Monday, October 19, 2009

U.S. Recovery Plan - Turning the Chinese into Americans

There have been many stories in the news lately, detailing statements from the U.S. government about the dollar. Statements known as “talking up the dollar” have been coming very frequently from Geithner, Bernanke and Obama. This, of course, is meant to make people around the world believe that, even though they’re doing nothing about it (and are actually making things worse every day), effective policies to keep the dollar strong will come in the future.

However, this strategy goes deeper than that. The U.S. government has now embarked on some pathetically futile strategy to try to change other peoples’ behavior to suit American economic needs. This is very evident in this recent speech by Bernanke, as reported by the NYT:

The problem, in essence according to Bernanke, is that people in Asia, and especially China, don’t spend money like drunken sailors, as is the custom in the U.S.. If the Chinese started consuming their own goods instead of selling them to other countries (and getting rich in the process), then the U.S. could become more competitive on the international arena.

It’s like asking the sports team you’re playing against to bench its best player, in order to make the game more fun for everyone else. How quaint.

The average person might not think much of a statement like “the trade imbalances on the world market are too large, and should be reduced by increased domestic consumption in China”. But it is in its core, a pathetic, vain and useless attempt to deal with the economic crisis in the U.S. by trying to take a non-existent shortcut.

Geithner, Bernanke and Obama know that the U.S. can’t export its way out of the crisis, because American goods cannot compete. If the dollar were to implode, American exports probably would be competitive for a while based on price alone, but the larger implications would unequivocally be irreversible, long-term economic stagnation. So again, the only way to take this shortcut is to tell others to change their ways. Now, how likely is it that that will happen?

Bernanke goes on to say that China should increase its social protection for citizens as a way to increase domestic consumption. Now, I’d be the first to agree with such a policy, but alas, China does not care about its own citizens. China is simply the authoritarian political/economical system it has always been. It doesn’t matter if the country calls itself communist, capitalist or imperial: the outcome is the same (the same goes for Russia, by the way). Much like the United States, whoever grabs the power has the power.

The much criticized “Asian values doctrine” can actually be helpful in this context. This doctrine, much favored by the Chinese government, is influenced by Confucianism and other eastern philosophies, but as applied to modern society, it proclaims that individual considerations, be they materialistic or human rights related, should be sacrificed for the good of the authority. I have myself met many Chinese students who have defended this doctrine vigorously.

Where does that leave the Chinese consumer? When, at any time, your house might be bulldozed for a new dam project, your farm taken away because a local politician sold it, or your salary might be cut in half, what is the most rational thing to do in order to protect yourself from catastrophe? You save money!

American politicians seem to think that Asian people save money as some kind of old, funny habit. In fact, they are just being rational, and Americans should obviously be doing the same thing, considering the fact that there is no social safety net in the U.S., and that we have a casino economy.

The Chinese will probably increase their own consumption eventually, but in order for that to be of any help to the U.S. they would have to start buying lots of American goods, and I don’t see that as very likely.

If the Chinese do increase their domestic consumption of domestic goods, I’m sure that won’t be at the expense of exports to the U.S.. They’ll just make up for that by building more factories and enlisting more unemployed people from the countryside to work in them.

Moving on to those who actually control things in China. Why the hell would they try to export less?? In 2007, George W. Bush asked Hu Jintao if they couldn’t please let the Chinese currency appreciate against the dollar. Jintao simply responded: “Why?”.

Embarking on a policy to export less, when exports have taken China out of the dark ages and into the light, would be something that not even a retarded Chinese equivalent of George W. Bush would attempt.

Advocating that the Chinese should be turned into Americans is so pathetic, I’m almost out of words.

Wait, I have a suggestion: if China actually were a communist country, exactly as described by Marx, then it would export almost nothing. So, the plan is simple: invade China, overthrow the authoritarian capitalist government, and install a philosophically pure communist rule! Then America can have its wonderful bubble/casino economy back on its feet!

Moreover, I advise that the winner-takes-all voting system should be destroyed.


Anonymous said...

The only way for the west to keep our economies rollin' and our stadard of life at its present levels or even improving is to keep climbing the value ladder. That's it. There are no short cuts.

We will never again be able to assemble low tech products and turn a profit. Asia outperforms us due to vast numbers of hard working low-paid factory workers. We can't go back and, honestly, we don't want to either. How many do you know who could stomach working their ass off at an assembly line for 60 hours per week?

We must push our products ever more complicated and complex so that raw man-power means little in their production. Education is fundamental here. And investment in research and in base sciences.

The level of sophistication needed is approaching where we find the automobile as it stands today. China does not yet have international successful brands, but they're on the way. Europe and Japan can still compete, for now, because they continued up the value ladder with increasingly sophisticated products. The US did not, and cannot compete internationally as a consequence.

Of course China is frantically climbing the value ladder also, in manufacturing, and India too - in IT-services. But this is one of the few edges we still have in the west, superior infrastructure being another, and we need to keep it. And we need to not take it for granted.

Marcus - Sweden

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Anonymous said...


You make a very good point, but what of the U.S. workers who have already completed school and can't afford to go back? What are they going to do and how will they acquire these high-level skills?

To the author:
I'd like you to do a post or explain to me why the argument that "jobs as a lagging indicator" will not apply to this recession. i.e. A lot of people are sitting it out on their unemployment checks thinking that jobs will come back, but I don't see how or even where. Why don't they get what is fundamentally happening.

Anonymous said...

Anon: "what of the U.S. workers who have already completed school and can't afford to go back? What are they going to do and how will they acquire these high-level skills?"

They probably won't. Some might partake in some job training programs but most need to find new employment at their skill level.

Infrastructure projects could create lots of jobs but probably not enough, and they are costly and Federal money is earmarked for other stuff it seems. Still it's a possibility with some potential.

To put a real dent in todays US unemployments figures would take... I don't know. I just can't see it happening in the short-medium term future.

Marcus - Sweden

Jacob said...

I agree with Marcus. Infrastructure jobs can have some benefits immediately, but when the project is finished, the job is gone.

The expression "boom and bust" is much more than an expression; in the U.S. it's actually a kind of economic order. Traditionally, after a recession (or bust) the country has actually relied on the re-inflating of a bubble to create jobs (boom). This also requires vast amounts of speculation, often with borrowed money. even though people are doing that now, I don't think that it will work this time, because the underlying fundamental problems are too great.

In countries that don't rely on bubbles to create jobs, at least not internally, such as Germany, you will often see a "jobless recovery", where companies hunker down and make themselves more competitive. In that way, when hiring does come back, it is a real recovery.

On the other hand, a jobless recovery during a time of desperate attempts to re-inflate a bubble must be seen as much worse. The temporary quick fix, the shortcut, does not work, even though it is normally easy to make it work.

Anonymous said...


Here's an excellent Op-Ed on the same topic as this blog post:

It describes the current situation quite well I think.

Marcus - Sweden

Chanelle said...

The winner takes all mentality is hurting a lot of countries - not just the US.

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Anonymous said...

When infrastructure project is finished the job is gone, however that makes it seem as if there are only a few fixes needed. America has ignored vast sections of its infrastructure for decades. There is enough work just fixing the existing parts (bridges, roads, railways, schools, public buildings) to last for a least a decade. Then you add new stuff as high tech rail and energy generation, it could go on for decades.