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This Fourth of July Marks the Week China Became the Most Powerful Economy in the World
by Charles Mudede • Jul 3, 2019 at 10:45 am
All that's left is that national feeling... LAILARBERG/GETTYIMAGES.COM
Two years ago, the US had three ways of dealing with the spectacular rise of Chinese capitalism. One was to reduce the economy's influence in its own region (this was Obama's plan, which had its origins in the Bush administration and took the form of a trans-pacific trading arrangement anchored by the US consumer market). The second was to reject globalization as constructed by the neoliberal program and revert to a New Deal-like project that heavily invested in US research/education, enhanced controls on finance, increased government revenue, strengthened social safety, and massively upgraded infrastructure (this was Bernie Sanders's position).
The third also rejected neoliberal globalization, but replaced it with protectionist and neo-mercantilist policies that directly confronted Chinese capitalism and asserted a US economic power that had more to do with national pride than anything found in reality. This was Donald Trump's agenda. It lasted for two years. It finally died at the fourteenth meeting of the G-20 in Osaka. The US will enter its 243rd year of existence as the second most-powerful capitalist economy in the world.
writes:
In a meeting on the sidelines of the G-20 summit in Osaka, Japan, President Donald Trump and Chinese President Xi Jinping agreed to resume trade talks that had broken down in May.
Trump will lift some restrictions on Huawei Technologies Co. Ltd.’s ability to do business with U.S. companies and will postpone tariffs he threatened to impose on an additional $300 billion annually in Chinese imports. In exchange, Xi agreed China will buy more U.S. agricultural products. Details will be spelled out later.
This deal — the second time President Trump gave in to China’s demands and ended restrictions on a major Chinese technology company that had been accused of threatening U.S. national interests — effectively marks the end of Trump’s trade war with China.
Why did China win? Because the US did not exit the first decade of this century in great shape. It lost a very expensive war in Iraq, and suffered a world-historical market crash. This US was a match for China, which, in 2008, resorted to Keynesian policies (increased government spending) directed at construction and jobs. As the historian and Crashed author Adam Tooze put it in the London Review of Books, "...when the going gets rough, the Chinese turn Keynesian. Beijing’s response to the 2008 crisis was the most dramatic work-creation stimulus in history." It surpassed the New Deal. The US, on the other hand, did not spend much of its money on work-creation, but on transforming its dead banks into zombie banks.
The Chinese knew its rival's situation; it has a fragile stock market that will not survive a second catastrophe, a war machine still recovering from a war that produced nothing but huge debts, and a blatantly corrupt and not popular president who has plunged the country's political systems and institutions into chaos. The Chinese president, writes Howard Gold, "clearly calculated his American counterpart is unwilling to do anything that would threaten his support among key constituencies, like farmers, as the 2020 election looms."
Trump will hold a military parade on July 4 because all that is left is national feeling. A few jets in the sky, some tanks on the ground, boots here and there, flags everywhere. No jobs are returning; the farmers harmed by the two-year trade war have become welfare cowboys; and the tools to keep stock market values sky-high and flying are diminishing by the day.
The market has already noticed a decline in share buybacks, which, with the assistance of the otherworldly corporate tax cut of 2017, created the mother of all bubbles. Because the growth initiated by the Obama administration has departed from anything that resembles conventional economic growth, Trump, in a panic, wants to resume quantitative easing (pumping government money—liquidity—into financial markets) during a period of expansion.
Some might say, smugly, that the US economy, as measured by GDP, is still 4 or so trillion dollars larger than China's. However, the problem with this very common accessment of the current global economic picture is made clear in Mariana Mazzucato's new book, The Value of Everything. Mazzucato, a British-Italian economist, points out that until 1980s, the financial sector was not (rightly) considered productive and, as a result, its activities were not included in the GDP. But to justify its ever-expanding role in the economy (which mostly amounts to the movement of paper from these hands to those—only 10 percent of all transactions in this sector terminate as actual business investments), it had to, by political means, extend the "production boundary." In this way, its activities—which have little to do with the noble function of relocating capital from places where it is in surplus to places where it is scarce—became accountable as a part of the GDP.
The US includes the financial sector in its GDP not because it really does anything of great importance or usefulness for the majority of Americans, but because it, by political means, made value extraction count as the same as value creation. But there is no "economy" in the political economy of this kind of accounting. It's all politics.
