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The eternal truths of history can guide us through this crisis

11 March 2009

Many versions of this are circulating around the Internet, describing how we can learn much from China’s evolution since WWII from rural backwater to major power.

Mao Tse-tung, On the Correct Handling of Contradictions Among the People, 27 February 1957:

When the rule of imperialism, feudalism and bureaucrat-capitalism was overthrown by the people, many were not clear as to where China was headed–to capitalism or socialism. Facts give the answer: Only socialism can save China. The socialist system has promoted the rapid development of the productive forces of our country–this is a fact that even our enemies abroad have had to acknowledge.

After Mao’s death, Deng Xiaopeng took control in 1979 and modified this:  Only capitalism can save China!

After the fall of the Berlin in 1989 the remaining true believers said Only China can save socialism!

It’s now 2009, the western banks are burning, and everybody knows that only China can save capitalism!

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14 Comments leave one →
  1. Duncan Kinder permalink
    11 March 2009 1:59 pm

    Plummeting Chinese Exports Shock Economists“, Washington Post, 11 March 2009 — Excerpt:

    “China’s exports plunged by more than 25% in February, compared with the same month a year earlier, shocking economists who had predicted that demand would remain stable or decrease only slightly.”

    If this continues, we shall revert to the Yuan dynasty, when only yurts could have saved China.
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    Fabius Maximus replies: Remember, China’s exports have decreased far less that those of its neighbors. Mainstream economists (delusionally) saw this as evidence of China’s strength, rather than just a lag until China too was hit.

    For analysis of this see these article by economist Brad Setser of the Council on Foreign Relations:
    * “It is hard to put lipstick on a pig (or even an ox)“, 11 February 2009
    * “The fall in China’s exports caught up with the fall in China’s imports, at least for now“, 11 March 2009

  2. underscore permalink
    11 March 2009 2:57 pm

    there was once an economist article that (prematurely, IMO) predicted the death of China once an entrenched recession ended income growth for the working classes and highlighted the class inequities that have risen since the famed black cat/white cat speech. given all the symbolic dates and unresolved grievances with local governments, we’ve sure picked one heck of a country to be the proving ground and lynch pin of our economic system in a global downturn.

  3. 11 March 2009 5:21 pm

    China is now entering an extremely dangerous time. Some 20 mil. new unemployed. Some 60 mil. young men MORE than young women (maybe ratios around 800 / 1000 girl/boy for 20 years).
    Huge ecological & pollution problems. Crony commie-friend capitalist riches.

    A Great Leap Forward, or Cultural Revolution, could see internal mass revolution.

    Altho the vast new consumption of the new, young, cynical working middle class might mitigate against anything too radical. Only China … can save China.
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    Fabius Maximus replies: They have little debt, smart leaders (at least so far), and two trillion bucks in the till. I suggest you worry about us. A a rapidly aging population, in debt up to our eyeballs, and run by elites for whom a lemonaid stand would be too challenging.

  4. DanWyns permalink
    11 March 2009 5:39 pm

    A new essay from Martin Armstrong has been posted at Contrahour: “Is It Time To Turn Out The Lights?” I think his analysis is spot on, but I wonder if FM would agree.

    “We are on the edge where the way of life may be altered forever. We must open the door to all solutions and judge our future without bias and prejudice. It is time we recognize Marxism for what it is – the most dangerous theory of all time that may destroy now western Civilization. The more Byzantium could not cover its debts, the more it became aggressive against its own people that in the end, destroyed capitalism and freedom itself. Marx gave us the only alternative to capitalism, and that he called Communism that was just a false dream of Utopia – everyone works for the government, the government takes care of everyone, and in the process, you not merely sell your soul, you give up your right to be an individual. The Western culture has flirted with Marxism because politicians see the power belongs to them. Socialism is no different, for it is trying to be just a little-bit pregnant. It still involves centralized planning of the economy that cannot be done by people who have never worked in the real world.”

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    Fabius Maximus replies: This excerpt looks like nonsense to me, just another rant. Marxism? Is he kidding, or just using it like Mom refered to the monsters under the bed — really bad if undefined something. Was Byzantium run as a capitalistic system? Marxism is as the only alternative to capitalism — what happened to fascism?

  5. 11 March 2009 6:20 pm

    And we thought you had no sense of humor!

  6. Pode permalink
    11 March 2009 6:20 pm

    Let’s not forget the “wisdom” of our economic leaders, who have recently been saying things to the effect of “Only China can save” and “If only China hadn’t saved!”

  7. TulsaTime permalink
    11 March 2009 6:44 pm

    China will either implode or explode. An implosion will inceinerate the present order, setting the stage for whatever comes next. An explosion could bring that much discussed OWG to reality. There will be some shock to set events in motion, perhaps the next evolution in the ‘South China Sea Chicken’ dance we just witnessed. Maybe a currency crisis that destroys the dollar and the yuan at the same time.

    Just think, we can see if the yellow hordes prevail over the atom bombs. I think so, but then I’ve always been a people person.

  8. 11 March 2009 7:22 pm

    Great topic FM! I’ve been giving this a lot of thought and want to blog about it soon. It’s not that we should copy China’s wild ideological swings, nor give praise to their eh.. unique political economy. Rather we should be applying the notions of pragmatism and gradualism which have allowed the Chinese to successfully evolve as they have.

