Lecture 31: “Side Effects”Politicization of the Financial World

5th May 2003 (Monday)

Structure of Lecture 31:

Economic and Political World: Theories Governing their Inter-relationship

Separated Spheres between Politics and Economy?

Impacts of 911 on World Economy “Financial War against Terrorism” Conclusion:

Future of the “Pure Commercial Cities” …

PART IEconomic and Politics:

Theories Governing their Inter-relationship

Perspective A: Liberalism Public Choice Liberalism

Unit of Actor: Individual Classical Liberalism

Unit of Actor: Country Adam Smith: Motivation of Economic Activities:

Innate Human Desire to Trade Voluntary Exchange between Countries Based on

Comparative Advantage John Keynes: If Free Trade doesn’t Work Interest

Rate Mechanism/ National Protectionism Policy and Economy: Separation as the Preference

Perspective B: Marxism

Classical Marxism Unit of Actor: Individual

World System Theory Unit of Actor: Country

Motivation of Economic Activities: International Division of Classes: Core VS

Periphery Competition of Scarce Capital Assumption: Uneven Growth among Nations in

Terms of Capitalism Imperialism as the Ultimate Stage of Capitalism

Economy drives Politics

Perspective C: Machiavellianism Statism

Unit of Actor: Domestic Politics Decision-makers Realism

Unite of Actor: International Politics Decision-makers

Motivation of Economic Activities: International: Security Concern Domestic: Aggregate Social Capital Personal Security and Careers

Politics drives Economy

Argument of Globalization

Francis Fukuyama: “The End of History and the Last

Man” “The End of History” of the

Political World The Beginning of History of the

Economic World No Longer Politics,

Everything is Economic Assessment of Fukuyama after

911……

International Political Economy (IPE)

Jeffry Frieden & David Lake. Ed. International Political Economy: Perspectives on Global Power and Wealth. New York: St Martin’s Press, 1995. 3rd Edition.

Joan Spera and Jeffrey Hart. The Poliics of International Economic Relations. New York: St Martin’s Press. 1997. 5th Edition.

Please Read the Newsgroup Article!

PART IIConcept of the

Separated Spheres between Politics

and Economy

Separation of Decision-makers:The Original Argument

Political Leader: Election-oriented/ Power-oriented Bureaucrat/ Demagogue Political Language Incomprehensible to E

conomic Leaders Economic Leader:

Money-oriented/ Appointment-oriented Technocrat Economic Details Incomprehensible by P

olitical Leaders Alan Greenspan (US Federal Rese

rve Board) as the Real US Leader?

Concept of the “Backdoor Insurance”

Harmony of Both Relations USA and Britain

Inharmonious Political Relations Still Maintain Acceptable Economic Relations USA and China

Inharmonious Economic Relations Still Maintain Acceptable Political Relations USA and Japan

Deterioration of Both Relations USA and France/Germany Today??

“War of Unlimited Boundaries”:The Revisionist Argument

All-rounded Wars: Political, Economic, Cultural, Social, Ideolo

gical, Psychological…

Economic Sanctions of Political Enemies “Oil for Food” Program in Iraq Does the Strategy Work?

Political Intervention of Economic Rival The “Oil War” in the Middle East against th

e Rising European Economic Powers? Does the Strategy Work?

The Case of the Asian Financial Crisis

Malaysian Prime Minister Mahathir Mohammad: George Soros as an “Economic Predator

” to cause Political Unrests in the Southeast Asia

Asian Financial Crisis and Conspiracy Concerted Efforts of Southeast Asian

Leaders Vs Soros Implication to Globalization, 911, and

the North-South Relations

PART III Impacts of 911 on World

Economy

The Coming Presentation?? ^ ^

The Whole World Trade Centerand Investment Banking

The Myth of Investment Banking (1980s-2000)

World Trade Center Tenants: Lehman Brothers, Morgan Stanley,

Bank of America……

Behind the Direct Financial Loss: Impacts on the Investment Bankers Challenge of the Start-up Industry Imperial Overreach of the American

Investment Companies? 911 as the Scapegoat of the Declining

Industry?

Wall Street Stock Market

The 1929 Great Depression and Wall Street Slump as the Default of Comparison FDR’s New Deal

Intermingling of Physical and Financial Strikes in 911 Comparison with the Black Friday in the

Interwar Period Reassessing the Stock-mania of

Financial Researchers Role of Wall Street in Counter-terrorism

and the Iraqi War Ups and Downs of the 20-day War……

Insurance Industry Insurance Claimed by WTC Tenants:

$US 50,000,000,000! Insurance of Hard Assets Insurance of Soft Assets Insurance of Lives Cases of Fraud Insurance

Challenge against the Concept of Insurance: Is everything insurable?

