Reading this NY Times article:
http://www.nytimes.com/2008/11/14/world/asia/14china.html?exprod=myyahoo
Including this quote:
67,000 factories? This is China. Supposedly they have all of the money.
Is the financial crisis going to turn the entire world upside down? I’m not sure what to make of this. Can the outcome be anything other than another world war?
Probably I’m being naive, but why would this lead to a world war? What would be gained economically by China through warfare? If their economy is on the verge of collapse as implied by the article, how could they even afford to engage in a war?
What I find interesting about the article is other than a throw-away line about world economics “intensifying” the slowdown they’re experiencing, there was no attempt to explain what has caused that slowdown in exports. Is it all due to the nearly global economic crisis, or did they finally bring (some of) it upon themselves with their lack of product safety regulations?
Usually, China could just sell some of the American debt that they bought, but no one is in a buying mood right now so…
Yup, no one in the world wants the US to have a bad year.
Amidst all the talk of the decline of American hegemony, we once more have a vivid demonstration of the old axiom “When America sneezes, the world catches a cold”.
I’m afraid that no matter how weak the United States appears at this time, everybody else is far weaker for it. While I have at times been accused of American exceptionalism, it seems to actually be true in this case. How long it stays that way remains to be seen.
That article is a bit shy on numbers. If 67,000 factories have shut down, how many employees does that cover (were many of these 10 person shops making grommets for tennis shoes?) and what percentage of factory jobs does this cover?
While that number is astounding, I have a sneaking suspicion that it is actually a very small percentage, when you spread it across all of China.
As far as this leading to war, when economies go bad there is a motive for debtor countries to go to war. Conquering your neighbor is one way to cancel a debt. That was one of the factors that lead Iraq to invade Kuwait. But China is creditor nation. If they attacked Japan, one of the first and easiest things the U.S. could do would cancel all the U.S. bonds they hold.
OK, let’s get a grip.
The Chinese population is huge (1.3 billion). Their economic growth for the last several years has been in near 10%. They’re still predicting a 9% growth rate this year, which is incredible.
They’re having a bit of a crisis because a> growth is slower in other areas of the world and b> the peak oil prices were a huge shock to the continued flow of jobs from first world nations to China. But look back at that phenomenal growth rate and take their fears with an Ocean full of salt.
The big “crisis” is due to the hopes of quite literally hundreds of millions of Chinese peasants who do not currently have all those “high paying” factory jobs. There’s a huge income gap in China between those employed in the factories that make everything for everyone, and the rather sizable portion of the population that works everywhere else. Part of the Chinese political/economic stabilization of their current regime is based on the promise that more jobs are coming, more wealth is coming, that people will be brought into prosperity as fast as the Government can make it possible.
Naturally, any “slowdown” in this process, even a slight drop in their white hot growth rate, is going to produce some hints of panic and instability among those who are still waiting for their share of the wealth. As the article says;
“The social problems arising from the slowdown have stirred anxiety in the top leadership of the Communist Party, whose legitimacy is based on maintaining economic growth.”
Frankly, I don’t see where anyone could even inject the silly idea of “war” into this picture. The entire Chinese economy is based on Exports, and the increase thereof. This requires stable relations with the entire world and stable currency.
First rule of business: You don’t kill your customers. That one is so obvious that most lists don’t bother with it, going for messages more pithy.
I’m optimistic that the world economy has become such a tangled web of interconnected interests that large, developed nations can no longer go to war with each other, instead picking on smaller, poorer countries when they wanted to show off, but people thought that in 1914, so what do I know?
CNN had an expert on who said 200,000 people a year move into Chinese cities looking for jobs. They need a growth rate of approx. 9 percent to stay even. It could be ugly for a while.
All wars are about money or resources. Strange how capitalists do not want to just pay for what they need.
Often, wars don’t happen because of some grand plan. They are backed into due to conflicting desires and pressures from the population.
For example, the U.S. could respond to the slowdown by slapping tariffs on various countries. Tariffs are a classic way to kickstart international tensions. Then you have someone play a little brinksmanship and make threats, and have the other side respond agressively, and there you go.
China could, for example, feel pressure to take Taiwan, and become desperate enough to try. Iran could get nukes, and decide that it was going to throw around threats of annihilation while issuing demands no one will accept.
I don’t think any of this is particularly likely, but the notion that no one will go to war because it’s not a good idea economically didn’t stop any of the last wars from starting.
Very true. Many wars start because both sides are issuing threats believing they will make the other side back down. As the threats do not have the desired effect they escalate and finally both sides are in a position where war or loss of face are the only options left. And most peoples and governments would rather go to war and lose lives than lose face. Many wars are the result of miscalculation rather than a carefully planned plot based on economic interests.
I heard the same talk on NPR last night. Generic British Economist was saying that the part of the recession hitting us now would look small compared to what may be coming for China. When times get hard for them, they may need to turn their money to their own problems, and won’t be able to buy the rest of us out of ours. He suggested the last time anything comparable happened, China & India were “emerging” but by now they are huge players, and … well basically “buckle your seat belts”.
I also think there is something to the idea that somehow or other this all leads to more war. There doesn’t need to be a logical path to that. When animals are really stressed, they get more violent. Plus, war can be economic stimulus.
Very often governments seek to create external enemies in order to unite the population against the external “threat” and silence internal dissidence. This is the oldest trick in the book. If China were to come to that my guess is Taiwan would be the objective.
I just read that projections were that China would become the world’s largest economy by 2030 and that this crisis may hasten that date.
I dunno. Who vs. whom? Even if it leads to civil war in China, that could be a purely internal affair if nobody else intervenes, and who would want to?
I don’t see why it is so baffling that a nation that produces consumer goods for export would see factory closings when consumer spending dies down in the nations that buy from them.
Fighting slowdown, China announces stimulus package
China is not looking toward a costly war. They are looking toward managing their economy to be more inward facing so that they are not subject to the vagaries of foreign markets. They are spending on infrastructure upgrades and providing jobs to those who might otherwise be jobless after the plunge in the export market.