Gady Epstein, Forbes’ man in Beijing (and a renowned Scrabble player), takes a look at the G20 talks and the seemingly universal notion that all the tough work lies on the shoulders of the US and China, a country that, as all fashionable pundits know, has failed to provide leadership and avoided sitting down to work out serious solutions. Which, Epstein says, is pure nonsense. Europe, he says, is the real slacker.
China in particular has stepped up to take an active leadership role after years of calls by Western nations to do so. Aside from its domestic efforts, China is pushing for IMF reforms that, while seeking to elevate China’s role in financing poorer nations, should also result in a more robust and better-funded IMF, which the developing world badly needs.
China has spoken up on the dominant position of the U.S. dollar in global reserves and trade payments and has made several deals with trading partner nations to provide export financing in its own currency. This is potentially helpful in an economy where trade financing has become scarce. And it would be misreading things to say that the Chinese are seeking to undermine the dollar, which, after all, they have bought so heavily to hold down the value of its own currency (and so make its exports cheaper).
No, China is, quite literally, invested in the global financial system as it is and, seeing that system in trouble is weighing in with real leadership. Many will disagree with some of the positions China takes from here forward, but now is the time to turn attention elsewhere. Now is the time for countries that have long wanted bold steps from China, the countries of Old Europe, to take some bold steps of their own.
The gist of the argument is the US and China’s stimulus plans, for all their faults, are big steps in the right direction. France and Germany’s plans are relatively toothless, and their commitment to serious stimulus simply too small.
I couldn’t help but notice how this assertion of China’s commitment and involvement contrasted with a recent column by Paul Krugman:
The bottom line is that China hasn’t yet faced up to the wrenching changes that will be needed to deal with this global crisis. The same could, of course, be said of the Japanese, the Europeans — and us.
And that failure to face up to new realities is the main reason that, despite some glimmers of good news — the G-20 summit accomplished more than I thought it would — this crisis probably still has years to run.
Krugman’s main beef with China is that their strategy of amassing dollars was unstrategic, counter-productive, self-defeating and dumb. What Epstein is claiming – and what Krugman either doesn’t see or doesn’t agree with – is that China is actually facing up to the present realities better than most, and certainly better than “Old Europe.” Looking at Krugman’s column, I think he’s caught up in what China did in the past with its dollar strategy and unimpressed with its stimulus plan – which parallels the way he sees the US. Krugman says it’s all much too little much too late. Epstein is saying both the US and China, despite the sins and stupidities that led us here, are at least taking serious steps to turn the calamity around and should be applauded for that.
I know there’s some “apples and oranges” in comparing the two columns. Krugman’s is more historical (and extremely critical of China’s role in the meltdown), Epstein’s is more about what needs to happen next. It was the diametrically opposed conclusion each drew about China’s stepping up to the plate that stood out for me.
1
By Thang Long
I was impressed with Obama explaining his economic policies to the British Royal Family in London:
http://www.youtube.com/watch?v=bTIklFsMjjU
April 3, 2009 @ 7:18 pm | Comment
2
By Thomas
This whole discussion as to who has the bigger stimulus package and how Europe allegedly isn’t doing enough is becoming a bit stale. The Anglosaxon press has been relentlessy repeating the same things over the last few months, and it doesn’t help that quite frequently the facts are distorted (or some bits conveniently left out) to support the intended conclusion.
April 3, 2009 @ 7:37 pm | Comment
3
By Si
some thoughts from an “old european”
1. the phrase “old europe” needs to go to the dustbin of history asap. all it means is pesky europeans who don’t agree with the us.
2. epstein seems to think europe (which apparently consists of two countries: France and Germany) should come to a united agreement on what to do. this is like pulling teeth at the best of times, let alone now. epstein doesn’t know much about europe methinks. i also note that he leaves the uk out of his horribly overgeneralised europe. this is presumably because the uk has also attempted a massive stimulus like the us and therefore doesn’t fit into his neat little theory.
3. germany’s position that they didn’t do anything wrong, so why should they pay. i fail to see how this is so unreasonable.
4. epstein’s statement that “And it would be misreading things to say that the Chinese are seeking to undermine the dollar,” is true in the short term – of course china doesn’t want to undermine the dollar, but in the longer term it will want/need to. As you say “Krugman’s main beef with China is that their strategy of amassing dollars was unstrategic, counter-productive, self-defeating and dumb.” – this position is correct. china is undoubtedly in a bind and its attempt to move towards a world currency is an attempt to get itself out of jail by having others pay for its blunder in much the same as epstein moaning that germany won’t cough up the readies to sort out its problems. china needs to re-balance its economy as much as the us and the uk do. the difference is china certainly has the money to do this, the us at a stretch does (though of course the inflation/debt arguments will run and run) and the uk certainly doesn’t. there is still a great deal of wishful thinking amongst all nations that we can get back to the way things were. it isn’t going to happen.
April 3, 2009 @ 7:50 pm | Comment
4
By Thomas
Quote: “the phrase “old europe” needs to go to the dustbin of history asap. all it means is pesky europeans who don’t agree with the us.”
