Friday, November 03, 2006

Bello on China's Boom

I've just come across this website - Global Alternative - which is the internet website of the Russian Institute of Globalisation Studies. The director of the institute is Boris Kagalitsky, who happens to be one of my favourite political theorists.

It looks fairly good so I'll add it to the sidebar. There's an interesting essay by Walden Bello which I would recommend. I don't know enough about the world economy to offer much opinion on what he says, but it seems convincing. He argues that growth in the US and Chinese economies are bound up in a simbiotic relationship which can only really end in tears for both parties. China's amazing rate of growth depends upon US consumption of its goods while US consumption is effectively financed by "Beijing's lending the U.S. private and public sectors a significant portion of the trillion-plus dollars it has accumulated over the last decade from its yawning trade surplus with Washington". Clearly this makes for an unstable kind of relationship. One thing I didn't realise about China is that there is huge overcapacity in that country. China's strategy is to maintain its growth by holding down wages - but as Bello points out this can only exacerbate the problem of excess capacity because of the limits to domestic consumption determined by the fact that Chinese workers are paid low wages. Bello suggests that at some point the Chinese economy will face a severe crisis of overproduction and since the health of the Chinese economy is so important for US health, too, and since the US economy is central to the global economy the reverberations from such a crisis will be severe.

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