by TigPil » Sat 06 Jan 2007, 23:53:05
$this->bbcode_second_pass_quote('chris-h', '
')1) China is a communist state .Business failure does not mean uneployment.
2) What about more exports to rich oil producers ?
3) Demand not there ? Everybody likes more !
4) Wealth is not there ? Good let's increase people wages. Like henry ford did.
5) The chinese certainly can afford everything they make at the chinese price of Z .
6) What will happen to the massive surplus it already has ?
7) China is a communist state . It can use price controls.
It produces much more oil than is needed solely for agricoltural uses .China communist goverment will prioritise.
There will be no food shortages in China.
Chinise people instead will start to use bicycles again.
Ok I'm going to address the points you make above in order.
1) The successful side of China is the free market side and major economic growth only started in 1981 after privatizing certain enterprises. The economic history of China before 1981 speaks for itself (not to mention every other communist country in the 20th century). Just because a communist government can force full employment does not guarantee a successful or productive economy. Controlled economies are very poor at matching supply with demand.
2) The aggregate population of the future oil exporting countries is probably no more than 300 million and the distribution of wealth in those countries is extremely uneven. So we are talking about far fewer actual consumers than represented by the consumer base of the developed world.
3) Does everyone need 2, 3, or 4 DVD players? More of what? The point is China is currently geared to produce certain types of goods and increasing the quantity of those goods is of no incremental utility to consumers.
4) What Henry Ford did applied to a single company within a broader economy. If you increase wages across an economy as a whole without changing any other economic conditions that will simply lead to price inflation. More money chasing the same quantity of goods.
5) See my response to 3 above. You missed the point of my example. The Chinese have developed in such a way as to produce a product for global demand. They are producing consumer goods for 6 billion people (or whatever subset of those 6 billion can actually afford the item in question, my guess is 2 billion or less). Since per capita GDP in China is around $7,000, they still have a fair portion of their population engaged in subsistence farming. This means that they can produce for 2 billion but have an internal market for those goods of around 400 million. That means that you have 80% overcapacity in your production capacity and can layoff 80% of your workforce. But as soon as the unemployment rate jumps your demand pool contracts from 400 million to something lower and so on in a vicious cycle. And that is called an economic recession, or if it lasts long enough a depression.
6) China's massive surplus is invested in dollar denominated assets. Investing back in dollars and maintaining a large currency reserve helps China keep the yuan stable and their currency competitive in the export market. However, if the US economy collapses as you predict the dollar will weaken significantly and the US government may either default on or inflate its way out of some of its debts. So China's accumulated surplus may be ephemeral at best.
7) See point 1 about Chinese communist government and economic mismanagement. China does produce about 3 million barrels per day and consumes 6 million. If they do prioritize for food production then they can produce enough to feed their current population for the time being. But pumping 3 million barrels per day will deplete China's proved reserves within about 15 years, at which point China would need to import 100% of its oil or engage in coal to oil conversion. Also, Chinese agriculture is currently unsustainable and regions are experiencing falling water tables and soil erosion (a problem shared by farming practices in some parts of the developed world). I don't know the full extent of these problems but they could exacerbate a decline in Chinese food production.