The socialists and communists never seem to learn that central planning and government control is a failure, is expensive, and never seems to accomplish any of their objectives. Currently the feeling seems to be that China (formerly known by the politically incorrect but accurate title – The People’s Republic of China) is taking over the world. Everything seems to be made in China and the PRC seems impervious to the economic woes of the world. But is this real? Is the PRC the economic success that they want you to believe or are they practicing the tried and true strategy of the USSR, which is that if you say it’s true then it must be true?
It is important to understand that there is no private capital in the PRC and that everything is controlled by the government. This means that all new construction, production volumes, and imports are strictly controlled and subsidized by the government. Given this strict control and oversight by the government the PRC must be a booming success but alas – it is looking more and more like the PRC may have created a bubble that is nearing a tipping point.
The Central Planning philosophy seems to be “if you build it they will come”. Meaning that if you build a mall or apartment complex the consumption will follow which has left the government holding empty buildings, empty malls, and ongoing construction projects which will yield even more empty buildings and malls. You must remember the bedrock philosophy of socialism is employment not efficiency so the harsh rules of capitalist supply and demand are ignored and not viewed as relevant. The result is that there is a housing glut with substantially more housing available that is needed, but that really only applies to the coastal region. The interior of China continues to be rural with a standard of living equivalent to most third world countries.
But this problem of excess capacity isn’t limited to housing but is prevalent in manufacturing as well. Chinese manufacturers continue pumping out huge amounts of steel, cement, aluminum, and other products to the point that it is unlikely the economy can absorb the output. When the world economy took a down turn China did not cut back but continued churning out massive amounts of product. Now the world economy has cut back and the domestic Chinese market cannot absorb the surplus. In a capitalist economy the individual businesses would simply reduce output, eliminate inefficiencies, and reduce headcount but these solutions are not possible with central planning, because employment is the objective. Furthermore, Chinese industry is heavily subsidized and relies strongly on imported raw materials. The pressure on the Chinese government is tremendous and the question is – how long can they maintain this drain on their economy?
Showing posts with label red china. Show all posts
Showing posts with label red china. Show all posts
Tuesday, April 17, 2012
Friday, March 23, 2012
China – A Strategic Threat?
Apparently in an effort to cover up the total failure of Communism and the growing failure of Socialism, the popular press has chosen to forget that China is actually the People’s Republic of China and that it is in fact a troubled communist country. Instead we are treated almost daily to the glowing reports of China as an economic powerhouse that is rapidly taking over the global market. Unfortunately the popular press is not noted for its objective reporting or critical thinking so perhaps it is time to look behind the press releases.
While China is a large country with a huge population, it is not a homogenous population in economics, culture, or ethnicity. Historically China has been a series of fiefdoms or provinces that have not always been comfortable or even friendly with each other. Imperial China was more or less stable but hardly rich and hardly a military threat. But also the coastal regions of China have always been economically stronger than the interior and have prospered at the expense of the agrarian interior regions. It was this economic disparity that allowed Mao Tse Tung to overthrow the Chinese government and to establish what Communist China is today.
However, the reality seems to be that nothing has changed under the communists and the same economic divisions remain. In fact what appears to be a strong and competitive Chinese economy is more of a veneer than a reality. The reality is that two thirds of the Chinese people have incomes equivalent or below third world countries. While the Communists unified China they also once again demonstrated the weakness of communism, which is universal poverty. The current government recognizes the growing instability of their government and has sought to achieve greater stability through mass employment. But mass employment requires industrial growth, subsidies, and expansion of consumption either domestically or via exports. But with central planning – the mainstay of communism – there is no thought given to markets or margins – just to employment. The result is exports become a necessity because the domestic market cannot absorb the output. Therefore, China must export their goods in order to maintain political stability through salaries and the revenues necessary to support the agrarian majority.