My feelings exactly. I wonder why the Americans and British commentators that keep using this term don’t realize that all they do is antagonize those very “old Europeans” whose cooperation they seek. When Bush first coined it, it still had some effect. Now, the phrase only causes Europeans to shut their ears and think “whatever…”.
April 3, 2009 @ 8:27 pm | Comment
5
By Lindel
can’t refrain from bashing the US can you.
old europe can also refers to the old europe that ran the world with several different empires. and now that they no longer have their empires some still act like they think they do.
sure that crotchety senile old man rumsfeld used it as an insult, but there is an old europe phenomenon that is not just an american bigotry.
when issues like touching the queen or french and german threats to disrupt a summit sometimes those are remnants of their thinking they still have their french, german, spanish, british etc empires,
April 3, 2009 @ 8:28 pm | Comment
6
By Richard
Si, interesting theory as to why he left out the UK, something that the reader can’t help but wonder about. And no, we aren’t going back to the way it used to be, not within any of our lifetimes, if ever.
In Epstein’s defense, he used “Old European” in quote marks and explained what it has come to mean. I doubt if he subscribes to that notion, which was used a lot when France refused to support the Iraq War.
April 3, 2009 @ 8:28 pm | Comment
7
By Richard
Lindel, who are you speaking to?
Epstein wrote, “‘Old Europe,’ as Donald Rumsfeld would say” – a clear reference that the phrase is the Bush-age slap at those in Europe who wouldn’t join in the fun in Iraq.
Appreciate your comments, always, but honestly, I can’t quite figure out what that last one means. Maybe explain a bit more?
April 3, 2009 @ 9:01 pm | Comment
8
By FOARP
@Thomas – I’ve haven’t seen the phrase ‘Old Europe’ used anyway but critically here in the UK in a long time. It is almost always used in an ironic sense.
A lot of the ‘other countries aren’t pulling their weight’ talk focuses solely on the actually quantity of each country’s bail-out measure. However, the larger social welfare schemes in Europe means that European countries will automatically have to spend more money as a result of the economic downturn. Government economic stimulus is therefore built in (although obviously not in a targeted way) and requires less in the way of special measures.
@Lindel – So what you’re saying is ‘The French and Germans shouldn’t make demands’, seems like there wouldn’t be any point in them coming if they couldn’t – there’s nothing ‘imperial’ in this. Nor is there anything ‘imperial’ in royal protocol – plenty of other countries are sticklers for this kind of thing, and you may note that there has been not even the slightest hint of displeasure on this issue from the Queen. In fact it was the Queen herself who initiated it, only wingnuts in the press have made a big thing out of it.
April 3, 2009 @ 9:12 pm | Comment
9
By Thomas
Quote: “interesting theory as to why he left out the UK, something that the reader can’t help but wonder about”
I read the FT (UK edition), and various commentators (in particular Martin Wolf) always make a point to distinguish “us” (= US + UK) vs. “them” (depending on the context, that’s either “Germany + Japan + China” or “Germany + France”).
April 3, 2009 @ 9:20 pm | Comment
10
By Thomas
Quote: “french and german threats to disrupt a summit”
Maybe I didn’t follow the coverage attentively enough, but I didn’t notice any such “threats to disrupt a summit”.
April 3, 2009 @ 9:23 pm | Comment
11
By Richard
Thomas: Maybe I didn’t follow the coverage attentively enough, but I didn’t notice any such “threats to disrupt a summit”.
Thomas, maybe you need to look harder:
April 3, 2009 @ 9:34 pm | Comment
12
By Thomas
Oh. Yes, I suppose you can call that a “threat to disrupt the summit”…
April 3, 2009 @ 9:35 pm | Comment
13
By amadeus
Nice posting and comments.I’m think about that why he left the UK left,suddenly I come out with this –Taiwan to China, is UK to USA,I means that long long ago,USA is an inalienable part of the inviolable territory of UK’s former-so called “Nation without sunset”. Then,there is no surprise they share the same opinion inherently at G-20. And historically ,UK is the unhappy people,because of the land-cutting.
And so,this is also an answer to “Why France refuse to support war”,you know,some of the territory of USA is “Buyed” from France. France remember this obviously.
April 3, 2009 @ 9:36 pm | Comment
14
By Richard
Thomas, yes absolutely, you can call that a threat to disrupt the summit. When the two leading heads of “Old Europe” make a joint statement to the press saying the summit is “pointless” that is indeed disruption. 100 percent. Disruption in a conference doesn’t mean throwing pies or shooting people. It means taking it in an unexpected/unintended direction.
April 3, 2009 @ 9:38 pm | Comment
15
By Thomas
Quote: “USA is an inalienable part of the inviolable territory of UK”.
Except that the percentage of America’s population with British ancestors isn’t all that high. 20 % or less, I’d say.
But anyway, why would your analogy imply that US and UK agree? Taiwan and PRC passionately disagree on most things, don’t they?
