China has a longer way to go to raise their population's living standards. About a BILLION people more to go. What does the West have? Just about everyone has the highest living standards already... the governments are broke.... and entitlements are kicking into high gear. The West is TOAST in terms of growth for the next 20 years. The East will eventually trade amongst themselves. Wishful thinking and quoting Mark Twain aside. Game over dude. All countries cook their books. But which ones have a surplus and who owes whom? That's the final deciding factor.
Here's the rub: China's surplus is a surplus (as a surplus is a surplus is a surplus), but relative to their population size and critical need for infrastructure (and shear number impoverished Chinese), it's not that relevant. Also, China's economic game plan, which has allowed it above normal GDP growth to date, and which shows no sign of abating, is low-cost manufacturer of the world; ask local Chinese how that's working out for them in terms of real wage growth, environmental catastrophe, and astounding restrictions on individual liberty. China has not been an innovator in any single segment of industry or commerce, and I defy anyone to prove that statement wrong. China has a massive challenge at hand of keeping their unemployment rate from exploding in a manner that will make the U.S. unemployment rate look great by comparison. As far as welfare state-ism, it's all a matter of degree; ask anyone in a western society how strongly they feel social security modeled programs, health care benefits, and other governmental assistance in retirement years contributes to their quality of life, and you'll discover that they'd kill (figuratively) the politician that took it away. While balance is key, China has NO safety nets, not for the young, nor for the old. Finally, if the U.S. were to put up barriers to Chinese imports, regardless of what other consequences it would cause, it would plunge China into a full scale depression, so what that does tell you about the state of affairs?
Important point. This is why China needs to keep buying USA debt no matter how big the number. On the flip side, USA also needs China to maintain the status quo.
I don't disagree with anything that you say here. But CHINA ITSELF DID NOT ENGINEER THE TRADE DEFICIT ALONE The tax code was changed in the 80s so that a company that manufactures outside the US does not pay any taxes on the profits if they are sold outside the US. That is why GE has paid NO corporate taxes for many of the last 20 years. I worked in Seattle when Regean was elected. I saw the Rolling Mills next door shipped to China that year. Any US company that exports a lot is much better off at least on paper from the tax perspective and the access to capitol to manufacture outside the US. The problems arises with the "on paper' part. Information is lost in translation and quality control has sometimes been a nightmare. Also Corporate Raiders specialized in taking over US manufacturing firms that were making a profit manufacturing here and transferring manufacturing to China so that the raider could make even more profit. Problems is that for consumer items like washing machines, they put their customers out of work. The Chinese have been willing partners but they did not do it by themselves.
In the grand scheme of things, which country is better off: 1) A country with NO safety net that will eventually start rolling out a saftey net OR a country that has an expensive safety net but no money other than a growingly skeptical bond market to finance it? 2)A country with an already impoverished population that is used to difficult work conditions and sacrifice OR a country with fat lazy people that get the highest salaries in the world. Which country will have a tougher time keeping their status quo? 3) I'll say something outlandish: Innovation means shit. Civilization peaked with innovation. Every subsequent innovaton makes life marginally better than it was 100 years ago. The question is - who enjoys the innovation? What percent of the population? And where would you rather be - in a place where modern amenities are on the upswing or a place where overindebted people that can't afford all the modern amenities they have will eventually revolt when they lose them? America's Government will get more brutish as this economy unravels - mark my words. We don't have a "free" government that repsects human rights. We have a population that is well fed and kept busy. When the population starts losing the lifestyle it's accustomed to - and reacts in violent ways - THATS WHEN YOU JUDGE A GOVERNMENT. Not during peace - but during conflict. Eventually, the US gov't will react to it's population much like China's did at Tianemen Square. China has nowhere to go but up. They will sell things more internally and with their neighbors. The US has to deleverage - to go down.... Where is growth? China. Where is deleveraging and bankruptcy? USA
Clearly you should move to China so that you might enjoy it's benefits. I admire China, and Chinese accomplishments, but I come from a hard scrabble area of the US. Hell we havn't had indoor plumbing that long. There was ingenuity and humor here. There still is. There are guys in the shops here that can hold a +/- .0001 tolerance and be good natured about it. We help each other. We will survive. We will get on with it. We will thrive.
Of course it's commies in China... Try to go there and say otherwise and you might end up in prison. In its nature it's very far from the communism ideals but it's the same leadership - the same people. Who do you think leads China's biggest companies? Enterpreneurs? It's the people who go hand in hand with the government and they do as they are told. You get out of line and you get punished. One reason China is growing so quickly is because it's growing from nothing. And don't forget that it's the western money and hunger for profits from the cheap labor that's feeding that growth. The second reason is that Chineese are incredibly hard working people and there's a billion+ of them. That's why it does not take a genious to realize that China has many great things lying ahead!
for a thread in the Economics column, shouldn't there be a more substantive and quantitative discussion around economics? while a lot of these comments have significant amounts of emotion and frustration and future concerns behind their words, there were surprisingly little quantitative stats used to justify the claims or responses.... just an observation, and just keeping this thread alive/..
I agree with most that you have written but this one point about innovation is just complete BS. Just look around you! Do you think if we rode horses instead of driving that you would be here trading? That you would even be around? Most likely you wouldn't even be born. Maybe give it a second thought and consider how people lived for thousands of years as hunters and gatherers as compared to how we live today.
Reread what I wrote. I said the past 100 years. That includes autos, telephones, plumbing, electricity, light bulbs... I should have said the past 50 years to include TV.