After the Iraqi war people stopped talking about ideals. The ideals "Freedom" and "democracy" were so compromised by the negative reports about the Iraqi war, and the ensuing global financial crisis dealt a severe blow to the efficacy of the "market economy".

Thus all modern civic norms, which constitute the foundation for industrialized society, were discredited, and the world has lost meaning.

But instead of futile cynicism isn't it time to restore the civic ideals, which still hold true as the ultimate goal of social and economic development?

Below is my article which was published in the latest issue of "Japan Economic Review".
I wish you all a Happy New Year! Akio KAWATO

Three principles for modern society
The rise of China and the decline of the United States are currently well-publicized. However, I feel that both are exaggerations. China's development cannot go any faster than the speed of the transfer of wealth from developed nations as long as China's development is largely driven by exports. Likewise, it is extremely unlikely that the United States would fall down from the status that it enjoys now as a superpower unless a great war occurs.

The world as a whole is gradually becoming wealthier as multinational corporations shift their production sites from one country to another around the globe, searching for cheaper labor. This global process of drastic expansions in productivity, in other words, the industrial revolution that started in the United Kingdom, is still apparent.

In that process, growing nations and "former" developed nations are comparing their strengths, or those who had been ruled are getting back at those who had ruled them. Competing endlessly under the framework of "nations," however, will be of no one's interests. This is because unlike the age of imperialism in the 19th century, when a war machine called a "nation state" was devised and nations fought fiercely for colonies (i.e. monopolistic overseas markets) by collecting taxes and mobilizing troops, the role of nation in the post-war world, where free trade is guaranteed to some extent, is largely geared toward ensuring the welfare of its people, rather than engaging in war.

As a result of recent attempts to impose democracy by forcible means, some developing nations, shunning interference by Western countries, have withdrawn into their "traditional values." Talking them into the importance of human rights or people's liberty would only result in receiving sniggers. Neither is it persuasive enough to talk about the effectiveness of a market economy when the world is facing an economic downturn.

Yet it sill holds true that liberty, democracy, and market economics have been established as the three principles to ensure the rights and welfare of all people as is the case in the United Kingdom since the 17th century, when economic and living standards improved, liberating the people from an excessive reliance on territorial connections and bonds of kinship, and submission to them.

John Locke argues that men have a right to protect their own liberty as well as the liberty of others. Jeremy Bentham discusses "the greatest happiness of the greatest number." Adam Smith advocates the principles of modern market economics, in which supply and demand come into balance even in an impersonal market, which is not driven by negotiation transactions, but by the invisible hand. These theories have formed the foundation of modern civil and economic societies.

It is true that some of these theories are hypocritical, but at least they guarantee the rights of independent individuals. Such assets as factories and banks, which bring about wealth, are indeed under the control of oligopoly capital. Yet competition is indispensable for their survival, and the government redistributes their wealth to general voters by means of corporate taxation and social welfare.

Significance of the rise of China
The rise of China will probably steal the scene again this year. Given that China and India were major players in the world economy until the first half of the 19th century, it is no surprise even if they regain their status now that the age of colonialism is over. Rather, it is something to be congratulated heartily that the peoples of China and India are finally coming to the end of the hardships they have endured for many years. The entire world would benefit from the expansion of domestic markets in these two countries. That said, I wonder if the world does not expect too much of China, forcing it to play an over-sized role.

Credit-rating firms' guaranty, or rating, has become an essential part of a mechanism in which sub-prime loans had created a great bubble in the economy. The same goes for the Chinese economy; is it not true that global financial and research institutions had made money by talking up the Chinese economy in an excessive manner to inflate stock and bond prices, which in turn attracted investors around the world, resulting in another hike in prices?

A recent survey shows that nearly 40% of the people in the United States believe that China has already become the world's largest economy. They are the victims of the propaganda conducted by their own countrymen.

Strange things are happening because people in mass media and academic circles, without examining it, write articles and papers making recommendations based on an exaggerated perception of China. For example, some people started to think that world affairs can be determined solely by the G2 - the United States and China; others propose leaving Asia to China (now, let us think of rebukes that would be elicited from other countries, had Europe been left to Russia or Germany); and some European countries have already shown their willingness to play up to China for economic interests.

As Premier Wen Jiabao of China told President Barack Obama of the United States last November that China, with many domestic issues, is still a developing country and thus has its limits in leading the world with the United States. And yet an increasing number of people in China, who are taken in by the chorus of "China as number one," humiliate foreigners unnecessarily by acting like a superpower.

Revive the meaning of the world
It is no good forcing values on other nations. The Obama administration commits the United States to no longer forcing their values on others. Still, it is important for the world as a whole to reconfirm this point: the ultimate goal of economic development is not to secure the interests of leaders and oligopoly capital, but to realize the rights and welfare of all individuals.

The world must be united as one in tackling environmental pollution and shortages in resources and water, issues that a global economic development has brought about. All cultures are equal and relative. The rights and welfare of individuals, however, are not relative issues. I wish for 2010 to be a year to re-examine the meaning of economic development and values serving as the starting point of modern society, overcoming cynicism and lapses of confidence.