by Lyndon H. LaRouche, Jr.

Date: September 21, 1998

     Under the program of economic reconstruction which was
launched during the period of U.S. General of the Armies Douglas
MacArthur's official residence there, Japan launched a model
economic policy, which came to rank among the world's most
respected post-1945 achievements in post-war economic
reconstruction.  Later, during the 1970s, Japan began to come
under intense pressure to reverse and destroy its economic
achievements, pressures prominently including those from a
notorious duo of U.S. national security advisors: first from
Nelson Rockefeller's "Tweedledum," Henry A. Kissinger, and then
David Rockeller's lackey "Tweedledee," of Carter Administration
days, Zbigniew Brzezinski.

     In a Japan play on the words "Rockefeller" and the Lockheed
aerospace firm, one of the key, internationally orchestrated
intelligence operations used to break Japan's political will, was
sometimes referred to, with a touch of bitterness, as "the
Rockheed scandal." This was the model for the allegations of
corporate bribery used to break Japan's 1970s resistance to a
U.S.-dictated beginning of a long-term, downward turn in its

     Those developments of the 1971-1982 interval, led into
Japan's financial crises of the 1980s. During the 1980s, with the
Plaza Accords, and the later misdirection of Japan into large-
scale derivatives speculation, the bankruptcy of Japan's
derivatives-drenched, financial and monetary system, has become
today's principal immediate threat to bring down the entire
world's financial and monetary system.

     The final blow to the sanity of what passes for Japan's
youthful financial elites, and the immediate cause of the
presently ongoing collapse of Japan's banking system, was Tokyo's
capitulation to the present phase of derivatives speculation.
This phase of Japan's ruin, was introduced to it by major
financial interests of London and Wall Street, beginning the
international political crises which accompanied the fall of the
Soviet system, during 1989-1991.

     The question is, shall Japan save the baby, or the dirty
bathwater, Japan's healthy industrial economy, or the worthless
banks? There is but one sane answer to such a question.  Accept
the fact that the Japan has been lured into financial bankruptcy.
Put Japan's financial system through action resembling a mid-
1920s "Dawes Plan"-style of drastically purgative bankruptcy
reorganization. Do this under new laws of the U.S. "Chapter 11"
type; and, use a financial reorganization akin to Germany's
highly successful post-war reconstruction, through the
Kreditanstalt fuer Wiederaufbau, to return Japan's economy to
the export-oriented, pre-"Rockheed scandal," industrial export
policies of the pre-1971 period.

     The reasons for the economic successes of the earlier part
of Japan's post-war decades, ought to be well known.
Unfortunately, for most of the relevant, economics-illiterate
specialists of that younger generation dominating Alan
Greenspan's Wall Street, Toyko, and many other centers of the
world's economic-policy-shaping, today, even the most elementary
facts of Japan's earlier achievements are beyond their
comprehension.  It is indispensable that those younger fellows be
sat down, to be told a few elementary facts of economic life.  If
they refuse to learn, they must be set aside, replaced by saner
minds.  Rude?  Perhaps, but such are the facts of real economic

     Here, we lay out the most crucial features of a Japan
economic-recovery plan, step by step.  We begin with a fact which
any graduate of a decent U.S. elementary school would have
learned in earlier decades, as a geography lesson.  Japan is an
island nation, of whose total land-area only a small fraction is
economically habitable for much use but that of a watershed and
scenic recreation-areas.  Even to meet the most elementary
requirements of its population, Japan requires imports of food
and raw materials, imports which can be secured only through
earnings from Japan's high-technology exports.

     In modern times, only two types of industrial exports could
serve as a source of income to offset Japan's import
requirements.  One is high-technology, machine-tool-design-grade
industrial exports of capital goods; the other is export of heavy
engineering capabilities into large-scale infrastructure programs
of nations of the world lying, principally, to Japan's south.  On
both counts, "Go south" is the key to Japan's long-term economic

     To understand the role of U.S. National Security advisors
Kissinger and Brzezinski in ruining Japan's excellent economy,
take two model cases from the 1970s: Iran and Mexico.

     In both cases, the growth policy had been based on the
concept of oil-for-technology packages.  Kissinger and London
played the leading roles in shutting down Japan's role in the
economic development of Iran; the Carter Administration's
Brzezinski, together with the Reagan Administration's advisor
Henry Kissinger, played key roles in shutting down Mexico's
development plans.  As Kissinger's and Brent Scowcroft's
notoriously racist population policies (e.g., NSSM-200) of the
mid-1970s show, and as the racist population policies of the
Trilateral Carter administration (e.g., Global 2000) also show,
the intent, in both cases, was not only to wreck the economic-
development prospects of the oil-exporting nation, but, also, to
ruin Japan's industrial economy.

