Friday, October 26, 2007

Stats for Thought

As you head out into your weekend, here's some food for thought:
While we are worrying about a third-rate power (that happens to sit on the oil), arming itself with nuclear weapons; China, according to Elisabeth Rosenthal, writing in this morning's New York Times (at page C1), produces and uses 45 percent of the world's output of cement.
Going further into the business section, (page C4), according to Chinese statistics the Chinese Economy expanded at 11.5 percent in the third quarter, which was a "slight slowing from the second quarter." The inflation rate in China in September was, according to the same article by Keith Bradsher, 6.2 percent. The annual growth rate of Chinese industrial production, according to the same article, is 18.9 percent.
Now Chinese statistics, like that of all authoritarian states, have to be taken with a liberal amount of Morton's Salt. However, China wants more access to world markets, so this rule of thumb is not as true as it used to be. In any case, China is clearly growing in economic and industrial power at a stunning rate. This is going to change our world, in all probability, far more profoundly than Osama and his tapes, or Mad Jad with his nukes. Over at Real Clear Politics, there is a piece by Francis Fukuyama (he of the End of History) opining that the "the fundamental problem remains the lopsided distribution of power in the international system." Lopsided in favor of America, that is.
Dr. Fukuyama needn't worry: the international system is about to be dramatically rebalanced, no doubt producing plenty more history. During the Cold War, America had a tremendous advantage in that its great power enemies, besides being tyrannies, embraced a completely stupid economic and philosophical system that caused them to, dramatically, underperform industrially. Now, we are witnessing the return of authoritarian great powers: states with locked-down political systems philospically opposed to ours that employ unbridled capitalist economics. For the historically minded, think of the rise of Wilhelmine Germany into the more or less unipolar world run by Great Britain. Perhaps our wishful thinkers' prayers will be answered, and China's rise to power accomplished peacefully. Then again, perhaps not.
Meanwhile, we are led in part by loons who seem to think that our power (economic and military) requires no maintenance, and can go on forever. We have been very fortunate not to run into, say, a Bin Laden backed by a great power. I wonder if Dr. Fukuyama will miss the "lopsided distribution of power in the international system" when that happens ?
Have a nice weekend.


louielouie said...

LL, of course, is more inclined to be isolationist, when it suits me, and xenophobic as well, than EJM I.
china's economy is expanding because the US is sending all of it's jobs over there. the people at TCS call it trade.
let me see what word would i use to describe the US manufacturing capability.....what word would i DECLINE!!!!!!
those in US corporation board rooms seek slave labor. and will go wherever to get it.
first mexico.
now the near east.
or far east.
they are not going to pay someone in mexico $1.17/hr when they can pay someone $0.47/hr in china and will not pay someone in china $0.47/hr when they can pay someone $0.17/hr in vietnam.
how's that for a run on sentence?
and who is going to fund my social security anyway?
someone in malaysia making $0.09/hr??????
the little princes that will soon come to power in china are going to be a much more ruthless breed than we see there now.
but it doesn't matter about chinese running the world as long as the US board rooms have access to those billions of chinese who are being paid slave wages in hopes of buying some consumer products. i haven't figured out yet what consumer products you can buy on slave wages, but i'm sure the guys in US board rooms have that all figured out. right?
and all the while we just can't understand why the chinese won't play nice buy our copyright laws.
that would make the US.....enablers??????
could it be that is why their society is still steeped in the mid 1400's.
so much blather on thisred button topic of mine.
oh well, i'm sure things will be joyous in the kingdom this weekend.
here in the provinces we still work 11 hour days.
surrounded by liquor of course, but still 11 hour days.

louielouie said...

red button topic

El Jefe Maximo said...

I'm not at all isolationist, LL, and am a bargain shopper at "China Direct" as much as the next guy, but I don't entirely disagree either.

This is what comes of (1) the short term focus on next quarter's costs and profits by people who aren't worried whether the widgets are made in Cleveland or China, and who will have moved on to bigger and better jobs by the time the Cleveland plant's closed and the lead from China's found; (2) the domination of everything here by the lawyers, who add too much to the cost of doing business. I could go on, but I'm away from my papers and not in the mood anyway.

I agree with you about the desire for labor at slave prices. Ditto "enablers." We can't compete in an open borders world where our trading "partners" don't have to deal with the same lawyers, regulators and unions as we do here -- to say nothing of the minimum wage.

Either the world "comes up" to our scale -- that is, our way of doing things; or we do nothing, and free trade will remain the slow death of our manufacturing capability that it is, made bearable by rock-bottom prices at China Direct and the like -- paid for with debt. This will work till we can't borrow anymore.

Suppose we could go down to their level -- fire the lawyers, muzzle the regulators, break the unions and no minimum wage -- but I don't see that happening. The only other alternative is some type of protectionism, to the extent that it is possible. But changing to that sort of trade regime is going to be like getting off of heroin for methadone. There will be significant, and painful, adjustment costs.