Monday, July 28, 2008

Worried About China?

I'm not, even though it seems to be poised to surpass the USA in so many meaningful ways, with GDP being just one such. To me, the meteoric rise of the Chinese economy is an fine example of what even a little capitalism can do to raise the standard of living anywhere- even within a farily totalitarian regime.

It should be a stark lesson to us, and easy to see: More capitalism = more wealth. More government = less wealth.

There is an interesting Washington Post article today that gives many reasons not to worry about China, despite our huge trade deficit with that country. Here's one:
One important nuance we keep forgetting is the sheer size of China's population: about 1.3 billion, more than four times that of the United States. China should have a big economy. But on a per capita basis, the country isn't a dragon; it's a medium-size lizard, sitting in 109th place on the International Monetary Fund's World Economic Outlook Database, squarely between Swaziland and Morocco. China's economy is large, but its average living standard is low, and it will stay that way for a very long time, even assuming that the economy continues to grow at impressive rates.
Remember what kept that economy down- the Communist regimes, beginning with Mao, and to the present.

I don't like the conclusion in the quote, though. The USA was once in the position China was, relative to Britain, as an economic power. The US was the up and coming low-tech, cheap production underdog, while Britain was the high-tech economic ruler of the day. The British once scoffed at America's position in the world, confident it would never be surpassed. The USA kept producing cheaply and innovating, eventually becoming the high-tech producer of the world.

Why was Britain surpassed by the US? Two things. The UK became increasingly regulated, and Britain had a worldwide empire. "The sun never sets..." That took enormous effort to sustain, and proved unsustainable. The British choked off innovation in their industries, via regulation.

Here we are in the USA, repeating the mistakes of history. We hyper-regulate our industry, driving the business to other countries. We are trying to play the world's cop, intervening in affairs that don't affect us directly, paying for bases and operations in most of the world's nations.

The US built its wealth under relative 'isolation'. Notice that China, once greatly involved in funding revolutionary forces in SE Asia, now is relatively isolationist itself. How about that? Increase capitalism, reduce interventionism, and China begins to assert itself as a growing financial power.

China is hardly perfect, but in some important ways, they are going in the right direction, while here in the USA, in those same important ways, we are going in the wrong direction.


varangianguard said...

You too, are guilty of seeing only what you want to here.

China's current form of national government is not "less government" oreiented. In fact, the direction of the interantional economy is closely monitored and directed.

If you think the Chinese aren't itching to play "international cop", I think you are in for a sad surprise.

Mike Kole said...

China is indeed less government oriented in direction than it once was. There was virtually no capitalism some 15-20 years ago. Now, however guided it is, China is more capitalist than it was. Those are gains.

Maybe the Chinese are 'itching' for the role of World's Cop. We, otoh, are the role. It seems to be historical that whenever a nation comes into some position of marked power, be it economic, military, or whatever, they begin to become imperialistic or interventionist. Perhaps China will go there.

But the point of my post was that China is getting richer while it stays on the interventionist sidelines. We are getting poorer while we play World's Cop. Not to say China won't stupidly follow. They may well.

varangianguard said...

The thing is, in my opinion, is that the US needs to decide (the US, not each administration) what is really in the interests of the US.

If we stuck to sticking our nose only into the hornet's nest that are really, really important to the best interest of the US, we would no be the world's cop.

You are quibbling over the Chinese government. I would rather say that China is not as completely blinded by Maoist Marxism as it once was. Not that the government stick its nose less into "business" affairs. That, I think, is a very important distinction.