     In opposition to the exemplary, ruinous demands by the
dubious duo of Kissinger and Brzezinski, the best pro-growth
policy of Japan was one sometimes described as Japan's vital
interest in a "knowledge-intensive export" orientation toward
nations, principally, to the South.  This meant upscaling the
productive technology of Japan's customers, using proven Japan
technologies for this purpose. There were often moral flaws
within the way in which the "knowledge-intensive export" policy
was defined in practice, but, with a bit of fixing, it represents
the natural mutual interest of both Japan and its relevant
current and prospective trading partners.  Very significant, is
that this notion of "knowledge-intensive export" was a Japan
conception, not, like Tokyo finance's lunatic, suicidal rage for
derivatives speculation, something dumped upon it by some
shallow-minded U.S. or British "wonk"-pack.

     It is an enhanced version of the "knowledge-intensive
export" orientation on which we concentrate attention here.

                     {The Recovery of Japan}

     Japan's late-Nineteenth-Century emergence as the leading
industrial nation of Asia, was the result of the success of U.S.
President Abraham Lincoln's administration, in defeating the
British puppet, the Confederate States of America. That strategic
victory, and the 1861-1876 U.S. industrial revolution, which
established the U.S. as the world's most powerful, most
technologically advanced national economy, persuaded the authors
of Japan's Meiji Restoration to adopt the American model. As in
the case of post-1877 Germany, and Czar Alexander II's Russia, it
was the U.S.A.'s Henry C. Carey, the world's greatest, and most
successful, living economist of that time, and Carey's
representative, E. Peshine Smith, who led these and related
efforts to spread the U.S. agro-industrial model into Europe and

     Until the present outbreak of Japan's banking crisis, the
origin of Japan's greatest misfortunes during this century, has
been its recurring alliances with Britain, against the U.S.A.
Such an alliance came into the open with the launching of the
first Japan war against China, 1894-1895.  This grave error in
Japan's policy, which included its conquest of Korea, was
followed by the de facto British-Japan alliance in the Russo-
Japanese war. During this period, until 1945, Japan remained,
strategically, either an anti-U.S. ally of London, or, despite
Britain's nominal anti-Japan alliance with the U.S.A. during
1941-1945, a British strategic asset, or gambitable pawn, against
the U.S. and U.S. China policy in Asia, until the close of World
War II.  The origin of the war-plan for Japan's December 7, 1941
attack on Pearl Harbor, for example, was as a by-product of a
Japan naval alliance with Britain, against the U.S.A., beginning
the period immediately following World War I.

     Nonetheless, the combined influence of Germany's world
leadership in science and the U.S.-modelled industrial
development of Germany, upon Japan's science and technology,
remained strong.  The famed, World War II Japan "Zero" fighter
aircraft, was a reflection of the same Riemannian tradition of
Prandtl et al. otherwise exhibited in the Peenemuende aerospace
programs of the 1930s and 1940s, the same German tradition which
later supplied the U.S. its first, post-war success in jet-
powered supersonic flight.  Similarly, Japan's naval development
throughout the late Nineteenth and early Twentieth Centuries,
prefigured much of the successes of its post-1945 development of
heavy industry.

     In Japan, as in all cases of economic development of nation-
states, success rests upon a combination of several leading
social and economic factors.  First, either to prevent, or to
break, or at least greatly tame the power of any feudalist land-
owning class. As the history of modern Europe since France's
Louis XI, demonstrates this forcefully, and repeatedly, this
anti-Yahoo shift in political power is indispensable for the
kinds of social policies, especially in education, needed as
preconditions for developing the productive powers of labor.

     The type of educational policy which has proven itself
fruitful on this account, is a policy of universal education
modelled upon the precedents of such European teaching orders as
the Augustinians, Franciscans, Brothers of the Common Life, and
Oratorians.  The successes of these teaching orders supplied the
origins of programs of Classical humanist public education later
introduced into North America and Europe.  The methods of the
Brothers of the Common Life and Oratorians are of particular
urgency for producing a population which is efficiently competent
in the assimilation, development, and application of science and
technology.  Such educational policies presuppose a corresponding
--no Yahoos!-- social policy of practice respecting {all} of the
nation's family households.

