Posted on 12/04/2014 4:15:32 PM PST by etl lll
There’s no easy way to say this, so I’ll just say it: We’re no longer No. 1. Today, we’re No. 2. Yes, it’s official. The Chinese economy just overtook the United States economy to become the largest in the world. For the first time since Ulysses S. Grant was president, America is not the leading economic power on the planet.
It just happened — and almost nobody noticed.
The International Monetary Fund recently released the latest numbers for the world economy. And when you measure national economic output in “real” terms of goods and services, China will this year produce $17.6 trillion — compared with $17.4 trillion for the U.S.A.
As recently as 2000, we produced nearly three times as much as the Chinese.
(Excerpt) Read more at finance.yahoo.com ...
That's sugar-coated pablum for Western observers. In reality, the Communists shot opium cultivators, dealers and addicts.
That’s what peasants eventually do to end a growing drug trade regardless of form of government. It can be done with or without order.
As a longtime non-Chinese observer of the Middle Kingdom, I'm not defending either the Chinese people or the Chinese political system. I'm just pointing out that China's is a capitalist system to which the government has applied lipstick and referred to a socialist system with Chinese characteristics.
Richard Pipes once said, more or less, that the problem with the Soviet Union wasn't Marxism-Leninism, but Russians, who haven't gotten rid of their worldview that Russia's destiny is to bring the world under its rule. China presents more or less the same problem, but its ambitions are thousands of years old. Our dilemma is that we are allied with countries that have been targets of Chinese ambitions for millenia. How much sacrifice should Americans be prepared to shoulder on behalf of allies who will always be there for us when they need us?
The Chinese have been growing and using opium since the Tang Dynasty 1300 years ago. It was only under Communism that the government started massacring people for growing, using or selling it. One thing I'll agree with you on, though. The only way to eradicate drug usage is mass murder. Countries in East Asia that have limited themselves to killing drug dealers have only managed to reduce drug sales.
“IMHO there has been little vision in the US business community for way too long”
Up to the mid 1960’s the route to the CEO suite in US corporations was through customer oriented functions (sales and marketing) or operations (manufacturing, product development, and logistics). These were the executives who either had to generate sales by serving customers or actually product the product. Their accomplishments were direct and measurable. They were producers, not beancounters.
By the late 1960’s the bean counters (financial MBA’s and lawyers) were wresting control of corporations from the producer executives. In the 1970’s and 1980’s cost cutting and financial manipulation (LBO’s, outsourcing) became the route to the top. Product quality was cheapened, capital investment slowed. As a result by the early 1990’s US factories were inefficient, products were poorly designed and corporate America was facing huge investment to recapitalize US industry by buying the modern equipment needed to bring the US industrial infrastructure of the 1950’s and 1960’s up to the standards and capabilities of the approaching 21st century.
Instead of making investing multi billions of dollars in modernizing neglected and inefficient factories to give US workers the modern tools to compete globally, the bean counters running US corporations decided instead to further disinvest by moving capital out of the US and contracting to foreign companies their manufacturing operations. Beginning with the George H.W Bush administration, tariffs were lowered and quotas eliminated allowing products produced in third world countries, by newly built modern factories, compete with US workers saddled with and aging or obsolete inefficient capital infrastructure. As the new factories were built overseas, often with development money from multinational organizations funded by the US government, the inefficient and uncompetitive US factories were not cost competitive and were closed. The bean counters heading up US companies poured what should have been funds invested in productive infrastructure into stock buybacks, private equity takeovers, ill conceived acquisitions and other financial exercises that did nothing to build long term value for shareholders but did result in manipulation of financial results to maximize executive bonuses. In twenty five years what was the greatest industrial infrastructure on the planet has been almost completely gutted. Entire industries, supply chains supporting those industries, and the millions of middle class production related jobs supporting those industries and supply chains are gone.
It is ironic the “robber barons” of the 19th century became incredibly wealthy investing in productive assets inside the USA that employed American workers. These men were producers, developing better mousetraps and selling those mousetraps to the workers they employed creating more opportunities and wealth for both the industrialists and the people they employed, not to mention the nation as a whole. In contrast today’s robber barons are vultures. Colluding with politicians, foreign nationals, and rapacious bankers they have stripped the engines of the US economy bare, enriching themselves and industrialists in other nations and leaving the US worker with a declining standard of living and condemning the children and grandchildren of what is left of today’s middle class to a life of third world poverty and likely servitude to foreign masters.
