The cultural economics of China will fail… absolutely
When I was studying Chinese medicine, I had a teacher who had worked to develop blood banks from India to China. He said China was the only country where the people did not want to give their blood to other people. Think about that for a second. Are they being selfish? Are they seeing blood as sacred? Do they just not want to give of themselves to others?
My teacher tried to understand why. His conclusion was that the people did not want to give their precious blood to others. It was an obvious conclusion stating the observation, but still…
My view is that the Chinese will not be able to re-balance their economy in the future by raising wages enough. Culturally it will be impossible. They are a culture that can grow on the backs of low paid workers, but will be unable to mature by paying those workers like real people.
Let me explain with some examples…
The Chinese offered $100,000 to the Philippines after being hit by the strongest storm in recorded history. Again we see a desire to not give to others in need. It’s as if money is blood to the Chinese. (source Daily Conversation)
Robert Reich just posted about how Walmart should learn from Henry Ford and pay the workers more. I am so happy to see his post which points us in the right direction. However, Walmart is basically a Chinese-minded company. They may have an American face, but they have a Chinese heart.
To be transparent… In my own personal case, I had developed a complex and thorough theory to integrate Chinese meridian theory. It was the work of over 25 years. A top university of Traditional Chinese Medicine in Beijing which was working with Harvard university was presented with my work by a leading international authority in Chinese Medicine. They were impressed and offered me an honorary doctorate. But they didn’t know anything about me yet. They asked for my picture. I waited 2 months in giving them my picture. Then they saw my picture and I didn’t hear anything from them for 3 months. I asked the authority what was happening. She said they saw that I was not Chinese, and that it would be impossible to accept such a high level breakthrough in their theories by a non-Chinese. But they said that if I wanted the doctorate I would have to pay full price to get it.
There is a deep and true knowledge in Chinese medicine based on centuries from insightful people. What I did was to integrate all of their diverse principles of meridian theory into one model. The model is complex, highly symmetrical and balanced. I went toe-to-toe with the authorities of Chinese medicine in the US… for years. Finally it was evident to me that authorities get invested in their own ideas. They are part of a group that shares the same developed beliefs. It is their job to protect their ideas, even if those ideas are readily challenged with a more comprehensive model. I see Mr. Krugman experiences the exact same frustration with fresh water economists. No matter how much he shows that their model was incomplete, they simply will not accept it.
By the way, with my new theories in economics about effective demand, I am unexpectedly experiencing a similar frustration from economic authorities. There is resistance to discuss my theories. However, theories in economics can be readily verified by the economy. Let’s say that the utilization of labor and capital cap off at the effective demand limit, and not where most economists think. Then my model will be seen to perform better. Then we will see if the resistance softens a bit.
The story is different in Chinese medicine where the results are isolated to individual people within a multitude of influencing factors, and the differences between a traditional theory and a more comprehensive theory are subtle to understand.
The hope is always to have a more comprehensive model that coordinates and integrates various theories. I did this in Chinese medicine. Now I am offering unknown equations to the field of economics for a more comprehensive model on the limits of the business cycle and maintaining a healthy economy within those limits.
Back to the Chinese…
From my experience with the Chinese, they are not humble. They feel they are superior in intellect and culture. They want to appear better, but not do what is necessary to actually be better in the highest sense. This is why they will ultimately fail in re-balancing their economy. My view is that it will be absolutely impossible for the Chinese to raise wages in order to develop a domestic demand healthy enough to validate years of massive investment.
The labor force of China receives wages that allow them to contribute only 35% from consumption to national GDP. Low wages in China reflect a cultural value system. The Chinese do not value the lower class. They work upon private interests, not social interests. They are not interested in the truth, because ultimately they cannot change.
The Chinese do not want to give to others whom they feel are less than they are. And so many US businessmen have gone to China to make lots of money. They have been infected by the culture of paying low wages to second-class citizens. Walmart is the most obvious example.
China will fail due to their culture, and the US has to be careful to not copy the Chinese cultural model of paying socially inept low wages.