     The remaining essentials of a successful economic policy,
are to be taken from the lesson-books of U.S. Treasury Secretary
Alexander Hamilton and the followers of France's Lazare Carnot.
Without the aggressive, centralized development of large-scale
basic economic infrastructure, of a type which could not be
accomplished without direction of the government, no general
economic development is possible.  There can be no progress in
the productive powers of labor without capital-intensive, power-
intensive modes of investment in scientific and technological
progress. There can be no adequate rates of scientific and
technological progress without a relatively large-scale sub-
section of industry devoted to transforming forced-draft
fundamental scientific progress, into the proliferating
application of improved machine-tool technology.

     Without these combined measures, there is no possible source
of a sustainable, net national economic profit, excepting by
looting and stealing, as the British financier oligarchy and its
brutish "free trade" system have done for centuries.  Japan has
all the internal essentials, and also the market opportunities,
of a national economy with the required qualities.  The task of
rescuing Japan from self-induced financial suicide, now, is, to
translate that potential of Japan into the required results. The
best industrial practices of pre-Kissinger, pre-"Rockheed
Scandal," post-war Japan, provide most of the needed examples to
be applied.

                       {The Global Setting}

     The indicated economic reorganization of Japan matches the
objective potentials to be found in such places as its relation
to China, and to the nations of the Asia side of the Pacific and
Indian Ocean rim, in particular.  Admittedly, at the present
moment, these are only possibilities.  To realize such potentials
for both Japan and its trading-partners, would require a new
international financial monetary system, one with many
similarities to the Bretton Woods and related arrangements of the
pre-1958 period of global, post-war economic reconstruction.

     Obviously, both sets of remedial action, those internal to
Japan, and those in the realm of international relations, must be
coordinated, essentially simultaneously.  Here, on this account,
the President of the U.S.A. and his Treasury Secretary, Robert
Rubin, are indispensable for the survival of Japan, and for
civilization in general.  Some may not be pleased to hear those
facts, but these are the facts. Reality can be very cruel to
those deserving fools, like the Biblical Belshazzar, who refuse
to face the warnings presented by such potentially apocalyptic

     On both sides, the American System of political-economy,
which formerly served Japan so well, must be the standard of
reference for the measures of reform to be instituted now.  If
precisely such reforms are not imposed on international
relations, and that very soon, this planet will assuredly flop
into the collapse of civilization, that "new dark age" which the
backers of U.S. special prosecutor Kenneth Starr are threatening
to bring about.

     The area in which Japan may find its greatest trading
potentials, represents more than half the population of this
planet--not exactly a poor market to have.  Moreover, as the
recent and continuing rate of economic growth in China shows, the
entire area, allowed to do as Malaysia's Prime Minister Mahathir
bin Mohamad illustrates the point, is an area of the relatively
greatest potential, as measurable in rates of net physical-
economic growth.  Japan's principal market sectors in this, and
other regions of the world are concentrated around the
specialties of heavy engineering and frontier-technology capital

     This is the same area which Japan shares with the currently
waning machine-tool powers from the past: the U.S.A. and Germany,
most emphatically, and also shares, potentially, with the
machine-tool potential of the former Soviet Union's military-
scientific-industrial complex.  The principal means for uncorking
this potential is peremptory action by a group of nations
(whether or not the British Commonwealth accepts this), to
establish a new, protectionist, dirigist international financial
and monetary order modelled on the precedent of the pre-1958
Bretton Woods system.

     By bankrupting, and, usually even simply nullifying, the
monstrous, cancerous accumulation of speculative financial paper
choking the world economy today, we may declare the Jubilee, give
anguished humanity a fresh start, and launch long-term credit
emission for those heavy-engineering and machine-tool-grade
capital goods needed to bring about renewed net physical-economic
growth world-wide.  As a celebrated wise man once said of the
1929 stock-market collapse, "It is only paper."  Let it go;
reorganize the world's finances; and, get back to the business we
used to be in, before that orgy of "post-industrial" and
monetarist lunacy which was unleashed approximately thirty-odd
years ago.


