Friday, November 30, 2012
Being a war-mongering banana republic isn’t all it’s cracked up to be
Thus saith Across the Street. A couple of thoughts on what is in the whole a very good article.
1. The likelihood that China will grow over the next decade like it did the last is nil. China has rapidly transformed itself into an economic power, but lots of that was a combination of a) population and b) low-hanging economic fruit. China has an enormous reserve of workers, but like South Korea, Japan, Malaysia, Taiwan, and other Asian tigers, will soon run headfirst into the concept of decreasing marginal utility. It is easy to hire starving farmers at decent* wages to assemble products. It is far more difficult to make those now-experienced workers - and their children - settle for the same wages for decades.
2. Japan is toast. It does not matter what they do going forward: they face a demographic, financial, and industrial cataclysm because of what they have done in the past. However, it was a mere generation ago that Japan was widely believed to be the power that would overtake the US. That error ought to illustrate the folly of straight-line extrapolation over time.
3. Russia is a first-world nuclear arsenal bolted to a third-world economy. India is a third-world nuclear arsenal bolted to a third-world economy.
4. The lack of theoretical economic replacements to the US is a bad thing, not a good thing. And the reason it's bad is that the world economy works best when one nation is far and away its leader, its organizer, and the one who keeps the sea lanes open. In the 19th century, that was the British empire. As other European nations finally caught up to Britain's position of leadership, two World Wars finished the lot of them. But the US took the torch and was able to pick up the pieces, thru Bretton Woods, the Marshall Plan, and various other mechanisms. There is no similar up-and-coming nation today - the American Century will not be followed by the Chinese Century or the Indian Century or the German Century. So as the US continues its Japanese-style slide into debt-hell and possible disintegration, accompanied by an ever-shrinking piece of the economic pie, and as we look forward to our inevitable war with China, which will likely result in China breaking into a million little pieces, we look forward to a world with no nation economically capable of keeping the peace, and given billions of hungry, angry people, maybe no nation that really wants to.
You don't need a chart to tell where that combination leads.
* decent by Chinese standards. While the average American would be shocked at how little a Chinese worker makes, for the Chinese worker, that job is still the best of his available options.