We give too much credit to China for the industrial-commercial challenge it now poses to America and the rest of the West. But if we step back to the bigger scheme of things, we’ll be able to trace back much of the prosperity we see in China today to its ultimate origins — the intellectual capital originating from the industrial revolutions and the creative explosions that began in the West — neat stuff that laid the commercial, technical, and industrial infrastructure that paved the way for the unprecedented quantity of capital and the unprecedented efficiency by which this capital is channeled and allocated that we see today.
Without all that — i.e. without the origination of this capital and the facilitation of its movement and allocation to those who need it the most — China will never have been the “manufacturing base” that it is today nor would India (and now the Philippines) be the outsourcing capitals of the world today. For that matter, neither will the Middle East see any of the oil wealth they enjoy today (because the ideas of the petroleum guzzling machinery and the production and lifestyle demand for these were all originated from the West). Japan, mighty industrial power that it is, itself started out as a net importer of capital (in all of its wondrous forms of which its financial incarnation is but a small subset) from the West.
There is, as expected, a lot of “debate” around how currencies’ relative values bob freely or get tweaked every now and then to suit the politics that surround the direction and speed of trade and capital flow across the planet. But stepping out of a regard for economics framed by a monetary system that has been perverted (enabled by modern technology) to such an extent that its place in human civilisation as a reliable measure of value has become suspect is the challenge that may define the 21st Century. Already two of the biggest global risks to our “civilised” way of life have come about as a result of the illusion of value that our monetary system propped up for us. The first is evident in how the global financial crisis (GFC) uncovered the ability of this system to hide regions in our economies that are devoid of real value. The other is the reality of this system epically failing to account for costs that have accrued against the ability of the planet to sustain human life over the last 200 years.
I go into a bit of the detail behind the long buried notion that money is but a flawed scorekeeper of real value in my book. This excerpt is from the section where I introduce some concepts of “wealth” and “capital” that may sound a bit counter-intuitive to the textbook-imprisoned minds of some “economists”:
We have so far used the word “capital” in this chapter but have gone nowhere near any discussion about financial stuff. For most people, this can be quite disconcerting. However, a discussion on capital can potentially go on and on without ever touching on the subject of Finance. That is because financial stuff merely represents the mechanism – and a flawed one at that – for keeping track of and quantifying the value of capital. The fact is, capital continues to be created and destroyed below the radars of most economies’ financial systems. This flaw manifested itself many times in history, most notable of which were the stock market crash in the 1930’s that led to the Great Depression, the Asian Currency Crisis in 1997, and the Dot-Con meltdown in early 2000. In all of these instances, financial data consistently provided misleading information right up to the end when panic finally gripped the investing public. The financial indicators of the value of capital showed robust gains, but the subsequent crashes demonstrated with a vengeance the true value of the underlying capital itself (the assets – both tangible and intangible – owned by the businesses whose shares were traded in the equities markets) when people suddenly came to their senses.
What does this have to do with the the emerging challengers to America’s domination of the planet’s trade?
Simple. Much as the US laments the havoc that the Chinese economic juggernaut is causing its people’s way of life, the rise of China along with the wealth that puts teeth in the “belligerence” of these Arab desert kingdoms are creations of the American Way. Where it not for Americans’ glutinous appetite for oxymoronic economic constructs — cheap luxuries, mass individualised mobility, and commodity manufactured goods — none of these geo-politico-economic monsters would exist as the risks they now pose to the American way of life. But they do exist now.
That they now make the viability of the way of life of their creators precarious is the biggest irony that will define the 21st Century.
The three oxymoronic economic constructs have become addictions precisely as a result of the illusion of value that our present monetary system propagates. Affordable access to these makes the average schmoe today far wealthier than, say, any one of any ancient Egyptian Pharaoh you can name. But are these things truly affordable? Have we counted the real costs of all this stuff that we enjoy today? We evaluate their value on the basis of how much it “costs” to mass-produce these things in volumes that allow them to be sold to us at “affordable” rates. But think for a moment where this ability to mass produce them comes from. It comes from mechanisation. And what ultimately powers mechanisation? You guessed it. Fossil fuels.
When we think of mechanisation, think beyond the machines that power our factories to the machines that power the ships and trucks that transport raw materials and finished products to and from production and consumption sites. The trinket that comes together with a McDonalds “Happy Meal” — a product that would have come across as an artifact of exquisitely precise craftsmanship to an ancient Egyptian Pharaoh — was churned out in a factory somewhere in China and shipped thousands of kilometres so that it could give amusement to the average attention-deficited Western kid for all of five minutes. We produce them in vast numbers and give them away for free because our machines make it “economically viable” — even “profitable” — to do so. We do so because we can.
Our monetary system tells us this is so.
It does this without making a full accounting of the bigger reality that surrounds free Happy Meal trinkets shipped thousands of miles from the Third World rat hole where they were manufactured;
– That it is environment-killing machines that allow goods to be made in numbers that make them “affordable” and even disposable;
– That it is environment-killing machines that make “viable” the moving of goods from places where they can be manufactured cheaply to places where they can be consumed wantonly; and
– That it is global wealth disparity between the First World and the Third World that underpins economists’ rationale behind the need for “economic growth”.
The big lie is that everyone can enjoy First World standards of living. Indeed, we are made to believe that everyone is entitled to such levels of affluence — a belief that justifies humanity’s foolish rush to embrace “globalisation”. But stop for a minute and imagine a world where every Chinese and Indian household has one car, one washing machine, one water heater, one air conditioner, and one or two kids who buy lithium-ion battery-powered mobile phones and iPods every couple of years.
Can such a world exist?
Look no further than how outsourcing may just be the new OFW-ism — no more than the most recent gold rush that may further impoverish Filipinos.
Perhaps it is time that the intellectual capital that made the West great and that spread the notion of limitless “growth” that today underpins the aspirations of emerging China and India be applied to the task of coming up with a better regard for the challenges we face in the coming decades.