Rioters take to the streets daily in Athens to protest austerity cuts designed to stabilize Greek finances. Red-shirted protesters in Bangkok refuse to disband after months of campaigning (sometimes violently) for the resignation of the current prime minister and a new round of elections. In the United States, a relatively new political group, self-dubbed 'The Tea Party Movement', holds rallies across the nation periodically to denounce both President Obama and any enlargement of the government..
Finding consensus in politics for the sake of governing effectively has always been a challenge, but our most recent round of globalization - more frenetic and unpredictable than in past periods of rapid change - has created more complex socio-economic and political questions than any philosopher, sociologist, historian or politician can answer. The result is a world fraught with divided governments resting upon seemingly insoluble problems.
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Welcome to the intractable age - where every political position (many of them rooted in economics) is contested and attacked by leaders with another agenda.
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As Franklin D. Roosevelt once remarked, however, no problem was unsolvable 'if we face it wisely and courageously'. The first step in finding answers is to frame these issues with common sense, compassion and as much objectivity as possible. Once an agreed framework for debate has been established, true civil discourse will follow.
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Of all the political questions facing citizens in North America, Europe and elsewhere, the most pivotal issues of our time may be 1) how to handle the rise of China economically, and 2) the current wave of transmigration (immigration) and its effects on nation states. In this installment, the realities of cheap, Chinese goods will be examined. Next week, the explosive topic of transmigration-immigration will be considered.
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Made In China
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Few people could have predicted that China would throw off the yoke of Marxist economics for an aggressive state-sponsored capitalism less than a decade after the death of Chairman Mao in 1976. Despite crushing a legitimate democratic uprising in 1989, Western statesmen decided to overlook the tyrannical event and 'engage' China by integrating its endless supply of cheap labor into the international trade system. Two decades later, the Communist party is still in power, censorship rather than free speech is still the order of the day, and a Chinese middle-class of urban professionals has emerged to sustain the regime politically.
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Citizens of the United States need not buy a plane ticket to visit China at all. A simple drive to a local Wal-Mart, Walgreens or similar shop will suffice. Forget the Forbidden City or porcelain pieces from the Ming Dynasty - the epitome of 21st century Chinese culture is manufacturing. In the first debate between the prospective prime ministers of the UK, Conservative leader David Cameron (the likely the next prime minister) was the only candidate to suggest that the decline in British manufacturing had gone far enough. He then stated that 'Made in China' was not the answer for the future of Britain.
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Mr. Cameron and his party might have received a majority of the vote had he cited statistics and made the re-establishment of Britain as a leading world manufacturer the centerpiece of his campaign. In only one decade (1997-2007), the UK saw manufacturing decline from 20% to 12.4% of its overall economy. Across the pond, the US has seen its manufacturing base plummet from a peak of 39% in WWII to a paltry 9% of its current economy. For some reason, the West seems to be under the impression that these trends are irreversible. Not only is this trend not unstoppable but a rebirth of Western manufacturing would not necessarily entail a loss for China.
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In the 19th century, the engine of the British Empire pivoted on the presence of ubiquitous smokestacks, heavy exports of textiles and concomitant technological innovation. In the 20th century, the rise of the United States as the pre-eminent world power directly correlated to its unrivaled ability to mass produce commodities of all kinds. No Western nation should be under the impression that a service economy, based on the precarious world of finance, will ensure its economic viability or national power. Hence, leaders of the West must take steps to redress the imbalance and restore a sense of pride in its people.
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While purchasing Chinese products for half-price is a prospect almost impossible to resist among cash-strapped consumers in a recession, the long-term effect of these purchases on a wide scale is ultimately detrimental to both Western domestic economies and to the Chinese economy itself. It is not a coincidence that the influx of cheap, Chinese goods has coincided with the ebbing of labor unions and living wages.
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Is economic nationalism the answer? No. The G-8 (of which China should be admitted as a member) and other nations (including China) simply need to realize that China has taken on too great a role in the world economy - in too short a time. The loss of 'living wages' in the West, which was partly caused by the rise of Chinese manufacturing, paradoxically threatens the future of the Chinese economy itself. If fewer people in the West have middle class jobs with true middle class salaries, then fewer purchases of Chinese goods (or any goods for that matter) will be made. It is just that simple.
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Thus, China has an enormous stake in seeing Western nations sustain and expand their middle-classes through targeted investments in manufacturing. If GM, Ford and Chrysler are actually on the precipice of a comeback, Chinese leaders ought to be elated. At the moment, the US and China essentially do not compete in head-to-head auto manufacturing. Hence, no one loses in the zero-sum game of economics in the category of car-making between the two countries. Each country, however, benefits as GM sells cars again - thereby re-creating highly paid union jobs for thousands of workers - who then have the ability again to become consumers of goods from all over the world - including China.
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In all, China cannot continue to prosper unless the West rebuilds its collective manufacturing base and returns to an economy based on adequate wages. As the world economy is more integrated than at any time in history, ad-hoc economic diplomacy will no longer suffice. Too many lives, too many families and too many futures are now at stake. Similar to the issue of immigration, the solution lies in achieving a balance. Rather than tariff wars, currency manipulations and threats, a sustainable path of development, guided by international negotiation, planning and compromise on the volume of Chinese exports to Western nations, will produce a long-term, mutually-beneficial solution.
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Otherwise, the debacle in Greece may turn out to be a portent of worldwide economic chaos.
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(Photo: Riots in Athens, May 2010)
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J Roquen