Yes, the bean counters took over US industry built by visionary builders, stripped it bare, and sold off the carcass to accumulate personal wealth unimaginable a century before. Even the bankers of yesteryear, such as JP Morgan, financed the ships, airplanes, and factories of his day, employing capital to build assets that would produce value for decades. Instead of investing in productive assets with long term value for the nation, today’s bankers, fully backed by the US government so they take no personal risk, speculate with depositor money engaging in high frequency trading in pieces of paper (derivatives, junk bonds) which will produce no products, transport no goods, and employ no middle class assembly line workers. For producing nothing of long term value they skim billions of dollars in transaction costs to become elite members of what we today call the wealthy 1%. Unlike the entrepreneurs of previous generations, or the true investment bankers such as JP Morgan, these banker aristocrats have no skin in the game because as the 2008 financial crisis demonstrated, if they fail the government will bail them out by stealing from the taxpayer.
In the days when CEO’s worked their way up from the factory floor or the sales organization, the average CEO made 10-15 times the salary of the average production worker. Today’s bean counter MBA CEO’s, who have never worked in a job actually producing a product or a sales to a customer, are paying themselves 150 times or more the salary of the average worker. At the same time they are destroying the US economy.
The mainstream press isn’t reporting it but China is carefully and methodically signing trade deals around the planet that eliminate the US dollar as the currency in which transactions are denominated. The day is soon coming when the dollar will no longer be the world’s reserve currency and the trillions of dollars printed by the Federal Reserve to fund the irresponsible federal deficits of the current and previous administration will become worthless. Since year 2000, less than 20 years ago, the nation has increased its total debt from $5 billion to $18 billion.
We are technically bankrupt and thanks to the decision to go “free trade” in the 1990’s, instead of rebuilding our industrial infrastructure, our productive capacity is an empty shell. This nation does not have the production capability or capacity to refight World War II, or beat the Chinese manufacturing economy of today in a protracted conventional war, much less 10 years from now. We won WWII because our second to none industrial infrastructure allowed us to outproduce our enemies in weapons and supplies. How would we clothe our soldiers and population if our ports were blockaded in 2020? There is virtually no textile industry so we cannot put clothes on our people if we don’t have access to Chinese textile mills. How would we build our smart bombs and missiles when the computer chips that make them work are produced by the enemy bombing our cities? How would we make the steel to produce tanks, trucks, ships, and guns when the steel mills no longer exist? When China is able to take out our aircraft carriers and submarines in a conventional war China can choke a US economy dependent on global supply chains the same way the industrial North choked off the import dependent agricultural South during the Civil War. Face it, service economies are not self sufficient nor can they domestically produce the weapons of war necessary for self defense. We have also learned service economies will not produce enough decent paying jobs to support an upwardly mobile middle class.
Yes we owe our children better. Cleaning out the corruption in the system means more than replacing the politicians. American’s boardrooms also need a housecleaning to sweep out the parasites and put in place people who actually know how to create and produce items of real value.
Thank you for posting that. It is a great explanation, and should be necessary reading for those looking for explanations for how we got to where we are now.
National Socialist China is the model for the world supported by the world bank elite.
If China had a similar government to what we began with, they would have dwarfed us decades ago - bigger populations of Free People tend to do well.
Your honest commentary on the history of de-industrialization of the U.S.A. was very well done. Thank you for passing your knowledge on to the rest of us.
The time has come for availability of more information about efforts for trade and foreign alliances from 1969 through the 1980s. The history will be offered, where it will be most appreciated—completely outside of contemporary politics. See earlier western efforts for Czechoslovakia and Poland along with newer efforts.
See open source technologies in the following. Look past the political correctness necessary for contemporary public affairs. Listen to Marcin. Stay with the video, until you see farm equipment—one small part of the effort. That project and many others have progressed much since then.
Marcin Jakubowski - The Open Source Economy | @marioninstitute
https://www.youtube.com/watch?v=MIIzogiUHFY
Fuzhou Launtop M & E Co.,Ltd.
“Now the company owns 850 employees, among which there is 100 technical person.”