The economic downturn has affected the economies of virtually every nation but with its dependence on exports China has been hit particularly hard. China depends on the American and European markets to absorb their exported goods, but with their declining economies the law of supply and demand has taken over. The demand for Chinese goods is down and the competition for those goods is up. China is caught in a dilemma – they cannot reduce their output nor can they reduce their subsidies to the interior and their manufacturing base. They cannot layoff workers because employment is key to their communist principles, but they cannot sustain their current production levels either. The Chinese government is trapped in the inherent flaw of Marxism – central planning and government ownership rather than private ownership. Maintaining stability is dependent on goods flowing overseas while raw materials flow in, but maintaining this flow is a growing challenge because the Communist system ignores profitability in favor of employment which in turn breaks the self regulating law of supply and demand. This problem is further aggravated by inflation, which not only raises the cost of subsidizing the interior but it drives up the cost of the manufacturing output which reduces their competitiveness with other global suppliers. An alternative might be to produce higher cost products like automobiles, which China is attempting, but this requires a different workforce – one with more education and training than what is available today. But even if they are successful in making this transition they will come face to face with Germany, Japan, and the United States. The Chinese government is caught in a situation they cannot control. They are coming face to face with the fatal flaw in socialism, which is employment as the priority rather than efficiency.
While China is a large country with a huge population, it is not a homogenous population in economics, culture, or ethnicity. Historically China has been a series of fiefdoms or provinces that have not always been comfortable or even friendly with each other. Imperial China was more or less stable but hardly rich and hardly a military threat. But also the coastal regions of China have always been economically stronger than the interior and have prospered at the expense of the agrarian interior regions. It was this economic disparity that allowed Mao Tse Tung to overthrow the Chinese government and to establish what Communist China is today.
However, the reality seems to be that nothing has changed under the communists and the same economic divisions remain. In fact what appears to be a strong and competitive Chinese economy is more of a veneer than a reality. The reality is that two thirds of the Chinese people have incomes equivalent or below third world countries. While the Communists unified China they also once again demonstrated the weakness of communism, which is universal poverty. The current government recognizes the growing instability of their government and has sought to achieve greater stability through mass employment. But mass employment requires industrial growth, subsidies, and expansion of consumption either domestically or via exports. But with central planning – the mainstay of communism – there is no thought given to markets or margins – just to employment. The result is exports become a necessity because the domestic market cannot absorb the output. Therefore, China must export their goods in order to maintain political stability through salaries and the revenues necessary to support the agrarian majority.
The economic downturn has affected the economies of virtually every nation but with its dependence on exports China has been hit particularly hard. China depends on the American and European markets to absorb their exported goods, but with their declining economies the law of supply and demand has taken over. The demand for Chinese goods is down and the competition for those goods is up. China is caught in a dilemma – they cannot reduce their output nor can they reduce their subsidies to the interior and their manufacturing base. They cannot layoff workers because employment is key to their communist principles, but they cannot sustain their current production levels either. The Chinese government is trapped in the inherent flaw of Marxism – central planning and government ownership rather than private ownership. Maintaining stability is dependent on goods flowing overseas while raw materials flow in, but maintaining this flow is a growing challenge because the Communist system ignores profitability in favor of employment which in turn breaks the self regulating law of supply and demand. This problem is further aggravated by inflation, which not only raises the cost of subsidizing the interior but it drives up the cost of the manufacturing output which reduces their competitiveness with other global suppliers. An alternative might be to produce higher cost products like automobiles, which China is attempting, but this requires a different workforce – one with more education and training than what is available today. But even if they are successful in making this transition they will come face to face with Germany, Japan, and the United States. The Chinese government is caught in a situation they cannot control. They are coming face to face with the fatal flaw in socialism, which is employment as the priority rather than efficiency.
Wednesday, October 20, 2004
What Ever Happened to Red China
When did the “Peoples Republic of China” become simply “China”? As far as I know the Chinese government still thinks of themselves as “The Peoples Republic”, yet the media no longer refers to them as the PRC. For that matter when did China cease being “Red China” and morph into the PRC and then to “China”? Are they less “Red” today? Has China become democratic or less communist? Of course not, what has happened is the media wants to turn world attention away from the abuses by the remaining Communist Regimes. North Korea is no longer “Communist North Korea” instead it has evolved into “North Korea” or if any negative connotation is offered, it is referred to as a “rogue regime”, but rarely if ever is it referred to as “communist”. The same is true of Cuba, suddenly Castro has gone mainstream as the Left tries to garner acceptance for his worker’s paradise, while ignoring the continued suppression of dissent and persecution of those who dare to challenge him. Did Communism die with the Berlin Wall? The recent anti-war protests were organized by the communists but for the most part in their haste to turn opinion against the administration the part played by the communists has either been glossed over or ignored altogether. What is going on in the media and when did communism die? For that matter what about its birth?
