Worth deeply noting: China is about to join the cascade of international contractions, and in a starring role. The Washpost reports:
"The impact on China, one of the rare lights in an otherwise gloomy global economy, is particularly troubling. Beijing announced yesterday that its November.... imports [fell] 17.9 percent.... growth there is slowing to its lowest level since 1990."That is, under 4%. Whoa! Recall the brass-band talk in our elite press about the great Han stimulus package a month back? The boys in Beijing rolled out a plan equal to "...roughly 7 percent of its gross domestic product," in each of the next two years, "to construct new railways, subways and airports...."
Yup, tons of infrastructure shit. Sounds bold, eh? It's like Uncle spending a trillion a year for two years. On "railways, subways and airports." Man, that would be the day, wouldn't it?
Less than meets the eye here, alas. Once you shave off the stuff already in the hopper, and compare this plan to China's looming output gap, it won't be nearly enough, by my estimates or anybody else's.
China needs to force back through the system more like 30% of its GDP (yes, 30%) and it'll need to be in additional household spending.
The problem is that even if it wanted to, China, like Hooverian America circa 1930, doesn't have a personal income tax, or sales and property tax system combined, big enough to pull off that large a rebate.
Now of course the system has at present a fiscal surplus; hence the ease with which bold increases in infrastructure spending can be financed. But there are 750 million peasants out there waiting.
The export sector is the culprit, of course. Formerly able to suck up Gargantuan piles of surplus workers and a massive (40% of GDP) accumulation of surplus funds, now it's like a Keynesian nightmare over there. No one ever on earth has seen an economy this size, moving this fast, hit this hard of a wall.
It ain't likely to end well.
The great unanswered question: why didn't the ever so modern and clever economic authorities over there see this coming, and begin to switch over as much and as fast as possible to domestic-driven growth, maybe 4 years ago? You know -- get household spending up from under 50% of GDP to say 65%; create a safety net; a tax and transfer system; etc.
I have some ideas on this subject, but they'll have to wait for another post.
Comments (5)
I don't know, but I can guess. Once you start acting like a modern and clever capitalist, you become one pretty quickly. And that means hating labor with a fury.
Posted by Al Schumann | December 13, 2008 12:08 AM
Posted on December 13, 2008 00:08
al
i propose a toast:
to the class struggle
and its ever re-emerging
from its own asshole
Posted by op | December 13, 2008 7:53 AM
Posted on December 13, 2008 07:53
OP -- keep these observations coming! Good to see ol' SMBIVA kicking again!
My explanation for China's failure to anticipate the collapse of its export economy is that few people/managers will walk away from a good thing in the midst of it. Just like the US financial managers who knew they were buying crap securities but couldn't stop because they'd "lose market share", and meanwhile they were getting great bonuses.
Posted by seneca | December 13, 2008 12:35 PM
Posted on December 13, 2008 12:35
Seneca: the local party-state officials actually responsible for enacting
"development" (sic) policy were offered every licit and illicit incentive to court export-oriented investment, from bonuses to promotions to kickback. The central authorities long saw the manufacturing overcapacity problem looming and more recently tried to do something, but in fact despite popular stereotypes of the PRC as an authoritarian monolith, what Beijing says and does counts for squat in the tens of thousands of enterprise zones and industrial zones carpeting the land (especially the urban coasts). China is a lot more anarchic that most distant watchers recognize!
AS: Yes, the Chinese Capitalist Party fears and despises workers, especially workers who organize and act independently, but it is savvy enough to recognize that winning the game is as much about cooptation as it is about repression. (See recent "labor-friendly" initiatives, e.g. requiring all foreign firms to recognize and bargain with the state-controlled union).
This is the most earnest contribution I've made in months to SMBIVA... what the hell was in my oatmeal this morning?
Posted by gluelicker | December 14, 2008 12:41 PM
Posted on December 14, 2008 12:41
"and begin to switch over as much and as fast as possible to domestic-driven growth, maybe 4 years ago?"
i think the answer is that it's still, despite all the growth, a periphery economy for the u.s. and europe. russia was the same way till the revolution and is the same way again now...
Posted by dermokrat | December 14, 2008 9:21 PM
Posted on December 14, 2008 21:21