April 3, 2009 @ 9:40 pm | Comment
16
By Thomas
@Richard:
You don’t have to rub it in, I already agreed! 🙂
April 3, 2009 @ 9:41 pm | Comment
17
By Richard
Lets not make too big deal out of his leaving out the UK. That may be standard practice when referring to Europe, I don’t know and don’t really care because we’ll get side-tracked if we focus on the minutiae. The article was about France and Germany vs. China.
April 3, 2009 @ 9:42 pm | Comment
18
By Richard
Okay, Thomas, I wasn’t sure you got it. Won’t mention it again.
April 3, 2009 @ 9:42 pm | Comment
19
By Si
@foarp
absolutely
@lindel
“when issues like touching the queen or french and german threats to disrupt a summit sometimes those are remnants of their thinking they still have their french, german, spanish, british etc empires,”
as foarp said, the queen initiated it (if she hadn’t it would have been a serious faux pas – you may think other countries’ traditions or protocols to be backward but they need to be abided by) and the only furore has been from the nutcases. i don’t think anyone really cares.
@everyone
maybe my comment about “old europe” diverted from my real point in that epstein was far to generalised in referring to europe – the situation is far too complex for that. personally i have very little faith in the msm of any country when they report on foreign affairs – unless it is by someone who is a clear expert in the area it tends to be superficial at best and misleading bs at worse.
what will happen from now on is a steady deterioration of the living standards and wealth of the developed nations, of which this crisis is a symptom not a cause. as communication grows and becomes more sophisticated the tech/education advantage is becoming narrower which means that developing countries will be able to do what the devleoped countries do, but much cheaper. i don’t see a way out of this for developed nations.
April 3, 2009 @ 9:43 pm | Comment
20
By Si
@richard
the talk out “red lines” is standard positioning by european nations. we hear it all the time before big eu summits, particularly by the uk. it is often for domestic consumption if nothing else. i think this is perhaps part of the reason why france and germany are less enamoured of this approach is that they have seen this fail to work so many times in the european union. there’s a big eu summit, much haggling is involved, everyone agrees, then everyone goes away and ignores the summit’s decisions or stretches it to breaking point.
April 3, 2009 @ 9:49 pm | Comment
21
By Richard
Sounds like most industry conferences I’ve gone to for work.
April 3, 2009 @ 9:57 pm | Comment
22
By tom s
Richard Spencer at the Telegraph has a take on this – he basically says one should be careful before hailing China’s stimulus because a) it comes on the heels of some pretty dumb monetary policy and b) because China should not be compared too directly to Western countries whose recent history it does not share; it is at a different stage of development.
http://blogs.telegraph.co.uk/richard_spencer/blog/2009/04/02/g20_stop_taking_the_china_koolaid?from_comment=true&message=WW91ciBjb21tZW50IGhhcyBub3cgYmVlbiBtYWRlIHB1YmxpYyE=
April 3, 2009 @ 10:11 pm | Comment
23
By Richard
I saw Spencer’s post. He’s a great journalist but I thought he was a bit hard on China. (Not that I would ever be hard on China.)
April 3, 2009 @ 11:19 pm | Comment
24
By Resident Poet
La vielle Europe n’existe plus
La nouvelle n’existe pas encore
La Chine pas du tout réveillée
L’Amérique incertaine, en retraite
Mais pensez bien, amis, et vous verrez
Que l’Europe, la Chine et l’Amérique
N’ont jamais existé et n’existeront jamais
Qu’a l’intérieur de vos têtes pleines
De matière bouillonnante
De fantaisies
D’espoir
Mais pas du tout, et jamais,
De la pure réalité
April 3, 2009 @ 11:46 pm | Comment
25
By AndyR
Just gotta say…Richard shouldn’t you be working??? Just kidding…excellent posts recently, thanks!!!
April 4, 2009 @ 12:37 am | Comment
26
By Lindel
i was responding to this
“old europe” needs to go to the dustbin of history asap. all it means is pesky europeans who don’t agree with the us.”
the prior administration may have made that the most recent meaning, but the term “old europe” has meaning that has nothing to do with the US.
It also means sometimes the europeans forget it is the 21st century and start behaving like they still have their colonial empires or feud over past slights.
April 4, 2009 @ 12:42 am | Comment
27
By Richard
Thanks Andy, I try. Actually, I’m working Sunday-Thursday now, so I can post a bit more on Fridays, my day off.
April 4, 2009 @ 12:51 am | Comment
28
By MichaelTurton
I’m not understanding how China’s fiat control of the value of the Yuan works. If the US dollar is devalued, as it inevitably must be, I think, but China refuses to revise the Yuan upward, then essentially doesn’t that hold down the inflationary effect of the bottomless dollar? Is there a massive black market in Yuan in China now? Or is one expected? Or what?
What should I be reading? I’m in a 2007 book on China’s financial markets now, but it’s like ancient history.
April 4, 2009 @ 10:03 am | Comment
29
By Conscience
Richard, you juxtaposition of these two sides is really incisive by presenting a whole picture.
