A Chinaman’s Chance

A politically-incorrect description of the economy

© Bryan Zepp Jamieson
http://www.zeppscommentaries.com/Sociology/chinaman.htm
3/30/08

With all the bad economic news that’s been going around, I thought I might mention that there is a bit of good news, a faint beam of hope that might save America’s economy from imploding.

Of course, this good news involves untold misery for billions of people, and quite possibly such things as mass starvation, war, and revolution, but in economics, that’s considered good news.

Now you know why they call it “the dismal science.” It’s still not clear why it’s called a “science” of course, since most economists are about as well equipped to provide a solid analysis and build a model of what we can expect as your average psychologist or diviner of chicken entrails.

One other caveat: when Wall Street types talk about economic good news, that doesn’t translate into a wage hike for you, or even 10% off on beets at the local market. In fact, it usually means that you’ve been made expendable, and your role, if any, is that of “fodder.” If you’re lucky. More than likely they’ll make the water boil by setting fire to you and stuffing you under the pot.

So when I say “good news,” you might want to take that with a grain of salt. Starvation, hopelessness, despair. That type of good news. Okay?

Okay. Now for the good news.

The American economy might be saved by the fact that the Chinese economy is a huge bubble, and it’s going to pop, sooner rather than later.

I’ve been watching the BBC series on China that has been broadcast for the past few nights, and there are a number of factors at play.

First, there’s the increasing concentration of wealth. The huge economic boom of the past twenty years in China has left nearly 80% of the population behind. That would be over a billion people. Bad enough that they aren’t any better off than they were in 1985 (although indisputably better off then they were at any time prior to that), but they are losing ground as the price of food commodities and other necessities, driven by inflation and industrial depredations on the land, take their toll. The price of rice world wide has doubled this year, and that includes China.

The industrial depredations are more startling. Between the vast Three Rivers Dam project and dozens of other huge projects, China is basically revamping the entire geophysical face of their country, and in most cases the changes are not for the better. Millions are being uprooted and tens of millions more have to deal with the changes in local climate, pollution, and other side effects of the industrial expansion. One village is being torn down in order to build a planned city for 3 million people. The villagers will get barracks on the outskirts to live in.

But there are ever-increasing demonstrations and even riots because the pollution is so bad that it’s killing the children. And the government is being forced to listen to those complaints. Everyone knows about how bad the air is in Beijing, and the heroic measures they are taking just so the air might achieve passable levels of cleanliness. Outside of Beijing in the other huge cities, it’s far worse. One friend who travels there frequently (his wife is in China, trying to get a US visa) talks about taking a dozen steps and having to stop for breath. He’s normally capable of putting in a full day at 8,000 feet snowboarding.

Another reason why the Chinese economy might pop is that it’s a mixed economy. Not the type of mixed economy that has worked so well in Canada and Europe, and made America a world power until America abandoned it; this one is the opposite. Government is in the role of corporations, and presses for ever higher productivity and trade. But it doesn’t regulate, which is why Chinese companies take such awful shortcuts. When you make toothpaste, and are under orders to make a certain amount of profit or go to jail, you find shortcuts, like saving money by using antifreeze as a sweetener. Or use a lead-based paint on baby cribs. In other words, China combines the very worst elements of a controlled economy and an unregulated economy. An economy like that can make a country develop rapidly, but it isn’t sustainable. It will implode, much like the Soviet Union’s did in the 1970s, and for much the same reason.

There are other factors. China is losing its best customer. Americans are rightly suspicious of the safety and quality of Chinese goods, and since the Chinese can’t keep pushing down the value of the yuan so exports to America remain cheap in America, the resulting inflation, coupled with the already-existing rise in food prices, will lead to further unrest in the urban areas. If they let the yuan float, not only does that cut into exports to America, but it devalues the nearly $1.5 trillion in bonds and other notes the Chinese hold in the form of American currency. That foreign holding makes up a sizeable chunk of the creditworthiness of their own economy. If the dollar falls, they eventually fall with it.

Aside from Canada and Europe, America doesn’t export much these days, but other countries need America as a customer, and will try to prop up the American economy. This is particularly true of the oil producing states such as the UAE and Saudi Arabia. Their holdings of US debt dwarf China’s, and they lose their shirts – not to mention security for their oil operations – if America falls enough to cease being a world power.

So the world, for a variety of reasons in a variety of areas, has vested interests in finding ways to keep America afloat and solvent despite itself, and will do a lot to make sure of it.

Now, how does that help you?

Well, it doesn’t. Oh, granted, a complete economic collapse would translate to cities in flames, rival gangs vying for control of areas, cannibalism and nothing on TV, and that’s probably worse than what the movers and shakers in government and in Wall Street have in mind.

They want to save their asses, and they expect you to do your patriotic duty and sacrifice yours so they can avoid having to pay for all the screwups and little (ok, big) malevolent deeds they have committed whilst parceling out the American economy and treasury for their personal gain. So they will be expecting you to work for double what you make now. The only problem is that the dollar will only be worth one twentieth what it was, so you’ll be making $60 an hour and a loaf of bread will be $60. They WANT inflation, because it decreases the burden of the debt. Even with 6% interest, a million owed in 2008 is going to be a heavier load than a million, one hundred and thirty thousand owed in 2010, when the dollar is worth less than half what it was, and less than a quarter of what it was in 2006.

It also masks the effects of the economic depression. I’m sure your eyes lit up when I said your pay would double. “Economic output” will increase because it’s measured in dollars, as is “economic activity.” Think of inflation in this economy as being about the same as using cocaine to treat a terminal cancer patient; he may not get any better, but he’ll FEEL better.

But at least the Chinese are looking out for you.

They have nothing but your best interests at heart.