China's Economic Advice to U.S. Defies Logic

© 2008, Creators at Large, LLC
By YleXot

For the past couple years, it appeared to me that the Chinese government may have had an inside line on the new economy. Spectacular growth and a stable currency – albeit artificially so – over an extended period of years made me wonder whether they were on to something worthy of our attention. My mistake.
Today, these same Capitunists (capitalist-communist opportunists) suggested that the U.S. needs to reign in both fiscal and monetary spending, start saving more and curb its consumer appetite. Unless I am missing part of the equation here, every bit of this "advice," if heeded, would be the functional equivalent of the captain of the Titanic adding ballast to correct the mighty ship’s iceberg-inflicted list.
China’s continuing economic growth – estimated at a still-stunning 9 percent in 2009 despite the near-global contraction – has been fueled by our appetite for cheap consumables. Barring a total meltdown, we are, have been, and probably will continue to be China’s biggest trading partner. In fact, our desire for bargain-priced merchandise will most likely grow stronger for at least the duration of the current recession as millions of American households are forced to make do with less cash.
I have never been comfortable with the notion that consumer spending comprises two-thirds of our economy. Yet, there it is. If we were to follow the Capitunists’ advice and put $75.00 in the bank instead of replacing, say, a broken DVD player or microwave oven, we would be hastening the demise of our economy. And China’s economy. And Britain’s economy, and Belgium’s economy and so on ad infinitum.
Moving on to government spending as a stimulus, it bears noting that Nobel Prize-winning economist Paul Krugman has just gone on record as saying he fears that the incoming administration may get the cure wrong. He said that it would be a major mistake to confuse budgetary restraint with prudence right now. He favors massive spending to lift the economy back onto track to taking a chance on half-measures. Spending too much to do so at this stage of the game is virtually impossible, according to Mr. Krugman.
Which brings us to the final remedy: China says we need to balance our budget. This, even according to those in the public eye whose politics are only slightly to the left of Genghis Khan, would be ultimate folly and have immediate and disastrous consequences. This suggestion flies in the face of every reasonable expert’s opinion on the current crisis.
If there is any logic to be found in these recommendations to restore our economic health, it is of that type so long imputed to the Far East: inscrutable. Adopting any of these measures, according to the prevailing wisdom, would doom not only us but the entire global financial apparatus. To what end? Are the Communist leaders looking for a way to turn back the tide of capitalism while their piggy banks are bursting at the seams with the wealth their little experiment has generated? Are they subtly suggesting they might just be inclined to dump the $600 billion of U.S. debt they already own? Do they think their own newly minted middle class will gladly forsake the upward mobility to which they have quickly become accustomed to return to the purity of class struggle?
I highly doubt that any of these scenarios are the correct answer. I doubt even more whether the Chinese economic theorists and political leaders have any more clue about what the correct answer to the current situation is than we do.



–30–