April 4, 2009 @ 11:00 am | Comment
30
By Dror
Richard,
China is not doing anyone a favor with its recent attempts to influence events and be more involved. It’s simply trying to save it’s own ass before all the dollars it owns lose their value. America, it seems, understands that one of the main causes of the crisis is China’s currency manipulation and is responding with moves that will cause the USDs value to go down and punish China for saving too much. There’s little China can do now to escape the pain. See my take on this new Financial World War here.
April 4, 2009 @ 3:09 pm | Comment
31
By Richard
Dror, if China does “save its own ass” (which, let’s face it, is what we all want our governments to do first) it has no choice but to work closely with the US and others. We’re all in this together, intertwined like big balls of string. Saving its own ass may be China’s motivation, but I disagree they are “not doing anyone a favor with its recent attempts to influence events and be more involved.” We want and need China involved. Everyone is saying they need to be involved more. Are you saying they should be involved less?
Michael, that is a complex question I don’t have the energy to pursue right now – have a fever and headache. Back later.
April 4, 2009 @ 4:54 pm | Comment
32
By Dror
Richard, I am saying that if they want to be involved in world trade, the first thing they should do is play by the rules – let their currency fluctuate (more) freely etc.
Indedd China made a big fiscal commitment in its stimulus package, but – with all due respect to all the Western economists – most of this money was previously earmarked for “shovel-ready” project + most of it will be spent in order to sustain China’s fixed assets bubble and not invested and the things that can really bring a change. This would mean that China will still have to rely on external investment and cheap exports and will hardly develop any new “skills” and human capital. It might help China buy time until consumption in the West picks up again, but it will not solve its own internal problem, and will position it to suffer even more once its bubble finally collapses.
As I wrote before, the saddest thing about all this is that this crisis is indeed an opportunity for China to deflate its bubble and make some serious change to its growth pattern and interaction with the world. This would have put China on a slower and more viable growth trajectory.
Again – China is only hurting itself by manipulating its currency. It gains hyper growth in the short term, and loses almost everything else in the long term.
April 5, 2009 @ 7:22 am | Comment
33
By Dror
I guess the best thing for us to do is wait and see. As you remember, most western economists (and you) wrote about China coming out of this crisis “unscathed”. Since then, about 25 miillion migrant workers lost their jobs, apartment prices went down some 20% more, and China’s government started to realize how deep it is in the s#$t by owning all these US T-Bills and is now trying to establish a global currency in order to minimize its own reliance on the USD (not going to happen).
Even Krugman realizes this (6 months delay, but still better than most).
Thank god, China will help protect the USD and has a strong interest to keep it strong. This is why the USD will indeed decrease in value, but not too much. Just enough to hurt Chinese exports and help America get back on its feet.
Don’t forget that America went into this crisis with all its debts in USD, a currency that America can print at will. Indeed, a privilege saved only for true super powers.
Don’t be so gloomy Richard. The American way is still the right way. It only needs some updating, but much less than you would think. Don’t get carried away by the right/left politicials and commentators who try to hijack this crisis for their own ends. Keep your eyes on the ball! 🙂
April 5, 2009 @ 7:29 am | Comment
34
By yourfriend
some thoughts from an “old european”
I guess you don’t like being on the receiving end of American propaganda.
That means you must be a crappeyouthe, i.e a British fenqing! Or brainwashed.
let their currency fluctuate (more) freely etc.
i.e let Europeans and Americans destabilize the economy through speculation. Kinda like Thailand.
Since then, about 25 miillion migrant workers lost their jobs
25 million sounds like a huge number but the total workforce is 800mil, not as bad as you want to make it sound.
Just enough to hurt Chinese exports and help America get back on its feet.
Not really. Once the money is gone, America’s obesity/general poor health, failing schools, unemployment and the weight of the entire world’s disdain are gonna start taking effect. I’m gonna guess the recent mass murders in New York and PA are just the tip of the iceberg.
April 5, 2009 @ 9:53 am | Comment
35
By stuart
“Richard, I am saying that if they want to be involved in world trade, the first thing they should do is play by the rules – let their currency fluctuate (more) freely etc.”
I agree absolutely. Unfortunately, China’s ‘chip-on-shoulder’ egotistical refusal to act in accordance with foreign advice (even when it’s in their own long term interests) does not bode well for global economic harmony. Nor does Beijing’s insistance on making investments conditional on dissing the Dalai Lama (and other such pettiness). As ever, China’s leaders are behind the maturity curve.
On a side note, where was Hu at the G20 bash? Very periferal – a mere shadow next to Obama’s gravitas.
April 5, 2009 @ 10:43 am | Comment
36
By Richard
Dror, I never, ever said China would emerge from this crisis “unscathed.” That is really a bad mistake on your part. I said I thought they’d emerge in a relatively stronger position than the US. Also, the myth that this crisis was mainly China’s fault is just that, a myth. The crisis was brought on mainly by the financial “wizards” in the US and, more than anyone else, Alan Greenspan. Read this for reference. Snip:
Dror, you can keep saying this whole thing was China’s fault, but you’ll be mighty lonely. As for having faith in the good old US of A, why should we? Driven by raw, unbridled greed that great nation has plunged itself into catastrophe. We just announced 8.5 percent unemployment and we’re just starting.
