China will not make it

Every Chinese person above the age of 12 must know it; Chairman Mao once said 'More People, More Power'. What he meant was breed, breed for the state, for its human wave tactics-centred military policy, its labor intensive pre-industrial and industrialising economy, and probably more else besides. We have now in China the mother of all baby boomer generations. It is often said in the western press that Western governments are declining, they will face a massive demographic crisis in the next 20 years as they have to pay the healthcare costs and retirement expenses of the soon to retire generation of 'baby-boomers' born after the second world war. What is usually forgotten is that China faces a similar problem of a much higher magnitude in 20 years time.

Today as the press, the left and right, the business sector, the leaders of China and the Chinese people themselves (through their self-confidence) we see the rise of China. China is posting record levels of GDP growth. Its economy is expanding rapidly. Not only this but it is beginning to compete with the United States for its superpower status in East Asia (a central sphere of economic activity in the world economy, that rivals western Europe in economic power). For this reason and because of the fact that China has been consistently growing since that wilily old genius Deng Xiaoping first initiated economic reforms 30 years ago the western press and co. are convinced that China will be the dominant power (if not super power) in the world 50 years from now.

Right now China is buying up everything it can across the western world, it is making a massive imprint upon the developing world too with its blind eye turning and trade. There is no doubt that China is a force to be reckoned with on the world stage. But this will not last forever. In fact I would argue that China's power will peak in the next 20 years and then begin to stagnate just as Europe's did in the 1890s-early 1930s from there Europe entered a period of prolonged relative power stagnation that ended in the end of empire and the realignment of the world power away from the old empires of Paris and London toward the new centred on Moscow and Washington. Likewise Beijing is set to grow further as a world power in the next 20 years. America's relative decline is set to deepen in the 3rd world as Latin America and Africa (the world's key suppliers of raw materials) move away from the Euro-American centred Capitalist world order towards the Sino-Asian centred one. This will not mean that America will lose its status as world power, merely that its power will be more akin to that of the Soviet Union in the 1970s, that of a world power that cannot expand and is seeing its influence decline abroad and its self-confidence shrink at home.

Nonetheless America will survive and continue to prosper. America has too much embedded wealth, talent and remainings the only developed society that records population growth rates above 3% (in the last decade a record low(!) of 9%). America is in the middle of a deep and profound structural crisis caused mainly by a redistribution of purchasing power away from most of the population towards the elite, the results should have been stagnation but through cheating the world with the Dollar as its global reserve currency, the US elite were able to lend what should have been the money of the world's poor to the American middle class in order to expand their purchasing power artificially whilst concurrently growing the incomes of the elite. This is a deeply disturbing state of affairs. It shows no sign of resolution at this stage, the results are a structural debt crisis that I have mentioned before in previous blogs. The US middle class and the US government, the bedrock of the US economy in consumption (and production terms) funded the US economic expansion of the last 30 years. They did so through mortgages, credit cards, raids on pension funds, bonds (lending to foreign nations, private institutions and wealthy individuals in the main) etc. This instead of tax and wage increases. The result is that the engine of US economic growth is for the time being spent. The credit cards are maxed out, the mortgage is going unpaid or is interest only, the pension fund has nothing left to give, the bond markets remain stable, but maybe not forever. But this just means that the United States is for the time being stagnating. This isn't the end of the United States, a long period of stagnation beckons.

In the long run China is in a much more serious situation. Unlike Europe and America it is still a developing country. If it continued to grow at present rates it will catch up to the present United States in 30 years in GDP per capita terms (thats me being very kind). Before that it will run into the huge roadblock of its demographics, basically the ratio of workers to dependents will grow exponentially in the next 20-30 years. China will be the first society in history to be aging before it has become developed. This will slow Chinese development to a crawl, and already it is too late for Beijing to stop this.

It was too late as soon as the One Child Policy was implimented in the 1980s. With its implimentation the Chinese leadership mortgaged medium term expansion for long term crisis and probable stagnation. Of course in the short term the policy was great for Chinese growth, it made some sense in terms of instrumental rationality. It was a necessary step to end the unsustainable population growth of the last 20 years which had been a serious threat to food security and general economic prospects (this is what was thought at the time). But the policy's very rigidity which was seen as so necessary has created an existential problem for the Chinese Communist Party and its state.

After the Second World War Britain (my home land) imported people enmasse from the West Indies (Central America), and the Indian Subcontinent in order to fill the gap left by the loss of heroic service men and women (as well as many innocent civilians) in the Second World War. The results were positive in many ways for cultural diversity in the UK and for its economy. The fact my mum knows how to cook Indian food is indicative of this, and the fact that I have friends from many different ethnicities based in the UK is another sign. There are many more. However there were also major issues in terms of public order, race relations and general community tensions. The numbers were not large in historical terms but the impact of very different peoples being integrated into a society used to a certain ethnic mix (inspite of the small numbers was great).

Out of all the states in the world the Chinese leadership would probably be most prepared to treat humans as cattle, and drag as many people from the developing world into China via 6 countries in order to resolve this crisis. But the effect it would have on Chinese society in terms of wage competition, social stability and governmental stability are unpredictable and dangerous for the very survival of the Communist Party dominated government. Furthermore the number of people required is truly staggering, there will be a need for hundreds of millions of immigrants to plug the gap between dependents and workers. The state itself will have to dramatically expand in its provision of social and medical services for the aged. It will dent the power of the Chinese state on the world stage whether or not the workers can be found.

If they are not, the gap is not plugged (and this is very likely) then the alternative is frightening for the pragmatic, patriotic, hardnosed technocrats who run the show in Beijing. China will enter economic and geo-political decline before it is allowed to finish its march toward first-world levels of GDP per capita. This will undermine and possibly fatally erode the rationalization of Communist Party control. The suffering of the aged will not be tolerated in silence by a strong, proud and well educated Chinese population with technologies that will dwarf what we already have. The future for Chinese Communism is bleak. The state itself is endangered by regional secessionist movements in Xinjiang, and Tibet as well.

China's rise will end. IT will not make it. This is the false dawn of a new world system. America will remain the dominant power for many years to come.