In any comparative discussion between the USA and China we’re inevitably directed to the USA’s clearly greater freedoms of the individual, its superior wealth and human rights.
But what’s happening right now, and are there any similarities between the two countries?
Similarities?! ……… Surely, you jest!
Over the years, America has obviously achieved enormous economic growth and prosperity for its people under a system of ‘democratic capitalism’.
A question has emerged, however: is the USA’s middle class retrogressing–as forewarned by Taylor Caldwell–and has some $11 trillion of mountainous household debt subsumed the US middle class, absorbing it in within the poor and lower class?
Since 2008, The Fed and federal government policy have continued to keep residential prices inflated, instead of allowing real estate markets to decline, or increase naturally, as with any other free market. Supporting banks and real estate prices at any cost has turned the US financial system into a free market caricature, and it has come at great cost to Americans.
Meanwhile, whilst the top 1% in the US uses this failed financial model to expropriate approximately 38.6% of the country’s wealth, its upper echelons–probably about 0.01% of the population–has developed itself into a super-wealthy elite caste within the 1%. In this combination, it’s not difficult to explain the retrogression of the middle class and poor: they’ve not received their fair share of the distribution of US produced wealth because it has been purloined by government-aided morphing of the monetary system into “Rent-Seekers Incorporated”.
The left and right of USA politics has accordingly bifurcated to a weird extent as the phenomenon of increased concentration of wealth plays out in a manner seeming to have parallels to pre-WWII Germany.
In recent decades, the People’s Republic of China has made astounding ground in improving the economic lot of its citizenry. More of the population has been drawn into the burgeoning cities from the countryside. Poverty remains, but a vast number of China’s 1.38 billion people are undoubtedly now far better off under the intensive economic expansion program. Paradoxically, the country has employed the instrument of ‘state capitalism’ as the method of generating incredible wealth (and debt) within a communist ‘command’ economy.
In the process, there’s no doubt that Chinese involved in real estate development have received far in excess of fair reward for effort as they inflated China’s land prices to incredible heights. With the number of billionaires in China rapidly approaching the number in the USA, some people have done particularly well for themselves!
The common factor
As growth in the USA slows to a crawl, and China’s phenomenal economic growth rate halves, rent-seeking elites have become the distinctive trait of both countries. ‘Free enterprise’? ‘Communism’? Bah, humbug!
With the history of property bubbles as a guide, if rent-seeking isn’t taxed out of existence–most unlikely in either the USA or China–it is this rigged government financial mechanism that promises to be the socio-economic undoing of both countries.
It would be nice to be more optimistic, but reason prevails.