One of these things is not like the others. It has recently been argued that China was following the “Japanese model” in its economy. The Japanese model was to move relatively unproductive labor from agriculture to manufacturing and utilize the economic surplus for personal consumption. That might have been a reasonable argument until 2000. What China has been doing is a lot more like the Soviet model.
The Soviet model was to move relatively unproductive labor from agriculture to manufacturing and utilize the surplus for government spending.
Call it “socialism with Chinese characteristics” or “capitalism with Chinese characteristics” but that is undeniably what the Chinese have been doing.
What of the United States? Our pattern is much more like that of Brazil or Mexico than it is like those of the Asian countries in the chart above. Our PCE are higher. As I have contended for some time, the United States is better understood as BOTH a First World and a Third World economy simultaneously within the same borders.
I appeal to authority and point out Pettis has argued my view (China was following Japan) for at least 10 years.
https://carnegieendowment.org/2010/10/18/japan-s-past-has-lessons-for-beijing-pub-41761
The key quote —
“For Japan in the mid-1980s, a sharply undervalued currency and extremely low interest rates had helped to generate tremendous growth in the previous 15 years. But as in China today, this growth came with low and declining household consumption as a share of GDP. This left Japan extraordinarily dependent on investment and on a large trade surplus to generate growth.”
I believe a key part of Pettis’s theory is that persistent trade surpluses and current account surpluses are an indicator that household consumption is being systematically repressed. In the Japanese/Korean/Taiwan/China model, household consumption is lowered through financial repression (currency and interest rate manipulation, giving artificially low interest rates on household savings) to fund sweetheart loans to investment (domestic champions like Japanese Conglomerates, Korean Chaebol, Chinese SOE); and this produces a positive feedback loop which forces even lower household consumption as a percentage of production, and pushes for more investment to create growth.
In yesterday’s WSJ (page A17), Phil Gram and John Early write that after correcting for taxes paid and transfer payments received, the bottom, second and third quintiles of the work-age population have essentially the same per caput income, about $30,000 per year (that is, the combined lower 60%; the welfare class, the working poor working class and the lower middle class).
They point out that the percentage of people actually working in the lowest quintile fell from 68% in 1967 to 36% in 2017. One has to wonder if the phenomenon of excess jobs (11 million listings) and unemployment (3.5%) are an effect of the Great Society and, more importantly, the recent covid lockdowns and transfer payments.
Graham and Early do not discuss what is happening in the upper middle class and upper class, what the Z Blog (http://thezman.com/wordpress/) calls the Cloud People (as opposed, actually, to the Dirt People).
China still has around 600 million poor, and much of China’s domestic policy is aimed at bringing them into middle class living standards, joining the 800 million already elevated. The CPC needs another generation of peace to get there.
I agree that we are a lot closer to Mexico and Brazil than most people think. And not only economically, we are becoming more that them politically. The recent raid on Trump’s Florida home, and the use of the DoJ and FBI (and even CIA) to target him is typical of Third World politics, where political opposition is criminalized. The degree of corruption in our Congress and military also is in line with Third World countries.
Although the bottom 60% are getting only $15/hr, that is still three times the world average of $5/hr. And while our inner cities are actual war zones, and almost all our cities have homeless people (80% mentally ill men), that is no different from the places the immigrants are fleeing.
PS. What is this continuing nonsense about unaccompanied immigrant children? They are being shepherded by Coyotes, and their passage has been paid for by pedophiles and sex gangs here in the US.
“One has to wonder if the phenomenon of excess jobs (11 million listings) and unemployment (3.5%) are an effect of the Great Society and, more importantly, the recent covid lockdowns and transfer payments.”
It would defy basic economic principles if it was not true. As a society we have, for the most part, done these people no favors. We have made them adult wards of the state, and reliable Democrat voters.