Not Made In China

Considered a feat of human sweat, ingenuity and imagination, 138 pyramids (discovered so far) were built across Egypt between 2600BC and 1800BC. To destroy a common myth, this meant the workers were paid in beer and bread, and in employment all their lives. Was this an unintended side effect of the quest for the afterlife or did the Pharaoh have a Keynesian economist in its inner circle?

‘Let them eat brioche’ is the quote attributed to Marie Antoinette. Didn’t work. If she had proclaimed ‘let them build a palace’ maybe her head would have remained attached to her neck. For giving treacherous minds work to do would distract their revolution seeking thoughts, which could instead be left to the brains that lacked the stomach to fight.

The Chinese Communist Party worship at the alter of extreme Keynesian. The grand bargain between the people and the government can be summed up by the following ancient Chinese proverb:

‘You can’t propel yourself forward by patting yourself on the back’

A little help is needed to hit the year on year 8% growth target. Why 8%? This maintains near on full employment. Workers working. No idle minds revolting.

During the global financial crisis this key figure fell to 6.6%, sending party members into shotgun solutions. The winner. Put another brick in the wall. The latest figures from China in 2014 show the rate of growth was 7.4%. The Egyptians used pyramids. The Communists construct great walls, not to keep the Mongols out, but to keep them in power. And that’s the only choice they have. If they stop building they risk losing everything.      

Commentators cite the environmental degradation across China during their recent, rapid industrialisation as a potential reason for the walls to collapse. Around 9,683 miles from Beijing is the warning: Easter Island. Its rapid felling due to chopping the native trees so to transport their stone statues. Why the long face? Nutrient leaching. Soil degradation. Crop and livestock failure. Population collapse.     

China, too, has suffered environmentally. Its air is thick with industrial wealth. Its rivers team with extra sediment. Its arable land shrinks with global warming. But the Communist Party has shown foresight. Embracing globalisation, China has “shared ownership” over huge parts of farming land across Africa and Europe and the commodity market is driven by its polluted air.

Is there to be a hard landing in China throwing the world back into recession? No, the Communist Party simply won’t let it happen. Its very survival depends on it growing year on year, and like the Pharaoh it will keep building pyramids. That empire lasted for 500 years. 

The next economic shock will not be made in China.