Saturday, April 14, 2012

My response... a message board discussing China's imminent and inevitable rise to global dominion:

This discussion began with the perceived importance of China purchasing land abroad and the ramifications thereof. I was (and still am) of the opinion that China is one of the largest unsustainable economic bubbles (in nominal and real terms) in history, and that its accounting systems, property rights, blatant mercantilist policies and completely ossified political structure will guarantee its downfall. Others here took the position that China is going to bestride the globe "soon" as its most powerful country.

Now, 10 months on from the beginning of our conversation, we have plenty of evidence on my side of the ledger. The question is, where does the capital flow now, and what are the effects? Forget China overtaking the United States by 2030...I doubt it will remain a "Country" by then.

We must think in variant terms here. It is during these times in history that the political geography re-forms form from economic tectonics.

The People's Republic made the same mistake Russia did. They tried to compete myopically in an arena where they enjoyed a temporary competitive advantage. This advantage faded over time and caused more and more destabilization.

In the U.S.S.R.'s case, it was nuclear and conventional armaments using a surplus of Physics genius. In the P.R.C., it is Economic development via low labor costs and zero respect for engineering rights and intellectual property laws.

But we see the destabilizing effects once these advantages are ameliorated...we also see the danger of myopically pursuing the same strategy after your competitors have altered their own behavior. The U.S.S.R. continued to invest in nuclear weaponry while its populace was miserable. The P.R.C. continues to practice a mercantilistic "export, export, export our way to growth!" while its populace grows miserable.

They share similar processes in strategy formation. They will also share similar fates.

No comments: