Christopher Laird argues that the world has transitioned from an industrial to a post-industrial economy, causing massive population shifts & job losses.
China not the economic replacement to US
He says that China will not be the economic wonder set to take over as the world's leading nation. China is not the US and does not follow the free market entreprise model of the US. China is a hybrid system of socialism/communism combined with capitalism. He thinks China's experiment with capitalism is doomed to fail, & might lead to wars over resources.
He contends that the Chinese economy is a huge bubble & growing out of control. The nature of the Chinese economy with endemic government corruption leads to wasteful allocation of resources, risking vast amounts of money at moral hazard. Examples are overbuilding of infrastructure - Ghost Cities of unoccupied buildings.
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China is too big not to fail : it is too chaotic, & hopelessly unregulated
China is still an un-modernized society of 800 million peasants living on US$100-200 a month. He sees this as an economic & socio-political disaster waiting to happen.
China has 2 problems with implementing capitalism :
One is it's huge population.
For example, 3 million engineers graduate each year ! Neither China, nor the US or Japan, or indeed the world economy, has enough work for that many graduates.
Due to automation and machines, China will simply be unable to create enough high-income jobs in manufacturing for the bulk of its poor. For the majority of China's population, aspiring to western standards of living will be just a dream of unachievable fantasy. Their purchasing power will afford little more than instant noodles.
Unemployed graduates
Nowadays being a college graduate does not guaranty a life of high income employment. Whether China, US, Europe - this is a worldwide phenomenon affecting just about every country. Lack of employment will inevitably lead to consequences.
Chaos in geoplitics & economics
Evolving from industrial to information/technology economy, these forces play out :
- Labor arbitrage : internet & communications outsources backoffice work (like phone banks, accounting, lawyers, doctors)
- Instability : nations losing jobs become unstable economically & politically
- Automation : increases efficiency at cost of jobs destruction
- Wealth disparity : new economic reality produces 2 distinct classes - those with decent paying jobs, versus the unemployed or who slave on low income
Wealth disparity is a major problem for China. If they cannot manage this effectively, it could lead to political instability, even revolution.
*Chaotic Events* - the fuse for the tinderbox world under painful economic stress.
The Lehman situation was a stark example of what could happen - a chaotic event which unraveled the Fed & other central banks. They lost control of the situation and were hours away from a world banking shutdown.
Lehman shook an already-stressed financial system, and the world economy took a nose-dive. Total collapse was averted by the desperate measures instituted by governments & central banks. The economy now limps along in decline from pre-crisis levels. It has not exited the precarious situation, & further shocks in a weakened economy could implode the financial system.
Transition
As the world transitions from industrial to post-industrial economy, there will be winners and losers. The stakes are high, and players understand the vital strategic step is to move swiftly to gain control of resources before others.
The world is now at the early stages of that transition.
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