April 5, 2009 @ 11:38 am | Comment
37
By Dror Poleg
Richard,
The bankers would never had all this excess liquidity to play with if China would not have manipulated its currency. You are mistaking the effect with the cause. No doubt that the fed should have been more alerft and that bankers should have been stopped earlier, but this is not the cause of the crisis.
China was saving about 60% of its earning and buying loads of US T-Bills. The US had two options – serve as the world’s largest consumer in order to keep up OR create a domestic recession. It chose the former, and its harder to say how it could do otherwise. Have no mistake, the US consumers financed China’s growth as much as China financed the US’s consumption boom. You can ask yourself who go the better end of the stick and it might help you understand what China was up to and why (and China is not denying this, by the way, only you are).
As for saying that China is the only one to blame for this – I never said that. It shares responsibility with the US. And I have been quite loenly and proud at saying this for a good while, but now, as you see, many are starting to catch up, including Paul Krugman, Simon Johnson, Richard Spencer, etc. More importantly, China itself is starting to admit that being stuck with all these USDs in its hand was not such a good idea…
In any case, I don’t think we strongly disagree on most point. It’s just the general feeling… you seem so eager to blame the US for everything.
Apart from that, on a personal level, I think the current capitalist system is rotten and look forward to a new world order. But, as far as the current system goals and the way it should work – the rules of the game – there’s no doubt that China is the main culprit in creating the trade imbalance that led to the current mess. Yes, the US should have spotted this earlier, tame its own financial industry, maybe even raise protective barriers, but all of these would have been a defensive response to China’s own foul plays. It’s quite simple realy – in an integrated global financial system, when the 3rd largest economy manipulates its currency + saves 60% of its income, this quickly go off the rails.
April 5, 2009 @ 1:13 pm | Comment
38
By Richard
Dror, just like the reporter from Forbes who I linked in my last comment, I see the economic meltdown as 80 percent America’s fault, and that is not a very radical viewpoint. I love my country, but it was the key culprit, aided and abetted by China and greedy bankers around the world. China, I believe was stupid and reckless, but the American bankers who engineered the loans and encouraged us all to run up huge debts on multiple credit cards and who fought like mad to end regulation – these are the primary culprits. China was strictly an accessory. I also would absolutely not say that “many are starting to catch on” and then point to just three writers. Nearly all the focus of nearly every article on the calamity has been about the questionable (make that “evil”) practices of predatory lenders, a conscious and persistent attempt to dupe the public and to neutralize the regulators. Very, very, very few economists have blamed China for this mess (although, to be fair, that doesn’t prove or disprove anything). They helped to create a trade imbalance, as we’ve known for many years, but no one was raising hell about it until now, making me wonder even more about our “wizards.” If it’s as painfully simple as you suggest, why didn’t the wizards at the Fed and Treasury tell us we were in mortal danger years and years ago?
We will never agree on this, so I do recommend we call it a draw. Bottom line, and this is inarguable: the US got itself into this mess. China and others helped. It was a massive confidence game that would work until the participants realized it was an Enron-like house of cards. US blame, 80 percent. China blame, 10 percent. Europe and other partners’ blame, 10 percent. Those are the official and incontrovertible statistics.
April 5, 2009 @ 2:54 pm | Comment
39
By amadeus
@Dror Poleg
It is a good lesson for me,thank you. I have some questions ,would you mind of answering it for me:
1) Do you believe that economic liberalization will speed up political pluralism?
2) Are you really ready to see a strong China?
3）Is American leading the globe and exporting its value now?
Thank you
Your student 🙂
April 5, 2009 @ 2:54 pm | Comment
40
By Dror Poleg
@Richard:
1. What you are saying about the bankers’ greed is true, but it does not conflict with what I am saying. You are talking about how the bankers used the “rope” they were given to strangle themselves, and i’m talking about the reason they had so much rope to begin with.
2. If you want to call it 80%-10%-10%, then so be it. This is not kindergarten and not a blame game. All countries involved are responsible for their actions, and I don’t understand why you ascribe each American action to cunning and greed while dismissing each Chinese action for naivete and ignorance. If you think that China’s construction and manufacturing boom was not driven by more greed and more corruption than the american consumption binge, you are either naive or just refusing to see China for what it is (since your lakc of sympathy for America’s previous administration blinds you…).
3. I complete agree with you that America’s financial wizards should have “raised hell” about the trade imbalance earlier. They did, but not enough, since they needed China’s support on other international issues such as N.Korea, Iran, Sudan, Afghanistan, Iraq, etc. In fact, I think that this IS America’s major fault in this whole mess.
