Two Different Paths to the Same Place

China's rise creates a moment of introspection, too

As I read Ed Flanagan's article about China's economic woes, the last thing that I expected to be thinking was how similar they are to our own.  China's economy is based on the exact opposite of our own.

The Chinese are producers, we Americans are consumers.  They are communists, we are capitalists.  They use undervalued, government regulated currency, we let our money stand on its own merits on the international market.

But somehow, we have arrived at the same place: the top of the world's economic food chain. In case you haven't heard, it was announced this week that China has replaced Japan as the second largest economy in the world behind the USA.

But being at the top doesn't mean that everyone is equally employed and compensated.  In fact, it seems to infer quite the opposite. According to Flanagan, there are 3 MILLION recent college graduates in China who are either unemployed or underemployed.

Recent American graduates are not doing much better.  On one campus interviewed by CNN, for example, on-campus recruiting was down 44% in 2010, and only 2 out of 10 graduates had a job lined up.  (New grads face tough job market)

The economic similarities between China and the US seemed to stretch far beyond the  problems facing the young.  As I read the following quote from Flanagan, I got goosebumps because of how easily I was able to insert "America" for "China."

"Even as the national economy surges, China’s per-capita income has simply not kept pace, and millions of people have been left out of the nation’s economic miracle."

Yes, I realize that the Chinese poor seem to be much harder up than the American poor.  Their per capita income is in the toilet.  But you have to remember that they are a DEVELOPING nation, with half of their population still living in the rice fields.  I bet if you read the above quote to Americans on random street corners and inserted "America" for "China," and asked if they agreed with the statement, a vast majority would say yes.

Let's take a look at another of Flanagan's eerily insightful paragraphs:

"While China’s liberalized economic policy has certainly pulled hundreds of millions of people out of poverty and transformed the country into an industrial dynamo, little of that prosperity has trickled down to the majority of would-be Chinese consumers – the very people who many economic experts insist will fuel China’s growth well into the 21st century."

After changing just a few words, I quickly getting a feeling of deja vu.  

While America’s liberalized economic policy has certainly pulled hundreds of thousands of people out of poverty and transformed the country into financial and banking  dynamo, little of that prosperity has trickled down to the majority of would-be American consumers – the very people who many economic experts insist will fuel America’s growth well into the 21st century.

Well, the part about pulling folks out of poverty is definitely a stretch, but I will not argue that point for the moment.  Let's move on to this bit, that reflects similar consequences stemming from the polar opposite of issues.

"Too little of what China produces ends up consumed by the Chinese themselves."

Again, we see the stark reality staring us in the face.  China produces too much but consumes too little, while America consumes too much and produces too little.  Yet, somehow, we are both the economic superpowers of this decade.

To me, all of this seems to spell trouble for the global economy.
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9/10
It looks like China wishes to own the world.  According to an article I found from the Financial Times on CNN's website, China has recently purchased large shares of Japanese government bonds.  This is especially irritating to the Japanese because China's bonds are not available on the world market for purchase.

However, some analysts say that in the grand scheme of things, the purchases will "have a negligible effect on the currency market."

Still, like with gift-giving, it is the thought that counts.  And when you add the fact that China has also purchased "South Korean, Canadian and Australian debt"  recently, China's intentions to own the world may not be that far-fetched.
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12/12
NYT: China's army of graduates is struggling  (NYT via MSNBC, by Andrew Jacobs, 12/12/2010)

As I read the above linked article about how how China's first really large crop of college graduates are struggling to survive, I couldn't help but think a similar trend currently occurring here in the US.   I think this change in what kind of education is in demand reflects a greater shift in the worlds socio-economic landscape.  I believe that in most of the developing world, technical skills are slowly becoming as high-paying as those that require a college degree.  This is because business are (once again) more focused on"creating" than "serving."  I know that we are lagging behind a bit, but as new battery plants begin to open, and our car companies get back on their feet, I predict the following quote about China today could be about the U.S. in the next decade:

"Between 2003 and 2009, the average starting salary for migrant laborers grew by nearly 80 percent; during the same period, starting pay for college graduates stayed the same, although their wages actually decreased if inflation is taken into account."
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