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LAST WORD: Four Important Economic Lessons the West Should Learn From China
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conomists, business leaders, and news presenters in the West are constantly harping on about what China and other emerging economies need to do in order to improve their financial system society, environment, political system and just about every other aspect of life. What is less commonly seen in the mainstream Western media and academic spheres are people saying what developed countries are doing wrong and countries like China are doing right.

 

I for one think it is a shame that our policymakers and central bankers in Europe and North America don’t take a few select leaves out of the Chinese book instead of lecturing the rest of the world about economic policy whilst they unwittingly destroy what little prosperity we have left! Here are four of the big things economic planners should realise…

 

Trade is better than aid

It never ceases to amaze me how news reports from within the former colonial powers of Europe cover China’s expanding influence in Africa and other resource-rich countries. In most cases the Chinese are being portrayed by the so-called ‘expert’ analysts as being some kind of ruthless, neo-colonialist empire which is using its new-found economic might to rape and pillage the minerals, energy, and agricultural land of other far-flung countries.  Whether or not one deems China’s ‘mining rights for hospitals’-deals with African countries to be equality advantageous for both sides, the fact remains that it is a more economically rational policy in the long term than either colonisation or aid programs.

 

One of the most authoritative economists of recent times is Zambian-born Dambisa Moyo. Her two major works, Dead Aid: Why Aid is Not Working and How There is a Better Way For Africa and Winner Take All: China's Race for Resources and What It Means for the World, shine a great deal of light on the implications of today’s Sino-African ties, and both are well worth a read in general. To paraphrase one of Moyo’s key conclusions, it is clear that trading with other nations is far more efficient than giving aid!

 

Asset bubbles lead to trouble

For so long now the Federal Reserve and their counterparts in the UK, Japan and elsewhere have been pumping up property and stock markets with their reckless but popular policies of cheap credit and quantitative easing. It’s all well and good for asset prices to rise as wider economic circumstances become more favourable, but inflating valuations to unsustainable levels will only ever lead to disaster when people see past the smoke and mirrors.

 

We have seen the catastrophic consequences of loose monetary policy time and time again in the last century alone. First came the Wall Street Crash of 1929, caused largely by too much easy money, then came the Great Depression – a consequence of not enough money in the system, and in recent decades it is fair to say that the Western world has seen more bubbles than a flatulent carp. The on-going financial mess, which has been caused by overleveraged banks and unsustainable debt levels, is as good a case as you’ll find for less tinkering with the money supply and tighter controls on the credit markets.

 

Yet despite the fact that it has now been nearly 6 years since the crisis began, the key players in the central banks have once again set about injecting billions upon billions of dollars into bond markets in order to promote economic growth by juicing up equities and real estate like steroid infused cattle.

 

China is certainly not immune to the dangers of overblown assets. In fact it is currently undergoing a moderate credit crunch and a potential real estate bubble of its own. However, in contrast to the risky and unproven ‘money printing = growth’ policies in the U.S. and Europe, Chinese central bankers and policymakers have thus far shown themselves to be more sensible and level-headed in terms of putting economic and price stability over short term financial euphoria.

 

For starters, there has been a string of bold policies aimed at curbing speculative property investment. Added to that we have seen many times in the last few years that the authorities are willing to raise rates in order to put the brakes on inflation; regardless of whether it makes other economic figures less attractive to the bankers and speculators.

 

Savings and investment create growth and prosperity

China, as with other parts of the world times gone by, has seen first-hand what benefits a country receives by having a healthy saving culture. Unfortunately for us Europeans and North Americans, we are constantly bombarded with propaganda from companies, the media and even politicians saying that from a young age we need to take out colossal mortgages on property, buy a new car and upgrade our phones. All of this of course involves us taking advantage of those wonderful credit cards and loans that our lovely friends at the bank are kind enough to offer us!

 

In conjunction with our collective addiction to debt, we are also increasingly coming face to face with the downfalls of a service-based economy. The U.K., which relies far too heavily on financial services and pen-pushing civil servants to fuel its economy, is particularly vulnerable in this regard. In the long run, an economically healthy nation can’t just provide services and spend borrowed money, it also has to produce, export, save and invest.

 

Unfortunately for China, a large part of its mainstream economic intelligentsia now seem to have been infected with the idea that more lending and spending by middle class consumers is the magical fix for slowing growth. Sure, a certain level of consumerism is good for an economy – especially when it leads to technological and time saving innovations, but relying too much on domestic consumption and promoting debt over savings is only going to lead to disaster.

 

Wars aren’t worth it

Again, this is a topic in which the U.S. media in particular portrays China, Russia and a number of other countries in a negative light. When you hear Fox News banging on about how these BRICS nations have vetoed military action in Iraq and Syria, one could be lead to believe that they are in cahoots with the local warlords and anti-American fundamentalist leaders in the Middle East.

 

But perhaps, just maybe, countries like China have learned from the countless mistakes and money wasting that has resulted from the U.S. trying to police the world for the last 50 years or so. I’m sure that most readers of this magazine would love to see certain regimes toppled and terrorist-friendly warlords taken out of action. Doing so, however, costs an enormous amount of money and in most cases turns out to cause more problems than it solves.

 

Ironically enough, the same media outlets that often portray China as being too soft on hostile nations and preferring trade over war, are also helping to ramp up the ‘China is taking over the world and is preparing to colonise its neighbours’ nonsense. One has to wonder when, if ever, the barbaric mentality of the military-industrial elite will fade into the darkness, and when policymakers in the US and other western countries accept that the money spent on wars would be far better used if it went towards building hospitals, schools, roads, factories, solar panels and high speed trains. 
 

By Josh Cooper
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