They are located in Fuqing, China. I’ve been there (my wife was born there). It’s not a tourist area like Beijing, and almost no one in that city speaks English. This was likely written using their version of Google Translate.
In assessing living standards, as in GDP per capita, yes, but if you are comparing the size of economies, use the raw numbers.
The U.S. economy is 70% larger than China's, although down from 3X the size in 2000.
The author wants to make a good story, so he uses PPP. He also uses the raw data in 2000 and PPP this year, which reveals his trickery.
Absolute control still rests with the Party, however, down to the factory level. As such, is not China a socialist system with a quasi-free market periphery?
China's economic success, relative to its peer India, must be credited to certain characteristics: its culture, i.e. the innate qualities of its people, the invisible hand of a relatively free market or, god forbid, central planning. The alchemy may be a combination of all three.
How would you summarize the reasons for China's growth?
You have described the situation quite accurately.
Hi I just got logged back in, I am now in Texas. Sorry I was just reading my posts backward, and yours is the first one which is looking for feedback.
WOO-HOO!!!
I believe we as a country have completely sold out the industry, which made us great.
I believe nobody yet realizes what this means, China is now the world’s premier producer.
But mostly I’m very happy to be now posting from the great state of Texas.
Texas bump.
Absolute control rests with the Federal government. It can shut down any business or combination of businesses it wishes to, via regulations, taxes or simple harassment. What gets in the way of its diktats? The fact that the government isn't monolithic.
The Chinese government might be run by a single party, but its policies are a compromise between competing party factions. Part of that competition is for power and perks, but some of relates to policy differences unrelated to personal gain. Hua Guofeng was Mao's handpicked successor when he took over after Mao died in 1975. By 1978, he had been demoted to a figurehead position by Deng Xiaoping, who became China's supremo for over a decade, and shepherded its move away from a command economy.
The party does own a controlling interest in some of the biggest companies in the country, ranging from banks, insurance companies to heavy industry. But what makes a country communist isn't government ownership of industry - it's output decisions made by central planners without any reference to market cues and employees who are paid the same regardless of output. For decades, Taiwan's economy was dominated by large government-owned companies run for profit. They were inefficient and subject to political interference and rent-seeking, but no one called Taiwan's government communist.
China has developed rapidly compared to India because because the leadership has more or less agreed that capitalism is the way to move the nation forward. The factional disputes have been over the speed of the change and who gets the perks, but not over the direction. China's path, of export-driven growth, is a well-trodden road. The leadership isn't composed of rocket scientists collectively having a eureka moment.
The principal requirement for economic growth has always been good infrastructure. In that respect, China has pretty much painted by the numbers - it's built roads and railroad track, upgraded ports, telephone lines, power stations, and in general, done all the things necessary to minimize costs for companies that decide to build things in China either to sell to the domestic market or export abroad.
India has done little of the preceding. In addition to having poor infrastructure, it has persecuted companies that ventured into India, and generally made things difficult for them in very gratuitous ways. Why has the Indian leadership not reached a consensus on doing the simple things that need to be done for India's economy to take off? I have a feeling India's aristos are a bunch of Marie Antoinettes, which would make them not very different from the elites of most non-Western countries with stagnant economies. They've got theirs - why should they worry about what the hoi polloi want?
Indonesia, one of the countries leapfrogged by China in the past decade, is now adopting the policies of its successful East Asian neighbors, the same policies that have taken China from rock-bottom in the GDP per capita rankings, to the middle of the pack. At least since the 70's, it has generally had roughly 2x India's GDP per capita. Under a new president who appears to be working on making the necessary infrastructure investments, while cracking down on corruption, I expect Indonesia will expand its edge over India to 3x by 2020.
The reason I brought Indonesia into the reply was as a point of comparison. I have heard from business people on the ground that Indonesia is a hard place to operate in. I can’t imagine that India is worse, but that is apparently the case. And that is why despite an abundant pool of cheap labor and superior proximity to the EU, India remains a relative economic backwater compared to its East Asian counterparts.
Congrats and welcome to the land of steers and queers (obligatory Full Metal Jacket reference, although drill sergeants from a certain era are said to have used the line quite liberally). Did you move to a major city or out in the sticks? Of course, to a CA native, all of TX may seem like the sticks.
Dallas.
I like the weather.
(so far...)
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