Interestingly, Communism is actually a moral reaction to capitalism and both are simply structured philosophical descriptions of market dynamics and part of the Science (?) of Economics. Commerce was largely unexplored or at least languished among the scholarly pursuits until the 1600’s. The history of the development and evolution of Economics is eloquently described in the “Worldly Philosophers”[1] Adam Smith in his book the “Wealth of Nations” actually is describing the real workings of the world of commerce at the dawning of the Industrial Age. Communism as described by Marx and Engels came as a philosophical reaction to the dark side of capitalism. This reaction can be summed up as being a moral judgment on the unequal distribution of wealth but it is a long way from formulating a philosophy and acting upon it. So Communism wasn’t born until 1917.
What seems to have escaped everyone’s attention is that governments can be capitalist, socialist, or even communist, but the actual form of government is none of those. Governments are democratic and freely elected, or they are hereditary absolute monarchies, or dictatorships. Communist governments are and have always been dictatorships. No Communist government has ever been freely elected. Yet from the very outset the Leftists have been unable to get past the inherent morality of Communist philosophy and see its failures in practice. In 1921 Lincoln Steffens upon his return from the Russia of Lenin and Stalin said “I have seen the future and it works”.[2] Of course virtually all of the leftist writers and journalists at the time were offering very positive views of Communism. So the positive view of Communism has a long history and includes some very impressive names who offered if not outright support, certainly provided a patina of approval. Shortly after assuming the Presidency President Truman said “You are needlessly worried about Russian Communism, I am worried about British Imperialism”. A view he quickly came to realize was erroneous but a position that the liberal Leftists never came to share.
Instead the media and the Leftist intelligentsia glossed over the excesses, blatant falsehoods, and most of all the atrocities committed by the Communist Regime in Russia and later in Cambodia, Cuba, China, and Viet Nam. These were largely ignored and the left wing intellectuals continued their love affair, providing the Russians with atomic secrets among other traitorous acts. Even today the Goldberg’s are viewed as martyrs by the Left and the posthumous proof that Robert Oppenheimer was in fact providing secrets to the Communists was simply ignored by the media. But now we have the papers of Senator McCarthy describing his attacks on Hollywood and the State Department, those “bastions of “right thinking” and the media are once again in a fighting frenzy. Senator McCarthy was certainly a flawed man and there is little doubt that he grossly overplayed his hand, but the fact is Hollywood was and still is filled with actors, producers, and directors who are filled with animosity toward America and American ideals and freedoms, in the words of Jeanne Kirkpatrick the “blame America first crowd.” Today “McCarthyism” is an epithet to be hurled at anyone who dares to challenge the Leftist intellectuals and their anti-American and pro-communist stance. The fact is that Senator McCarty was not totally wrong. . If you doubt this watch any Oliver Stone movie. He is an historical revisionist determined to show the world how history should have been.
But, what about Red China – how did it become not Red? How did Cuba cease being Communist Cuba and become “Castro’s Cuba”? Are these countries no longer “Communist”? Have I missed some dramatic change of heart? Are these countries now allowing free speech, freedom of the press, private ownership? Not that I know of, instead they continue to be oppressive states that imprison people for simply disagreeing with them. No dissent is allowed. The liberal press (a redundancy) paints a rosy picture of China today – it is a worker’s paradise. They are actually allowing elections at the village level. Of course, the old USSR held elections as well and you could vote for any Communist Party Candidate of your choice. The same is true in China today. It is just as Red and just as oppressive as it always was. It is interesting to me that the liberals today see China on the way to reform much like Taiwan and Korea. Apparently I missed something here because Taiwan was a leftover from the old Chiang Kai Shek regime and has been a democratically elected republic for a very long time. It evolved from a dictatorship but that was a very short period. As far as I know Korea is divided into two parts, the South which is a democratic government and the North which is a brutally repressive communist regime. So the “reforms” that the Chinese Government are implementing seem to me to be commercial more that political. Apparently this is just “realpolitik” because China wants to sell to the US and the US wants to buy. Red China is dead – Long Live China – the worker’s paradise.
