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Kotegawa Stresses Urgent Need for Glass-Steagall Globally

Dec. 8, 2017 (EIRNS)—In a lengthy expert comment, "Financial Capitalism and the Future," for the Dialogue of Civilizations Research Institute, Japan’s former representative to the IMF Daisuke Kotegawa looks at 30 years of global economic destruction caused by the Western globalization system from the Asia crisis and the scrapping of Glass-Steagall on, urging a shift from financial speculation back to a manufacturing economy. Donald Trump’s election victory, the May 2016 presidential elections in the Philippines and the United Kingdom’s June 2016 Brexit referendum all were revolts against the expanding gap between the rich and the poor, symbolizing a necessity for the global economy: the need for a transition from financial capitalism to a manufacturing economy, Kotegawa writes. "The reason is very simple: the financial sector widens the gap between rich and poor, whereas manufacturing closes it."

Western geopolitics, particularly the Blair Doctrine of regime changes, after the fall of the Soviet Union have created global instability, whereas the continuous Chinese development from the era of Deng Xiaoping on has created the potential of a return to stability, Kotegawa assesses, adding that the Chinese Way may serve as a model also for developing countries, though not in every detail.

By contrast, the dead-end into which Western financial policies have moved into, is best shown by "the desperate situation of Deutsche Bank, which became a safe-haven for global derivative transactions before the crash," Kotegawa writes.

"The only option for a soft landing would be nationalization; otherwise, a contagion effect could drive an unprecedented scale of economic crisis, comparable to the Great Depression. In this context, the reintroduction of the Glass-Steagall Act is urgently required, in order to prevent investment banks from further large-scale risks and destroying the world economy.

"In a situation of economic stagnation caused by financial crisis, the government must take the lead in stimulating the national economy because households and the corporate sector have to reduce their assets by repaying debt to banks. Fiscal stimulus, including the construction of economic infrastructure, is essential to stimulating real demand",

Kotegawa writes, such a stimulus occurring in the United States first, with Europe following suit and abandoning inappropriate fiscal austerity policies; also, the end of economic sanctions against Russia, and collaboration between the United States and Russia, furthering peace in the Middle East.

In addition to financial regulation and safety nets to prevent a return of big crises, a crash program for education is required as well, Kotegawa writes. "Affordable education for everybody is the basis for an equal society. Governments should ensure all children have access to primary education and that equal opportunities are applied to higher education."