paper tiger, greedy dragon
by Boris Glebov
Published: April 2, 2008
A lot is being said about the coming of Chinese dominance. Sure, its GDP is growing at around ten percent every year (according to National Bureau of Statistics), and the US trade deficit with China was more than a quarter trillion dollars in 2007 (US Census Bureau). Its military spending has grown just as steadily - a RAND Corporation study reports annual rate of over ten percent. I recently sat through a presentation on the state of American higher education, which highlighted that technical majors are actually declining in numbers.
Well, I am not worried. Others may tout protectionist measures, or brush up on their Mandarin. Meanwhile, I will walk over to Chipotle and get another burrito since it is such a nice day out.
Why am I so unperturbed? Because super-dominant powers simply do not happen. If someone comes even close, they inevitably implode. Mongols failed because their empire was too big for their communication and administration abilities. Macedonian empire did not have a sufficiently stable and mature political model and disintegrated within one generation. Romans… well, what didn’t kill the Roman Empire?
Generally, wealth is created in an environment that is politically and economically stable, and there is something of worth being manufactured. However, it really helps if there is someone else who can buy whatever it is that you manufacture. Then you are basically transferring wealth into your country.
The key here is the relative value of wealth. United States can lose a small amount of wealth and it would not make much difference in everyone’s lives. In an impoverished country, however, this same amount makes a tremendous difference. Suppose you lost a pair of pants. That is quite alright - you have five more pairs! For someone in poorer conditions, however, an extra pair of pants can be a significant move up the world.
Eventually, however, everyone in the poor country has that extra pair of pants, and it is no longer alluring. The local value of wealth has decreased. More is needed. Now it is about two clean shirts. Then a bigger hovel. Then a whole new wardrobe. Then a bike - a car! And a condo! On a beach! Mad bling! Pretty soon, they would not even notice if a pair of pants was missing…
Soon, China is going to lose its main advantage - a massive and cheap labor force. Constant manufacturing expansions means that workers - however numerous - are in short supply and their value increases. Government and company owners can balk and the trend all they want, but this force of the market is unbeatable. Labor will become more expensive and prosperous, protected by more effective unions, laws, pensions, healthcare plans and so forth. China will grow to the level of all the other industrialized nations, and then its neck-breaking expansion will be over.
I am not saying this is anything new or special to China. After all, Spain squandered its wealth acquired in the New World on buying British-made picks and shovels used to mine this wealth. United States used the massive influx of destitute European and Asian immigrants to launch its own industrial growth that fed off Europe. And look where we are now - we want giant plasma TVs, as long as we do not have to do the work to make them. That is why God invented poor countries and credit cards, right?
(In a further cruel twist of irony, the poor countries own our credit cards. So we are borrowing money from them in order to buy their stuff. Could we not just ship freighters full of cash overseas? That would be quicker, and more environmentally friendly.)
It is not China that I am worried about - it is us. We seem to be riding the crest of a wave that is about to break. We hang precipitously, and our conclusion seems forgone…
Still, I am left with questions. Can we resist the rampant consumerism that is inescapable destruction dressed up so shiny?
Can we realize that opportunities tomorrow are more important than cheap instant gratification today?
—
(email this article or post to social network)
—
(15)