[1] The Worldly Philosophers, Robert Heilbroner, Simon & Schuster, 1953,
[2] Useful Idiots, Mona Charen –Regenery, 2003
Interestingly, Communism is actually a moral reaction to capitalism and both are simply structured philosophical descriptions of market dynamics and part of the Science (?) of Economics. Commerce was largely unexplored or at least languished among the scholarly pursuits until the 1600’s. The history of the development and evolution of Economics is eloquently described in the “Worldly Philosophers”[1] Adam Smith in his book the “Wealth of Nations” actually is describing the real workings of the world of commerce at the dawning of the Industrial Age. Communism as described by Marx and Engels came as a philosophical reaction to the dark side of capitalism. This reaction can be summed up as being a moral judgment on the unequal distribution of wealth but it is a long way from formulating a philosophy and acting upon it. So Communism wasn’t born until 1917.
What seems to have escaped everyone’s attention is that governments can be capitalist, socialist, or even communist, but the actual form of government is none of those. Governments are democratic and freely elected, or they are hereditary absolute monarchies, or dictatorships. Communist governments are and have always been dictatorships. No Communist government has ever been freely elected. Yet from the very outset the Leftists have been unable to get past the inherent morality of Communist philosophy and see its failures in practice. In 1921 Lincoln Steffens upon his return from the Russia of Lenin and Stalin said “I have seen the future and it works”.[2] Of course virtually all of the leftist writers and journalists at the time were offering very positive views of Communism. So the positive view of Communism has a long history and includes some very impressive names who offered if not outright support, certainly provided a patina of approval. Shortly after assuming the Presidency President Truman said “You are needlessly worried about Russian Communism, I am worried about British Imperialism”. A view he quickly came to realize was erroneous but a position that the liberal Leftists never came to share.
Instead the media and the Leftist intelligentsia glossed over the excesses, blatant falsehoods, and most of all the atrocities committed by the Communist Regime in Russia and later in Cambodia, Cuba, China, and Viet Nam. These were largely ignored and the left wing intellectuals continued their love affair, providing the Russians with atomic secrets among other traitorous acts. Even today the Goldberg’s are viewed as martyrs by the Left and the posthumous proof that Robert Oppenheimer was in fact providing secrets to the Communists was simply ignored by the media. But now we have the papers of Senator McCarthy describing his attacks on Hollywood and the State Department, those “bastions of “right thinking” and the media are once again in a fighting frenzy. Senator McCarthy was certainly a flawed man and there is little doubt that he grossly overplayed his hand, but the fact is Hollywood was and still is filled with actors, producers, and directors who are filled with animosity toward America and American ideals and freedoms, in the words of Jeanne Kirkpatrick the “blame America first crowd.” Today “McCarthyism” is an epithet to be hurled at anyone who dares to challenge the Leftist intellectuals and their anti-American and pro-communist stance. The fact is that Senator McCarty was not totally wrong. . If you doubt this watch any Oliver Stone movie. He is an historical revisionist determined to show the world how history should have been.
But, what about Red China – how did it become not Red? How did Cuba cease being Communist Cuba and become “Castro’s Cuba”? Are these countries no longer “Communist”? Have I missed some dramatic change of heart? Are these countries now allowing free speech, freedom of the press, private ownership? Not that I know of, instead they continue to be oppressive states that imprison people for simply disagreeing with them. No dissent is allowed. The liberal press (a redundancy) paints a rosy picture of China today – it is a worker’s paradise. They are actually allowing elections at the village level. Of course, the old USSR held elections as well and you could vote for any Communist Party Candidate of your choice. The same is true in China today. It is just as Red and just as oppressive as it always was. It is interesting to me that the liberals today see China on the way to reform much like Taiwan and Korea. Apparently I missed something here because Taiwan was a leftover from the old Chiang Kai Shek regime and has been a democratically elected republic for a very long time. It evolved from a dictatorship but that was a very short period. As far as I know Korea is divided into two parts, the South which is a democratic government and the North which is a brutally repressive communist regime. So the “reforms” that the Chinese Government are implementing seem to me to be commercial more that political. Apparently this is just “realpolitik” because China wants to sell to the US and the US wants to buy. Red China is dead – Long Live China – the worker’s paradise.
[1] The Worldly Philosophers, Robert Heilbroner, Simon & Schuster, 1953,
[2] Useful Idiots, Mona Charen –Regenery, 2003
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