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The Chinese Economy is On a Slowing Boat
James Finnan

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Wages aren't a problem only in China Print E-mail

This Bloomberg take on Henry Fordism in China really takes the cake for mistaking the forest for the trees, if you'll pardon the woefully mixed metaphor.

First of all, the article breezily implies that a doubling in wages would promptly get Chinese consumption up to the point where the country can take over from the US as the engine of the global economy. But as we've pointed before, such a scenario would be historically unprecedented, however much appreciated by China's trading partners.

Certainly it will take more than a dose of Henry Fordism to make that happen for a nation that has fully a fifth of the world's population.

Then the article overlooks the fact that the same problem dogs the US, though it's in a more advanced phase. Indeed, real median wages have been stagnant here since the mid 1970s. And that's a big reason the consumer got so heavily indebted. How else was Mr. and Ms. America supposed to keep buying houses and other stuff?

And while there's a running debate, at least in the blogosphere, over the significance of the resulting inequality, it's hard to see what's going to keep hell from breaking loose here if the middle class continues to shrink, now that debt can no longer be expected to make up for wages.  

Among the more radical scenarios to result from this and other fundamental economic woes is that of the cassandra James Kunstler, who essentially foresees the wholesale dismantling of the global economy in favor of a highly localized one that makes the federal system we now have, not to mention governments of any kind, largely irrelevant.

But how we get from points A to B (or more like Z) is an open question. Kunstler grants as much, when he all but posits that the alternative is chaos, serfdom or some unpleasant combination of the two.

And while it goes without saying that the current political and economic establishment wouldn't be part of such radical change, I just hope the pain involved in such tremendous dislocation is manageable. Is there a means of making it so?

It might include Fordism on a grander scale, though with a post-modern bent. As in back to the land via high speed rail, as Kunstler might put it.

Of course, Wall Street and its promoters see no need for any of this, because the consensus there is for 2.5 percent GDP growth in coming years, not that even that much is likely, or would change much if it were. Not when much faster GDP growth is needed to make even a dent in unemployment any time soon. Then again, that quarter sees no reason to do so. All it cares about is inflation, and a heavily gated community to hide within.

 
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