Tillinghast-Tower Perrin: 911 – Implications for the Insurance Industry (http://www.tillinghast.com/tillinghast/publications/reports/Sept_11_Implications_For_Insurance/2002051310.pdf )

Aviation Industry

Nightmare of the Aviation Industry Suicidal Terrorist Attack (911) The Shoe Bomber (British Airway) Firing-missile Attack (Kenya)

The US Emergency Fund Comparison with the

Pan-American Airline Bombing (1988)

Nightmare of Tourism

The Domino Effect

Total: Direct Loss of US$33-36 Billions Domino Effect in the Globalized Econo

my Auditing Industry as an Exmple: why m

atters? Arthur Anderson Scandal:

911 Financial Crisis to Large Firms Enroy Scandal Exposed Arthur Anderson Covered up for Enroy Big 5 Big 4

Dominoes in Other Industries

911: an Economic Attack inNature Instead?

New York City as the International Economic Capital Shanghai Vs Beijing Casablanca Vs Rabat

The Target of 911: The American Economy Only? The Capitalist System? The Trend of Globalization/

Americanization?

Economic Failures Can be Remedied by Political/ Military Means?

PART IV Financial War

against Terrorism

Bush Doctrine to the Financial World

Bush Doctrine: You are either with us, or with the Terrorists

US Office of the Treasury Secretary of the Treasury: Paul O’Neill (2000-2002) John Snow (2003-)

20th Sept 2001: Freeze Assets of all Terrorists, Launched the Financial War against Terrorism Financial Capabilities of Al-Qaeda [refer to L28] Bush Doctrine Also Applied to the Worldwide Economic Sectors,

inc. Hong Kong

Further Blow to the World Economy?

Frozen Direct Assets andInvestments of Terrorists

The Family Network of Laden + Al-Qaeda

Rich Terrorist Families and their Supporters All Suspicious Assets Frozen

All Suspicious Assets and Investments “tied” to the Terrorists Frozen, including Donations from Millionaires in the Middle East

Challenge against the “Money Laundry Havens”

“Money Laundry Havens” Central and South America (Paraguay, Bahamas, Bermuda,

etc.) Flexible Laws Disregarding Origin of Money Reasonable Tax to attract Venture Capital A Possible Venue of Money-laundering Activities by Terrorists USA Froze All Suspicious Assets in the Pan-American Backyar

d Hong Kong Followed the Example!

Challenge against the International Creditable Banks

International Creditable Banks: Keep Top Secrets for Clients in Exchange for High Service Fees e.g. Switzerland: Principle of Neutrality

911: International Creditable Banks Harbored the Possible Capital to Actualize Terrorism

USA Forced International Creditable Banks to Disclose Customers Information

Economic Ways to Fight Back:Assigned Readings

Main Text: Martin Baily: “Stirred But Not

Shaken – The Economic Repercussions” (H&R P.269-282)

Supplementary Text: US Department of the Treasury:

The 2001 National Money Laundering Strategy. Sept 2001. (Financial Measures against Terrorism Website:

http://www.usconsulate.org.hk/usinfo/terror/2001/ml2001.pdf)

Conclusion – Future of the

“Pure Financial Cities”

The American Achievements

Successful Measures to Prevent Large-scale Terrorist Activities

Clearance of Suspicious Money Once-and-for-all

Further Interference of the Worldwide Economy

Breaking the Separation of Spheres between Politics and Economy

Possible Side-effects of the “War”

Politicization of the Financial World Order Can you do business with the Muslims?

Degradation of the American Image as a Free Trade Sponsor Weakening of the US Position in the Finan

cial Organizations Logical Handicap of the Bush Doctrine:

Legitimate Merchants Being “Pushed” to the Terrorist Side in the Financial Front?

Example of the Islamic hawala System

Implication of the Swiss Entry intoUnited Nations

Switzerland: Neutrality since the Thirty Years War

(1618-1648) Neutrality during WWI, WWII and Cold

War International Financial Center,

International Creditable Bank… 911: First Test of its Neutrality 2002: Joined United Nations

Possibility of Neutrality in the Future…

“Hong Kong is a Commercial City Only”?

Impossibility of Separation of Economy from Politics after 911

Tung Chee-wah, Chief Executive of Hong Kong: Hong Kong is a Commerc

ial City Only I don’t like politics……

New Lecture #34 – Anti-Terrorism and Hong Kong

~~The End~~

Thank you for attending