With that in mind, add this thought: A large number of financial institutions that are recorded as productive are merely zombies (banks, investment banks, so on). Without the politics (bailouts, quantitative easing, tax cuts), they would be dead today. At this point, we must wonder if the US is, in real terms, still the largest economy in the world. Recall the response to the 2008 crash. China directed its spending at work-creation, while the US directed it at these institutions that merely move paper around and around and around.
https://www.thestranger.com/slog/20...became-the-most-powerful-economy-in-the-world
by Charles Mudede • Jul 3, 2019 at 10:45 am
All that's left is that national feeling... LAILARBERG/GETTYIMAGES.COM
Two years ago, the US had three ways of dealing with the spectacular rise of Chinese capitalism. One was to reduce the economy's influence in its own region (this was Obama's plan, which had its origins in the Bush administration and took the form of a trans-pacific trading arrangement anchored by the US consumer market). The second was to reject globalization as constructed by the neoliberal program and revert to a New Deal-like project that heavily invested in US research/education, enhanced controls on finance, increased government revenue, strengthened social safety, and massively upgraded infrastructure (this was Bernie Sanders's position).
The third also rejected neoliberal globalization, but replaced it with protectionist and neo-mercantilist policies that directly confronted Chinese capitalism and asserted a US economic power that had more to do with national pride than anything found in reality. This was Donald Trump's agenda. It lasted for two years. It finally died at the fourteenth meeting of the G-20 in Osaka. The US will enter its 243rd year of existence as the second most-powerful capitalist economy in the world.
writes:
In a meeting on the sidelines of the G-20 summit in Osaka, Japan, President Donald Trump and Chinese President Xi Jinping agreed to resume trade talks that had broken down in May.
Trump will lift some restrictions on Huawei Technologies Co. Ltd.’s ability to do business with U.S. companies and will postpone tariffs he threatened to impose on an additional $300 billion annually in Chinese imports. In exchange, Xi agreed China will buy more U.S. agricultural products. Details will be spelled out later.
This deal — the second time President Trump gave in to China’s demands and ended restrictions on a major Chinese technology company that had been accused of threatening U.S. national interests — effectively marks the end of Trump’s trade war with China.
Why did China win? Because the US did not exit the first decade of this century in great shape. It lost a very expensive war in Iraq, and suffered a world-historical market crash. This US was a match for China, which, in 2008, resorted to Keynesian policies (increased government spending) directed at construction and jobs. As the historian and Crashed author Adam Tooze put it in the London Review of Books, "...when the going gets rough, the Chinese turn Keynesian. Beijing’s response to the 2008 crisis was the most dramatic work-creation stimulus in history." It surpassed the New Deal. The US, on the other hand, did not spend much of its money on work-creation, but on transforming its dead banks into zombie banks.
The Chinese knew its rival's situation; it has a fragile stock market that will not survive a second catastrophe, a war machine still recovering from a war that produced nothing but huge debts, and a blatantly corrupt and not popular president who has plunged the country's political systems and institutions into chaos. The Chinese president, writes Howard Gold, "clearly calculated his American counterpart is unwilling to do anything that would threaten his support among key constituencies, like farmers, as the 2020 election looms."
Trump will hold a military parade on July 4 because all that is left is national feeling. A few jets in the sky, some tanks on the ground, boots here and there, flags everywhere. No jobs are returning; the farmers harmed by the two-year trade war have become welfare cowboys; and the tools to keep stock market values sky-high and flying are diminishing by the day.
The market has already noticed a decline in share buybacks, which, with the assistance of the otherworldly corporate tax cut of 2017, created the mother of all bubbles. Because the growth initiated by the Obama administration has departed from anything that resembles conventional economic growth, Trump, in a panic, wants to resume quantitative easing (pumping government money—liquidity—into financial markets) during a period of expansion.
Some might say, smugly, that the US economy, as measured by GDP, is still 4 or so trillion dollars larger than China's. However, the problem with this very common accessment of the current global economic picture is made clear in Mariana Mazzucato's new book, The Value of Everything. Mazzucato, a British-Italian economist, points out that until 1980s, the financial sector was not (rightly) considered productive and, as a result, its activities were not included in the GDP. But to justify its ever-expanding role in the economy (which mostly amounts to the movement of paper from these hands to those—only 10 percent of all transactions in this sector terminate as actual business investments), it had to, by political means, extend the "production boundary." In this way, its activities—which have little to do with the noble function of relocating capital from places where it is in surplus to places where it is scarce—became accountable as a part of the GDP.
The US includes the financial sector in its GDP not because it really does anything of great importance or usefulness for the majority of Americans, but because it, by political means, made value extraction count as the same as value creation. But there is no "economy" in the political economy of this kind of accounting. It's all politics.
With that in mind, add this thought: A large number of financial institutions that are recorded as productive are merely zombies (banks, investment banks, so on). Without the politics (bailouts, quantitative easing, tax cuts), they would be dead today. At this point, we must wonder if the US is, in real terms, still the largest economy in the world. Recall the response to the 2008 crash. China directed its spending at work-creation, while the US directed it at these institutions that merely move paper around and around and around.
https://www.thestranger.com/slog/20...became-the-most-powerful-economy-in-the-world
