. Shorenstein Asia-Pacific Research Center
Abstract:
At the turn of the century, the United States' postwar alliance network remains a key component of its international security policy. That policy is fundamentally based on maintaining military superiority over current and potential rivals in the Eurasian landmass.
Topic:
Security
Political Geography:
United States, Eurasia, Asia, and San Francisco

17159. Containment by Stealth: Chinese Views of and Policies toward America's Alliances with Japan and Korea after the Cold War

Author:
Yu Bin
Publication Date:
09-1999
Content Type:
Working Paper
Institution:
Walter H. Shorenstein Asia-Pacific Research Center
Abstract:
At the height of the Cold War, the dominant Western theories of alliance building in interstate relations argued that alliances tend to be motivated more by an external need to confront a clearly defined common adversary than by the domestic attributes of alliance partners. The newly reinvigorated U.S.-Japan alliance, however, together with the newly expanded NATO, seems to depart from the conventional pattern by emphasizing shared democratic values and by maintaining a high degree of ambiguity regarding the goals and targets of the alliance. Although these new features of American-led military alliances provide an anchor in an other- wise highly fluid situation in the post–Cold War world, many Chinese foreign-and defense-policy analysts believe that U.S. alliances with Asian countries, particularly with Japan, pose a serious, long-term challenge, if not a threat, to China's national security, national unification, and modernization. The ambiguity of the revised U.S.-Japan security alliance means that it is at best searching for targets and at worst aiming at China.
Topic:
Security
Political Geography:
United States, Japan, Asia, and Korea

17160. Catch-Up; Why Poor Countries Are Becoming Richer, Democratic, Increasingly Peaceable, and Sometimes More Dangerous

Author:
Henry S. Rowen
Publication Date:
08-1999
Content Type:
Working Paper
Institution:
Walter H. Shorenstein Asia-Pacific Research Center
Abstract:
It is easy to be confused about the world's prospect. On the one hand, since the collapse of the Soviet Union and its empire, many millions of people have been freed from economic and political shackles that had long kept them under authoritarian rule and in poverty—or at least far poorer than they should be. On the other hand, several parts of the world are beset by political turmoil and conflicts, rapid population increases, and falling incomes.
Topic:
Security, Democratization, Development, Emerging Markets, and Third World
Political Geography:
Soviet Union