The G20 meeting of advanced and emerging economies has just wrapped up in South Korea. Picture a handful of captains of leaky life rafts shouting driving lessons at a passing freighter—specifically a Chinese one—and you have a pretty clear idea of what happened at this meeting.
China has been constantly devaluing its Yuan, driving exports. That causes problems for Europe and the Americas because when the consumer is at a hardware store and a Chinese-made hammer is about five bucks lower in cost than the one made locally … guess which one will move off the shelves faster?
China can make things inexpensively for two reasons: Workers are happy to bust their behinds for however many hours their employer asks of them, without complaining, striking, demanding more or better benefits, or any other such things that waste time and drive down production.
And China actually believes that it is still important to produce things. Ironically, the very capitalist concept of creating something of value that can be sold to someone who requires it is alive and well. Whether the Chinese are there of their own free will or whether human rights abuses are involved in keeping them there is another issue—and one that needs addressing in terms of equalizing markets and international competition, an issue as significant as any fiddling with the Yuan in which the Chinese may be engaged. But there’s no denying China’s grasp of this very basic trade concept of “profit for value” that has been so badly corrupted in western democracies through the perversion of the natural relationship between buyer and seller—typically by unions, benefit plans, taxes, and all sorts of other add-ons that serve only to complicate and obscure a logical and mathematical relationship.
Of course, in China the government provides capital for any really important Chinese business, and ultimately profits from its productivity, making the whole endeavour communist. The price of productivity is paid through sacrifice of individual freedom since no one who is financially tethered to the government is truly free, but THIS is the uneven playing field that needs to be addressed: Will Western democracies tell China that they will collectively hike import taxes on Chinese products, and impose various economic and political sanctions until such time as they grasp the concept of economic and individual freedom? Will President Obama stick up for the Chinese people working their fingers to the bone to produce toys for American kids in the same way that he defends his union pals in the interest of “workers’ rights”? Will he be for the Chinese—and perhaps even for the Russians, who are currently facing a new proposal by industrials to bump the legal workweek from 40 to 60 hours—what Ronald Reagan was to Eastern Europe and the people of the Soviet bloc during the Cold War?Highly doubtful. When you’re laid out in a hospital bed, you’re in no position to whine about the quality of the food. Nothing productive can come of it—and someone may even spit in it. That, right now, is Obama and the West in relation to China. Europe and the USA are in debt. China has the cash to bail them out and to buy up their deficits. Moral integrity tends to loosen a bit when the wallet is empty.
You can tell mom and dad off, and even run away from home, but if they’re providing the roof over your head, you’re going to have to suck it up—at least until you can crash at a sympathetic friend’s place. Right now, everyone is crashing on China’s couch. And when dad comes home, you’d better have the driveway clear and dinner ready. And that’s exactly what French President Nicolas Sarkozy—the new G20 president for the next year—did when the Chinese President and his wife came to Paris last week in advance of the Seoul summit. The roads were cleared of protesters, press conferences were prohibited, President Hu Jintao could speak without facing any questions or accountability from the French press, the entire decor at the Élysée Presidential palace morphed to China red for the live televised address, all the ministers and their wives, as well as various French showbiz performing monkeys popular in China, were all in attendance for the soirée. Then dinner was served up for dad (and his wallet) to great fanfare.
Instead, the G20 will now turn its focus to controlling non-Chinese entities like banks considered to have a global enough reach that their implosion à la Goldman Sachs circa 2008 would cause worldwide financial mayhem. They will soon be told what to do by this group of politico-economic savants, and forced to keep larger reserves in case of implosion. So the next time everyone stops paying their mortgage and credit cards because the governments are encouraging credit and spending—at least by their own example—the banks will be able to theoretically close shop in a more orderly fashion.