4. To sum it up: I see China’s main fault in manipulating its currency and amassing US T-Bills in order to maintain its growth. I see America’s MAIN fault in letting China get away with it. Practically speaking, the US had very few viable means to defend itself against China’s “trade war” maneuvers. Apart from forcing China to stop doing what it didn, the US had two options: to go into a self-made recession or to keep buying cheap Chiense goods like there’s no tomorrow. They chose the latter, and their “tomorrow” is already here.
@amadeus:
1) Do you believe that economic liberalization will speed up political pluralism?
I believe that these two things are two sides of the same coin and one is not viable over the long term without the other. Capitalism is based on the free flow of informaiton, the rule of law, and individual property rights. It does not work properly without them.
2) Are you really ready to see a strong China?
Yes. But strength comes from having an educated and stable society. I am in China because I love the country and its people, and all my “shouting” is in order to give my humble advice in order to avoid additional catastropy.
3）Is American leading the globe and exporting its value now?
The American way of doing things seems to be the main force in the world for the past 60 years, but it doesn’t and never did have absolute power to do whatever it wants. America’s strength is mainly in its soft power and ability to propagate its culture and its basic values throughout the world and “make” other countries adopt them out of their own free will. China, as you can, adopted many of America’s ideals and values and is today more open economically (and it’s ironic that China sees economic growth as its ultimate goal and is waving around its cash… this is not a very socialist/communist thing to do). Unfortunately, China seems to be adopting mostly the negative parts of capitalism – fierce competition, limited social security, limited investment in education and healthcare, extreme income gaps, and too much power in the hands of too few people. China, so far, did no choose to adopt most of the good aspect of capitalism – freedom of expression, free press, freedom of religion, free trade, individual property rights, indepdent judiciary system, etc.
April 5, 2009 @ 5:14 pm | Comment
41
By Dror Poleg
@Richard… and one last thing. I don’t value the oppinion of most economist, especially not when it comes to China – a country with very misleading statistics. I mentioned a few names since I know these are people you read and appreciate. Furthermore, I think that the fact that economists are the new priests and people trasure their everyword is a testament to the sad state of oru culture. Civilization is not built on economic growth and average GDP data. It is built on values and people who work hard and treat each other like human beings. Sadly, it seems that we live in a world were the economy has a life of its own, and we are all servants in an effort to help it become bigger and bigger, without remembering or asking ourselves why…
April 5, 2009 @ 5:17 pm | Comment
42
By Dror Poleg
@yourfriend: sorry, just saw your comment now.
In short:
1. The 25 million refers only to mirant workers, and not to other workers (plenty other jobs lost there, but the govt did not publish it). 25 million is about 20-25% of all migrant workers. That’s a big big big chunk. In addition, people are people and the world is not made of statistics on papaer. When you have 25 million uneducated people without a social safety network who are bored and angry, plenty of things can happen.
2. Using Thailand as an example has little relevance. As a fact, all of the world’s leading economies have free fluctuating currencies. This was not my invention. In addition, small economies like Thailand can afford to trade unfairly without causing too much damage to anyone bu themselves. China is the world’s 3rd largest economy and does not have that luxury. When it makes mistakes, it pays for them dearly, together with the rest of the world.
3. As for America’s state “once the money is gone”. Funny you would say that. America has plenty of intangible assets other than money: patents, the world’s best universities, an educated workforce, capital markets, a strong press, and an appeal as the leading immigration destination for the world’s brightest. These ‘institutions’ are not going anywhere and will be part of America’s recovery. In fact, China is the one that only has cash. And once the cash is gone (or its value diminished), it will remain a country with 800 million people who make less than 500 dollars a year, without a functioning healthcare and education system or any of the institutions listed above.
April 5, 2009 @ 5:32 pm | Comment
43
By amadeus
Thank you very much Mr.Freedom.I had entertained the hope that Uncle Sam is a superman,now I know, it is a paper tiger to some extent.
April 5, 2009 @ 7:15 pm | Comment
44
By Richard
Dror, we don’t disagree on much, except how much the US is to blame for the current catastrophe. I see the deregulation that led to the abandonment of Glass-Steagall (and all the other steps that then followed) as being at the heart of it. The US investment banks became an Enron-style house of cards. I cannot blame China for the grotesque excesses, the $35,000 toilets and corporate jets, and obscene salaries of the robber barons, of their creating this house of cards knowingly, and then coming to the very people they screwed, the US taxpayer, to bail them out. The path to armageddon was embarked upon long before China became a player, back in the 1980. I can’t really blame China too much for providing “the rope.” That was stupid and selfish of them, bit I don’t see it as malevolent. What the finance industry did was malevolent, along the lines of Enron’s brownouts in California to hike up energy bills artificially for little old ladies.
This crisis was American-made and China-facilitated (and Europe-facilitated). I don’t think any study of the crisis to date says the blame lies on China, except as a facilitator providing some rope long after the financial industry had taken off on its quest to hang itself and screw the little people, knowing always they were too big to fail and too well intertwined with the government. So can we call it a draw now?
