Sunday, June 08, 2008

China’s hold on US a market illusion

I seem to have wasted a great deal of time in the past few months, on other blogs, debating with conservatives about the cause of the current hold China has over the US. It’s largely economic/trade based and the conservative tendency is to blame Clinton (the cigar Clinton).

I take a broader view of economic cycles and maintain the trend began with Reagan, at the very least, even though Reagan himself was an avowed trade isolationist. A president is still only part of a much larger machine. But blame is only relevant in recognising and fixing a problem, which is why I’m recognising wasted time.

I sometimes complain that the ‘experts’ are delinquent in not seeing economic dramas before they suddenly unfold. Though I suspect the reality is that we are market driven and the economic Jeremiahs are drowned out in the process. The China hold on the US and world economy could well be another of those market illusions.

The way I’m seeing it is that to gain its threatening position China had to become an integral part of the world economy. To do that it had to become dependent on growth resources like the Western developed economies have been for so long. Incidentally another massive market, India, has developed at the same time.

China has 19.85% of world population, India 17% and the US a paltry 4.56%. If the US and already developed economies were straining available resources, where are well over 35% of the worlds population suddenly going to find them?

Certainly the world is in for a major shakeup, but I doubt China will have any real ability to threaten the US or any other economy. On the other hand the rest of us really do need to look at how we are going to restructure our lives. The fact is, the earth simply can’t provide our growing level of demand.


abi said...

I agree that there's an interdependence between China's economy and ours. Even if they had the ability to significantly harm ours, why would they want to?

But the danger China represents is simply in its huge and rapid growth, gobbling up resources at an exponential rate.

I think the world is in for a wild ride later in this century.

Cart said...

Abi, I agree entirely. It was some conservative US bloggers started the train of thought. Rudd has already shown the difficulty for China to flex its economic muscle, and I'm sure they'd rather not risk the value of their US debt.
The real concern, as you say, is that if fewer than 10% of the worlds population were stretching resource availability it won't take much of that bigger pool to break it.

lindsaylobe said...

I think the world has watched in amazement the huge growth spurt by China, particularly in the past decade which has been at rate of almost 4 times that of the developed world. Post Mao there has been a dramatic improvement in economic conditions, from poverty and terror to hope as growth has fuelled a recovery in the west in both commodity prices and traditional industries which were severely under invested during the unsustainable dot com boom of the Clinton era. But this more recent boom over the past decade in imports from China has caused severe dislocation in many industries particularly in the manufacturing heartland of the USA which has become desert land.

At the heart of the problem is our present trade agreements currently don’t include provisions for dislocated workers to be trained or engaged in alternative industries; there needs to be a significant improvement in planning if all are to share equitably in the benefits of globalization. Worse still some of the work undertaken by China is in a sub standard environment for safety; poor conditions as some peasant workers moving to the cities are exploited. So the free trade agreements that promise much must have inbuilt buyer ethical standards for the respective countries.
The economic question to ask is where all of this heading is and is it in the best interest of the world at large?
The responsibility of those involved in trade is to ensure ethical and human rights responsibilities to the respective countries. Providing these safeguards are included the benefits in free trade will represent a significant overall benefit. The alternative is to regress to trade blocks and tariffs, which lead to declines in growth and prosperity and bring economic misery.
So far the scorecard is a mixed bag.
China is opening up to the world and basic freedom of speech is improving. Human rights abuses continue. Employers don’t always take responsibility for the employees as we would be accustomed and reports confirm of situations where the average construction company worker in the cities is owed 2.5 months wages. Many simply give up and walk off with nothing. Large scale pockets of unemployment exist despite the booming conditions. There is no effective legal system or basic human rights. The remnant of Mao remains, and it appears a long road ahead, with some progress and an opening up of ever increasing access to other countries.

Despite its impressive growth nearly 50% of its population remains as peasant farmers on very small incomes. But that aspect is changing rapidly as agriculture becomes more productive and is accompanied by a huge migration of workers to the cities. As china has a population of 1.3 billion we are indeed fortunate she does not consume in the same unsustainable manner as the westernized advanced economies, for if that was the case we would need another 3 universes to meet her requirements. Hopefully China will not follow this disastrous route. Even so the accelerated effect can be gauged by the daily increase in motor vehicles with 55,000 new licenses issued every day!!

China currently has engaged a number of world experts on urban planning to assist with a project to construct 300 new sustainable cities. Each to house over 1 million citizens, ensuring all is self sufficient and sustainable, with no need for cars.
It’s a mixed bag, these are some of my thoughts, but there is no doubt in my mind in the next 50 years China will eventually emerge as a super power. This may well be of great benefit to all.
best wishes

Kvatch said...

The fact is, the earth simply can’t provide our growing level of demand.

...and no matter how you rationalize the result, the Earth has this nasty habit normalizing the situation.

Cart said...

Sorry I've been a little delinquent of late. rebuilding the computer and dealing with insanity seems like a fair excuse.

China sure is the herd of elephants in the room, with India. I can't say I believe they don't have a right to claim some of their share of the illusionary wealth, we've been doing it long enough.
But Kvatch, your eloquence and brevity really sums the plight up well. Good old Mother Earth works withing the limits.