    American politics desperately needs a dose of pragmatic thinking in Washington to counteract ideological brinkmanship that always threatens to undermine what needs to be done. The “socialization” of America today is not the result of nutty left-wing ideology but rather a matter of pragmatic necessity, just as it was necessary for China to move from Mao’s radicalism to Deng’s market reforms in order to survive. Fortunately, I believe Obama’s call for post-partisan politics is precisely in this vein; he might have said, ‘in order to do what is imminently necessary, we should supplant the role of partisan ideology in politics with some kind of higher calling, that there exists an overriding ethos of responsibility and pragmatism which trumps the rigidity of ideological belief.’ Just don’t tell this to Rush Limbaugh -_-

    Gradualism is another thing. Americans tend to want everything now now now. If something doesn’t get results right away, it’s failed (I expect a lot of short-sighted criticism from the GOP re: stimulus package #2). It took China almost a decade of gradual experimentation with market reforms in rural areas before it start to hit the urban centers in the mid 80′s. This is how China was able to successfully evolve without falling apart. Compare this diligence with the US stuffing democracy and capitalism down Russia’s throat, or forcibly implanting democracy into Iraq. Look how well that’s worked out!

    Maybe this is why China said recently they will “never have western-style democracy,” namely that Chinese politics is probably more pragmatic and post-partisan than American politics can ever be. Plus, in the time it takes for China to confidently make one change, we might have already had two presidential terms, with one trying to undo his predecessor’s work!

  9. underscore permalink
    11 March 2009 9:12 pm

    Hmm, I think the previous post exaggerates China’s stability–to be sure, there are certain lessons, but the graduality of China’s evolution is centered on a societal goal of achieving stability, something that has eluded the Chinese since they were cut up into spheres of European influence. Gradualism is also a tool to put off and stifle freedom.

    China faces huge social and environmental problems that threaten to crack its unity–the deployment of the military in Tibet and Xinjiang suggest that they have lost the legitimacy to govern in those provinces. Protests from Han Chinese should also skyrocket this year, given massive layoffs in the manufacturing sector as domestic consumption lags behind pre-crisis export levels. In 2005 China had something like 70,000 ‘major’ disturbances and its wealth distribution is more unfair than the US’s. This is not approval of the government’s patience.

    Also from a governance standpoint, there is no clear authority in China beyond the politboro, leaving federal and provincial agencies to duke it out over jurisdictional issues. In terms of post partisan politics… when there is a one party hegemony and the figure heads from other parties submit to its rule every year, sure, things are going to be a little more efficient than what we have here. The only cost is representative democracy.

    That’s not to say that the abandonment of economic orthodoxy in favor of pragmatic solutions to economic difficulties is a bad idea. It’s a great idea. But let’s not overstate the case. China has some difficulties that are probably worse than our own nightmares.
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    Fabius Maximus replies: I’ve been reading “China is about to implode” for two decades, along with “America is all right, mates”. My guess is that we’re deflecting our fears onto the most distant aliens we know of; it easies our anxiety about our fecklessness to image our major future competitor is worse off.

  10. 11 March 2009 10:48 pm

    China’s exports have been hit less in their low wage sector. That’s why Taiwan’s are being devastated, for instance, they are oriented to high end exports. On the U.S. side, it corresponds with WalMart’s OK results so far. The problem is that a low wage economy depresses domestic demand (see Japanese exports to China), which erodes China’s goal of a self-sufficient economy.

    People have predicting a Chinese implosion based on the long history of the country. It’s just hard to hold something that big together. The current Chinese government has only been around 50 years, during which time it’s nearly imploded a few times : the Great Leap Forward, Cultural Revolution, and Tiananmen Given that, it’s not an unreasonable question to ask. And Americans will be the last to know about any instability in the peasant or working class population there; they are basically invisible to us.
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    Fabius Maximus replies: This is very confident analysis, considering that most actual experts on China are quite tentative considering our limited knowledge of its internal dynamics (I have a post going up next week on the limited statistics they release, and their low reliability).

    “China’s goal of a self-sufficient economy.”

    On what basis do you say this? It’s an exporter economy, and they have made little effort to evolve away from this — despite recommendations during the last decade to do so. They are by some metrics the world’s largest importer of raw materials, and have zero prospect of changing that.

    It’s not an unreasonable “question to ask” (nor did I say so). But forecasts of China’s implosion have been frequent and extremely wrong.

  11. seneca permalink
    12 March 2009 12:37 am

    “Only China can save capitalism!”

    This is nonsense. China has nothing to offer us except credit and cheap products. But we’re not in a buying mood.

    The challenge of western capitalism is to come up with a new concept of the market — what goods should be produced and for whom. The credit-based growth and consumption bubble – which China supported –has burst. China has a similar challenge — to change its economy from one dependent on export to one focussed on internal development.

  12. Andrew B permalink
    12 March 2009 3:28 am

    China’s such a funny place.

    Its hard to believe any of its official population statistics, seeing as if you accept them at face value, it appears that nobody died in the massive Yellow River floods of 1931 (allegedly killed 2-4 million), and 1938 (allegedly killed around 1 million), or during the war with Japan from 1931 to 1945 (allegedly 20 million deaths), or during the Civil War from the 1920′s to 1949 (allegedly 3-4 million dead), or Korean War (roughly 500,000 dead), or during the Great Leap Forward in the late 1950′s (allegedly 14-43 million dead) or the Cultural Revolution of the 1960′s (allegedly 1-3 million dead).
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    Fabius Maximus replies: I have a post about this going up next week. It’s an important factor!

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