April 5, 2009 @ 7:53 pm | Comment
45
By FOARP
It’s exactly the international nature of this crisis which meant that Merkel and Sarkozy’s demands for an international watch-dog should have been better listened to. Take the Royal Bank of Scotland for example, a British bank which became exposed to the sub-prime mortgage crisis through its acquisition of ABN-AMRO – a Dutch bank which had invested substantially in the sub-prime market. At no point could either British or Dutch regulators have taken significant action against investing in financial derivatives the creation of which was prevented in their home markets but allowed in the US. The compromise of greater co-operation between regulatory bodies only compensates for the existence of an international regulator in part.
Sarkozy may have been posing, but he definitely had a point.
April 5, 2009 @ 8:00 pm | Comment
46
By Dror Poleg
Richard, we can call it a draw, but I think we still have things to say :).
We don’t disagree on any of the facts. I have no emotions in this, and since I am not American or Chinese, this argument is not influenced by my political oppinions (I have any…).
I think that main difference is that you (like most Americans these days, it seems) see the world as a derivative of US economic policy. You blame it on Reagan, others blame it on Clinton – the actual oppinion is less relevant. What is interesting is that even during a GLOBAL crisis of such scale, most Americans still refuse to recognize China’s influence and weight and try to turn this whole issue into something aboou US domestic policy. America was flooded with cheap goods and cheap money. It had little to do against it, and it didn’t even do the little that it could + excerbated the situation due to its greedy* bankers and investors.
It is similar to an area being wrecked by a big wave, and then the locals are arguing about who decided to cancel the policy of free swimming lessons instead of asking themselves where the hell did the big wave come from and how it can be prevented in the future.
___
*Greedy: it is nice that everyone is angry about the bankers and american consumers now, but they actually behaved exactly like every citizen of a capitalist country is taught to behave: when good are cheap – buy, when money is cheap – borrow. Unfortunately, the goods were cheap due to China’s currency manipulation, and the borrowing rate was cheap due to China’s massive purchase of US T-Bills. Don’t forget that the US never asked China to buy its treasury bills, and actually asked it to stop more than once.
I think that capitalist culture is in a sad state: it is built “programing” people to spend all their money on things they don’t need and then borrow more money in order to spend more money on more things they don’t need. In this way, the perpetuate their position as slaves of the owners of capital and can never break the cycle of dependence. However, this is what western consumerism is built on, and using the bankers (or whoever) as scapegoats and put all the blame on them is not the solution. The bankers are simply an extreme version of American consumerism. There’s little difference between the guy on Wall Street who spent cheap credit to buy toxic financial assets with money he didn’t have, and the buy on Wal-Mart who spent cheap credit to buy (toxic?) products with money he didn’t have.
at the world through American politics. This way, you can claim that the crisis is a result of Reagan’s policies from the 1980s.
April 6, 2009 @ 6:54 am | Comment
47
By Dror Poleg
REPOST____
Richard, we can call it a draw, but I think we still have things to say :).
We don’t disagree on any of the facts. I have no emotions in this, and since I am not American or Chinese, this argument is not influenced by my political oppinions (if I have any…).
I think that main difference is that you (like most Americans these days, it seems) see the world as a derivative of US economic policy. You blame it on Reagan, others blame it on Clinton – the actual oppinion is less relevant. What is interesting is that even during a GLOBAL crisis of such scale, most Americans still refuse to recognize China’s influence and weight and try to turn this whole issue into something aboou US domestic policy. America was flooded with cheap goods and cheap money. It had little to do against it, and it didn’t even do the little that it could + excerbated the situation due to its greedy* bankers and investors.
It is similar to an area being wrecked by a big wave, and then the locals are arguing about who decided to cancel the policy of free swimming lessons instead of asking themselves where the hell did the big wave come from and how it can be prevented in the future.
___
*Greedy: it is nice that everyone is angry about the bankers and american consumers now, but they actually behaved exactly like every citizen of a capitalist country is taught to behave: when goods are cheap – buy, when money is cheap – borrow. Unfortunately, the goods were cheap due to China’s currency manipulation, and the borrowing rate was cheap due to China’s massive purchase of US T-Bills. Don’t forget that the US never asked China to buy its treasury bills, and actually asked it to stop more than once.
I think that capitalist culture is in a sad state: it is based on “programing” people to spend all their money on things they don’t need and then borrow more money in order to spend more money on more things they don’t need. In this way, the perpetuate their position as slaves of the owners of capital and can never break the cycle of dependence. However, this is what western consumerism is built on, and using the bankers (or whoever) as scapegoats and put all the blame on them is not the solution. The bankers are simply an extreme version of American consumerism. There’s little difference between the guy on Wall Street who spent cheap credit to buy toxic financial assets with money he didn’t have, and the guy on Wal-Mart who spent cheap credit to buy (toxic?) products with money he didn’t have.
April 6, 2009 @ 6:57 am | Comment
48
By Richard
Greedy: it is nice that everyone is angry about the bankers and american consumers now, but they actually behaved exactly like every citizen of a capitalist country is taught to behave: when goods are cheap – buy, when money is cheap – borrow
I totally disagree. They cheated and they won AAA ratings by consciously lobbying to relax the rules so they could be the loaners AND the auditors. They set up a bonus system to lure in the ignorant and intentionally fleeced and fucked them. There were crimes.