                      LEADING DEVELOPMENTS

[Source: {Kto yest kto}]
latest issue of the Russian periodical "Who is Who," published in
Moscow, has a four-page article on Lyndon LaRouche, subtitled
"The battle against monetarism on a global level." The article,
by Prof. Taras Muranivsky, is illustrated by a nice picture of
LaRouche speaking at a conference, and is followed by a selection
of pithy answers from LaRouche to questions from the magazine's
editor. Details to follow. [RBD]

[Source: Wen Wei Po] WIESBADEN Sept. 22 -- "HEDGE FUND
Sept. 15.
        "As the Asian financial crisis has escalated under the
hedge-fund attacks, developing countries concerned have seen
foreign exchange reserves drained, stock markets plummet, banking
assets eroded, national assets plundered, or national economies
landed in a long-term recessions overnight," stated the
editorial. From Russia, the hedge funds have now turned to attack
Brazil. "It can be said that the U.S. backyard is on fire at the
moment. Under such circumstances, Hong Kong started enhancing a
sense of economic and financial security and tried in every way
to avoid becoming food for financial sharks,"  wrote.
        Financial Secretary Donald Tsang has described hedge funds
as "financial terrorism," and said that hedge funds, totalling $3
trillion at the moment, could now manipulate the world's
financial markets. Should they grow to $30 trillion by borrowing
loans and launch an attack on a small-sized economic system,
Tsang said, no medium-sized countries in the world would
successfully withstand such an attack.
        Hedge funds could enter and leave a market as they please,
create a bubble, and pull out. Tsang said that there are only two
ways of fighting against hedge funds,  reported:
either having a national finance is 'as strong as the Wall Street
stock market or the European currency alliance'; or if a country
decides to tighten financial market control, block financial
market loopholes, or adopt new foreign exchange market, stock
market, or futures market management measures.
        Tsang will now make a tour of the U.S., the U.K., Germany,
and the Netherlands to describe why Hong Kong had adopted its
"seven regulations and 30 measures." He will also discuss the
hedge fund attacks with central bank presidents and finance
        "It is indeed a miracle that Hong Kong has remained the only
region in the world boasting a stable exchange rate despite four
successive attacks by hedge funds,"  wrote. "We
believe that developing countries will also advance measures of
exploring ways and means of fighting against hedge funds and call
for straightening out the global financial order at the upcoming
        The editorial then stated that, of this "$3 trillion hot
money, only 3% has gone to production development, whereas some
97% has gone to speculative activities.... "once a market gets
out of control, the world will see a worldwide financial
        "Financial disorder has already undermined many countries'
political stability and threatened the world peace and
development as a whole.... Given this, finance ministers and
central bank presidents the world over have decided to hold a
rescue conference within 30 days to discuss financial problems
and economic recessions faced by many countries in the world."

[Source: {Utusan Malaysia}, Kuala Lumpur, 9/22/98]
International Organization of Securities Commissions, led by
Malaysia's Security Commission, issued a report last week, which
states that recent events have meant that "the conventional
wisdom that has justified the manner in which the international
financial system continues to operate" is increasingly subject to
challenge. {Utusan Malaysia} cites a press release on the report,
which reviewed general supervision, regulation and transparency
of international financial activity. The release says little
about specific recommendations, but says the study addressed the
"asymemetric standards of disclosure and transparency that exist
for different market participants," particularly international
investors, and advised that all relevant supervisory agencies
need to understand "from where systemic risk arises, and work
together in ensuring that the financial system remains secure,"
{Utusan} reports. 

[Source: {The Nation}, Bangkok, 9/22/98]
FOR OVERHAUL OF IMF, WORLD BANK. Pointing out that he has been
saying this since the beginning of 1998, Supachai Panitchpakdi
took advantage of Tony Blair's NY speech to underscore the need
for global reform. He identifies as the most important issue, the
financing of trade in goods and services, pointing out that such
trade accounts for only 3-4% of the US$1.5-$2 trillion in foreign
exchange trading daily. 

[Source: {Bangkok Post}, 9/22/98]
WILL "COMEBACK KID" CLINTON RETURN? A guest commentary, written
under the pseudonym "The X File," but attributed to one of
Thailand's leading academics in the area of social and public
affairs, picks up on Clinton's CFR speech and recent calls from
Deputy PM Supachai Panitchpakdi to identify the question of
leadership to pull off a successful extraordinary global economic
summit. The difficulty, the author says, is how to enforce any
decisions that might be reached at such a summit. Clinton may
have suggested a way out if leading industrialized nations,
motivated by sufficient shared urgency, can work in concert to
"avert a possible world economic calamity." U.S. leadership is
"indispensable." Can Clinton pull it off? Despite the Starr
report, and a general perception that his presidency may be
flawed, the American public still give him high ratings, which
"has a lot to do with economic leadership."
        "President Clinton is smart and is not known as the
'Comeback Kid' for nothing.... The famous quotation, 'It's the
economy, Stupid,' made Bill Clinton president of the United
States. Will it now rescue his presidency and allow him to
complete his second term?"