Asia's genius: Keynesism with a piggy bank
Tuesday, August 3, 2010 at 12:04AM 
FT op-ed in which David Pilling reports that Asia’s Keynesians “take pride in prudence.”
It is an oddly hypocritical logic that Pilling gets around to critiquing:
Chinese officials talk scornfully about US consumers’ proclivity to buy now and figure out the consequences later. Through this prism, the made-in-America crisis is seen as a modern morality tale in which reckless governments and citizens got their comeuppance.
As Pilling points out halfway in the piece, Asian governments have opened their fiscal sluices with a gusto in response to the crisis, remembering that they did too little during the Asian flu of 1997 (on advice of the IMF). In the end, the collective Asian stimulus probably outpaced the West’s. Of course, the big difference was that they were spending now money and we were spending tomorrow money (I will gladly pay you across the rest of my life for a stimulus package today!).
The hypocrisy I see: Asia’s miracle (and China’s especially) does not happen without our spending spree of the last couple of decades. Plus, China in particular ignores plenty of rising “debts” in its system, like the piling up of elders and environmental damage.
Reader Comments (6)
I don't know if China's contradictions are based on hypocrisy, but they certainly are bizarre to informed watchers.
The US has also been contradictory in its economic insights and actions for at least two decades. Reagan established a work group that became the Council on Competitiveness (CofC) during Bush 1 time. They published a plan for adapting our economy to emerging technologies and globalization of established products and services. Our new focus should be on technology and education focused on high value mass customization of products and services while assisting other nations with lower costs take over the established mass production ones. Bush 1 started the transformation process using DARPA and NIST. The DOD made agile manufacturing procedures and tech specs standard.
Clinton made the CofC plan part of his election agenda, and expanded Bush 1 efforts. Robert Reich, who wrote very effective laymen oriented books on the needed actions for domestic and international economic transformations, became Clinton's Labor Secretary.
One of the Labor Department's members with outreach to California's education and business modernization communities tried to get Labor Department support to promote agile manufacturing and other Reich insights. She was told that the Labor Department could only support initiatives that involved very large numbers of workers with standard job skill definitions. Later a Nevada representative, who was trying to help miner technical assistance workers displaced by a treaty with Canada, tried to get Labor Department sponsored agile manufacturing education for them. Instead the head shed said they should try to get training in existing shortage areas like tech support for nursing care.
Bush 2 may have let the housing market and finance gimmick market give us a false perspective on domestic economic progress to avoid economic anxiety after 9/11 disaster and implications on a new type global crisis. The phony jobs were, after all, mostly domestic.
I would like to see Tom and Robert Reich have a realistic dialogue on PBS or CSPAN.
Actions have consequences. The environmental consequences are the ones that directly and immediately impact people's quality of life. But the topic of the post is economics: so biggest economic consequence is the huge stockpile of US dollars China has parked in US Treasuries.
What China says, what the US says and what Wall Street says about this... denial? delusional? diplomatic dissembling?
Below are links that shed some light on this:
http://www.nakedcapitalism.com/2010/08/more-incoherent-remarks-from-china-on-its-dollar-holdings.html
http://mpettis.com/2010/02/what-the-pboc-cannot-do-with-its-reserves/
I hope the holders of the treasuries will forfeit a large portion of them in return for the services of the US leviathan.
TPMB's posting produced an especially thought-provoking comment from Petrer.
There is some interest nowadays in the concept of global public goods, let alone who should provide then pay for them. G20 funding? However first we need widespread agreement on what are such goods. Combatting climate change seems to have more support than others, but we are still far from wholehearted acceptance even here. Never mind G20 finance for a US leviathan.
The more I learn about Keynes, the more his famous quote, "in the long run, we're all dead" becomes so profound. You cannot magically create money and still think the purchasing power of each unit of money will stay the same unless productivity and production increases.
This will resolve itself in a compensation game, where the last "low cost" countries will reap the latest benefits while the first countries in globalization will, and are currently, like old Europe, are beginning to pay the check at the end of the party. The debts as a % of GDP, the steep income taxes (the highest brackets start at such relatively low income brackets) and high consumption/property taxes are a manifestation of this reality. The people who envisioned the "socialist democracy" ideal are all dead now!
July 7th, 2010
The principles of what the NSS [US National Security Strategy] defines as sustainable development include: increased investments in development; investments in the foundations of long-term development; and leadership in the provision of global public goods. The strategy urges greater attention to global development issues across the U.S. government, increased foreign assistance, and greater investment and expanded partnerships in multilateral institutions. The new approach, according to Secretary Clinton, also calls for increased efficiency of delivery through a single national security budget.
Obama Releases “A New Approach to Advancing Development”
Has the matter of global public goods been formally raised at the G20, with perhaps a working party investigating it?