Sounds very much like the tea party in the USA!
Actually this is the way china thought of outsiders before the middle of the 19th century, they were the most advanced country in the world. The emperor was the big cheese of the world. So is it suprising that they would return to their prior orientation?
Didn’t they have a communist revolution in China? How does that fit with your view of the Chinese character?
The role of culture…
Often, first generation immigrants do very well in America. Ours is still ‘the land of opportunity’; especially if one is coming from an overcrowded, impoverished country. Here, by working long hours and being frugal, they can get ahead, maybe buy a car, a house, and educate their children, … where before, even by working long hours and being frugal, the best they could hope for was day to day survival. Our politicians are wont to extol these virtues; say that this is what is needed to get the nation back on track. Easy for them to say, but are they right? Is it necessary or even better that everyone grubs for his or her livelihood? Does our very economy depend on such behavior? Other the immigrant, who benefits? Are the native born better off for this extra effort for less pay by others? The investor class probably is better off for the immigrants’ extra efforts for less pay, and may think that they would be better off if the rest of the working class did the same. We would have a world somewhat like the literary world of Jane Austen; one where the wealthy lived the very good live with cheap domestic help and the like. A world not so attractive perhaps to America’s working class, a group that had known middle class living standard for only a few short years. Ours is a mature economy; we have enough population. There was a time when we had extra land, extra jobs, … but that time is long past. There wasn’t really a need to import labor for the building of the railroads. The cheap imported labor wasn’t good for those workers already here, lowered their wages, lengthened the workday, etc. For the immigrant labor, it was better than they were used to at home. Here, in a mature economy like ours, this willingness to work extra hours for low pay puts the immigrant at an economic advantage, gives them a competitive advantage. Does the model extend where the workers are willing to work extra long hours work in a mature economy? Do any examples come to mind? Was such a model a part of the problem in their homeland?
In the San Francisco Bay Area and several other California Cities, immigrant groups, Asians in general; Chinese in particular, are the largest single ethnic group. Will the same the values and customs that led to their successes to date here work as well in a mature economy when theirs is the dominant culture. Or, will California become more like China than America? How much did the venerated ‘Chinese culture’ contribute to China’s centuries of woe? What happens when everyone is pushing ahead of everyone to get on the bus or the train? What happens when every mother is a ‘Tiger Mom’?
Good question about the communist revolution and that it might show a side of the Chinese to raise wages now for society as a whole…
Here is a quote from a web site…
“Clearly the pre-Communist history of Modern China has been essentially one of weakness, humiliation, and failure. This is the atmosphere in which the CPC developed its leadership and growth in. The result has been a strong determination on the part of that leadership to eliminate foreign influence within China, to modernize their country, and to eliminate Western influence from eastern Asia, which included the Soviet Union.”
China is growing through massive investment from the top down. The investment continues full-steam ahead. They feel they are growing in power and potential. They are getting stronger in their own minds. They are attracting foreign investment and are able to profit from foreign investment. They are fulfilling the determination in the above quote.
Yet there is a massive “dis-connect”. China’s future success now depends on their ability to raise wages a huge amount.
My calculation shows that they need to raise labor share by 2% a year in order to re-balance successfully into the future. I am not talking about a 2% raise in wages per year if productivity warrants it… I am saying that irregardless of productivity, labor’s share in the national output has to rise 2% a year.
China has to force up wages irregardless of the profit rate by 2% a year.
If you go back to the communist revolution, you will find a spirit of servitude among the people. They will work for very cheap money to serve the greater cause. This attitude will not bring them success in the future.
There are conferences about every month now in China where economists discuss the problems in China. You can watch the videos on youtube.
The Chinese economy is behind the curve with too much investment. And the government cannot control capital movements.
In general, the Chinese workforce is a controlled workforce. The idea is that they become property of the companies. Their loyalty is institutionalized. Where they live, the rents they pay, the hours they work, are controlled. Include wages in that picture.