Okay, we all know where you stand. Final word: China was there and helped. No one, but no one, blames this so much on China as I’ve heard you do so.
All the things you say about capitalism are true and always have been. Which is exactly why Glass-Steagall and other regulations were necessary, to provide checks and balances, to keep banks responsible and out of high-risk, unregulated hanky-panky. You see Dror, it all worked well enough for many decades. The factor that changed this was deregulation and the co-mingling of government and Wall Street to the point where they became practically one. Add the cash flow from China and the gleeful participation of bankers in Europe and elsewhere to buy up the CDOs and you have a perfect storm. The blame this time falls on America, and that’s not a unique or bizarre conclusion. It’s simply the truth. China flooded the system with cheap dollars and you say there was nothing that could be done about it? Not even a word of warning to the American people from our leaders? Sorry, if this were such an evil thing on China’s part someone would have protested at the time, no? To do so now reeks of scapegoating. I’m all for blaming China – if I see something to blame them for. Here, I don’t – at least nothing more serious than being dumb and not considering the long-term effects of a dumb strategy. Verdict: US Guilty. China Not Guilty, aside from being dumb.
Can we stop now? I’m going to close the thread soon because I think at this point we’re just talking past each other.
April 6, 2009 @ 7:16 am | Comment
49
By Dror Poleg
Richard,
Your argument is summed up in your final sentence: “US Guilty. China Not Guilty, aside from being dumb.” – everything America does is smart (and evil…), and everything China does is silly (and innocent…). That’s a convenient way of looking at the world.
Everything you said about wall street lobbying etc. is true, but it is only half of the story, and it’s incredible how unqilling you are to see the other half.
As for no one blaming China as much as I do – again, this is changing quickly, and will gain more traction as the crisis unfolds. In any case, I like to judge arguments based on merits and not based on popularity. At times of blindness and confusion, popularity is mainly an indication of being wrong.
I don’t think we are talking past each other. And this is not about you and I. Interesting ideas are being exchanged and everyone is having a good time. It’s a public service.
April 6, 2009 @ 8:54 am | Comment
50
By Richard
Dror, if you look over this blog carefully you will see I am more than willing to blame China – when I feel there is something significant to blame it for. This simply isn’t one of those times. I never give China a free pass. And I don’t give them a free pass here, either. I say they were guilty of mass stupidity and aiding/abertting the financial crisis.
April 6, 2009 @ 9:01 am | Comment
51
By Dror Poleg
But why do you choose the word stupidity when it comes to China? Was it not greed?
Are the Chinese politicians and their cronies who made millions from China’s export boom not guilty of greed? How are they different from the Wall Street bankers you mentioned?
Also – if crimes were made on Wall Street – and they were made – people should pay the price and go to jail (and some are). But if these are crimes, it means they were done against American law. So, it goes against saying that they were made as part of official US policy.
April 6, 2009 @ 9:52 am | Comment
52
By Richard
I am perfectly willing to call it greed, or at least greedy stupidity. I attribute many of the CCP’s problems, like its ham-fisted attempts at global public relations, as stupid because they’re, well, stupid. Lacking in strategy and oblivious to long-term consequences.
But if these are crimes, it means they were done against American law. So, it goes against saying that they were made as part of official US policy.
You lost me there. There were indeed crimes, and the perpetrators should be prosecuted.Unfortunately, as with the criminals in the Bush administration who burned their memos licensing torture, most will probably go unpunished, if only because it seems America can’t be bothered now with looking back, we have so many more immediate fires to put out. I do expect to see charges filed against some of the biggest sinners, like the AIG departments that were playing Enron-style games, and some of the more blatantly predatory lenders who clearly intentionally deceived their customers with disastrous effect.
April 6, 2009 @ 11:11 am | Comment
53
By amadeus
@ Dror Poleg
Personally I think you win this debate,thank you for providing a new perspective of the view.
@ Richard
Emotionally I think you win this debate,how could white people blame it on Chinese – poor waged slaves.
Thank you
April 6, 2009 @ 11:57 am | Comment
54
By Dror Poleg
@Richard: what I meant is that on the one hand you are saying that all the financial engineering was done by crooks and on the other you are saying that it was official government policy since the 1980s. Anyways, I understand what you’re getting at, and I generally agree with you. Still, whatever they did with the extra credit does not explain where the extra credit came from. I also agree with you that once they had power, they used it to influence government in order to get more power.
The difference between the ‘criminals’ in China and the US, is that in the US some of them will go to jail, and the regulation will change in order to prevent them from doing it again (i’m sure they’ll think of new tricks though); in China, you will never even hear about what the banks have been up to, and the same government and officials who get the country into this mess are still running things. This alone is enough reason why China is not headed in the right direction and has much lower chances to benefit from this crisis in the long term.
@amadeus: this is an exchange of ideas, not a competition! 🙂
April 6, 2009 @ 2:00 pm | Comment