20070806   

Michael considered fate at 11:48   |   Permalink   |   Post a Comment

How long will China last? I've been asking this question for awhile now, pointing out all the major problems inherent in a ginormous, growing economy where huge gaps in inequality, poor working conditions, and even worse environmental conditions prevail. Well, I'm not alone. The Chinese Deputy Minister of the Environment tends to agree:

How great are the effects of [the] environmental degradation on the economy?

[Deputy Minister]: It's massive. Because air and water are polluted, we are losing between 8 and 15 percent of our gross domestic product. And that doesn't include the costs for health. Then there's the human suffering: In Bejing alone, 70 to 80 percent of all deadly cancer cases are related to the environment. Lung cancer has emerged as the No. 1 cause of death.

I wrote earlier about government corruption in China (China is weaker than we think and the west has misunderstood the threat:

The Chinese economist Hu Angang.. calculates that over the late 90s the cumulative annual cost of corruption was between 13.3% and 16.9% of GDP and is still around that level today..

add that to the 8 to 15 percent effect coming from their enviromental problems and you've possibly hit 30%!)

Luckily, even if it is only a Deputy Minister, at least someone in China seems to be reading the writing on the wall. Interestingly, some of his discussion could almost apply directly to the U.S. as well:

The faster the economy grows, the more quickly we will run the risk of a political crisis if the political reforms cannot keep pace. If the gap between the poor and the rich widens, then regions within China and the society as a whole will become unstable. If our democracy and our legal system lag behind the overall economic development, various groups in the population won't be able to protect their own interests.

The key take home message here is that fast economies need fast policies and income gaps make for potentially uncontrollable issues down the road. A democratic society - even one in which capitalism rules - can only become so weighted with oil hungry monopolistic glad-handing millionaires before the whole thing just topples over.

I have a sneaking suspicion of my own, too. True capitalism is not being performed in the U.S. today. Certainly, there is a degree of financial freedom available in this country that allows for anyone to potentially become the next millionaire. However, that is not to say that everyone's chances are the same. As long as our government is pro-big business, they will have some sort of advantage and power over us. As long as it is prohibitively expensive to create a local phone company, Verizon will not be our elective service but our necessary one - it is, essentially, a tax. As long as AOL is allowed to give the run around to its users and make it almost impossible to cancel their service (something that has been happening for well over a decade now) and as long as the government does nothing about this, then we do not operate in a real capitalist society. If the RIAA is still around, still harrassing grandmothers without the technical know-how to even play an mp3, we do not live in a true capitalist society. In this respect, contracts of any sort are - in some ways - anti-capitalist devices. They tie you into a service which you are unable to terminate without getting the run around from the company and which give you little recourse when the service you are paying for doesn't work. Why should I not be allowed to charge my cell phone company for time when the service is unavailable? Why shouldn't I be allowed to get a bill reduction if my time warner cable is on the fritz for a weekend? Why should I be required to wait 6 to 8 hours for the installation guy when my time should be as valuable as theirs?

The danger here (and I may be crack-potting) is that of a false economy. Perhaps China is loosing 30% of its GDP to corruption and environmental concerns but how much are we loosing in "ethereal" financial transactions (defined as any time you spend money for nothing - like when you cable is out for the weekend)? Sure, that extra money makes companies like Time Warner stronger but is that truly a good thing? Competition, innovation, and creativity is what drives true growth and much of that is stifled by the current climate of big corporation control.

Meanwhile, the technology sector is one example of an area where big corporations don't quite exist yet. Certainly, there are Microsoft, Cisco, IBM, and the like but they are not in a position to create the new and innovative services that are popping up on the web all the time. Why? Because they are large behemoths and less likely to create new off-shoot divisions. Instead, they buy companies and claim lowered running costs. This is not creativity or innovation, it is cherry picking. I would argue that the truly worthwhile services that come from small companies could, in fact, support them as growing and eventually profitable entities and that this would be a better and more natural way for things to progress.

There is something to be said for a narrow income gap and this can be seen in much of Europe and especially Scandinavia. They may not have as strong an economy but they, as people, are happier, more satisfied, and (as a sad excuse for an armchair historian) a lot less likely to solve their problems with aggression and military action.


Household Income Inequality in the U.S.A.

As income gaps widen here in the states so does unrest (does Larry Ellison need a yacht with 8,000 sq. meters of living space at an annual running cost of $13 million?). I won't say that he shouldn't deserve it in some respects because we would all like to believe we can strike it rich. However, what is rich and what is richdiculous?