China as economic savior?

Europe is in  even worse economic shape than we are, with first Greece and now Italy being so indebted that they are threatening to pull down the whole Euro-zone house of cards.  And even Germany, still an economic powerhouse, may not have enough money or the will to bail everyone out.   Fareed Zakaria calls on the only country with the financial wherewithal to bail out Europe:  China

The time has come for China to adopt a broader concept of its interests and become a “responsible stakeholder” in the global system. The European crisis will quickly morph into a global one, possibly a second global recession. And a second recession would be worse because governments no longer have any monetary or fiscal tools. China would lose greatly in such a scenario because its consumers in Europe and America would stop spending.

Of course, China would have to get something in return for its generosity. This could be the spur to giving China a much larger say at the IMF. In fact, it might be necessary to make clear that Christine Lagarde would be the last non-Chinese head of the organization.

In a world awash in debt, power shifts to creditors. After World War I, European nations were battered by debts, and Germany was battered by reparation payments. The only country that could provide credit was the United States. For America, providing desperately needed cash to Europe was its entry into the councils of power, a process that ultimately brought a powerful new player inside the global tent. Today’s crisis is China’s opportunity to become a “responsible stakeholder.”

via How China can help Europe get out of debt – The Washington Post.

Why wouldn’t that work with us?  Maybe China would bail us out.  Of course, China would have to get something in return.  Maybe we could just sell ourselves to China.  Maybe Beijing would let us be a semi-autonomous region.

The former Soviet Union promised to bury us.  But that was in a time when nations dominated each other by war or the threat of war.  Now nations can substitute economic for military power and just buy up the countries they want.  If things get worse, don’t you think lots of Americans would be willing to give up their liberty and their sovereignty for some personal affluence?

Of course, you don’t have to sell out to China to make that kind of bargain.  Maybe the much-hailed “China model” of an authoritarian government that controls the economy while exploiting the free market will be the ideology that gets us out of our current economic malaise.  That platform would probably get a lot of votes.

About Gene Veith

Professor of Literature at Patrick Henry College, the Director of the Cranach Institute at Concordia Theological Seminary, a columnist for World Magazine and TableTalk, and the author of 18 books on different facets of Christianity & Culture.

  • SKPeterson

    How did we get to be so wealthy in the late 19th century that we could be the credit provider to Europe? It wasn’t by pursuing global military dominance.

  • SKPeterson

    How did we get to be so wealthy in the late 19th century that we could be the credit provider to Europe? It wasn’t by pursuing global military dominance.

  • http://www.biblegateway.com/versions/Contemporary-English-Version-CEV-Bible/ sg

    Impossible, Europe can’t have financial problems. It is a socialist worker’s paradise! Free health care for everyone, pensions, unions. What could possibly have gone wrong?

  • http://www.biblegateway.com/versions/Contemporary-English-Version-CEV-Bible/ sg

    Impossible, Europe can’t have financial problems. It is a socialist worker’s paradise! Free health care for everyone, pensions, unions. What could possibly have gone wrong?

  • Tom Hering

    Impossible, America can’t have financial problems. It is a capitalist paradise! Deregulation, tax breaks for the rich and powerful, an ever-increasing flow of the nation’s wealth to the top 1%. What could possibly have gone wrong?

  • Tom Hering

    Impossible, America can’t have financial problems. It is a capitalist paradise! Deregulation, tax breaks for the rich and powerful, an ever-increasing flow of the nation’s wealth to the top 1%. What could possibly have gone wrong?

  • SKPeterson

    Deregulation? What deregulation? Do you mean deregulating the money supply by artificially expanding the growth of credit and artificially holding down the interest rate as a sop to your good friends and spouses in the banking sector who can reap artificial, too-big-too-fail profits with any risk being passed on to taxpayers? Oh, wait. Those are regulatory measures. My bad.

  • SKPeterson

    Deregulation? What deregulation? Do you mean deregulating the money supply by artificially expanding the growth of credit and artificially holding down the interest rate as a sop to your good friends and spouses in the banking sector who can reap artificial, too-big-too-fail profits with any risk being passed on to taxpayers? Oh, wait. Those are regulatory measures. My bad.

  • kerner

    an authoritarian government that controls the economy while exploiting the free market will be the ideology that gets us out of our current economic malaise. That platform would probably get a lot of votes.

    It got a lot of votes in Germany in 1933, and we know how that worked out.

  • kerner

    an authoritarian government that controls the economy while exploiting the free market will be the ideology that gets us out of our current economic malaise. That platform would probably get a lot of votes.

    It got a lot of votes in Germany in 1933, and we know how that worked out.

  • MichaelZ

    China is a house of cards too. (much as the Soviet Union was) They are just better at hiding it than western nations. Just wait…

  • MichaelZ

    China is a house of cards too. (much as the Soviet Union was) They are just better at hiding it than western nations. Just wait…

  • DonS

    What a pathetic state of affairs. And Fareed Zakaria, hopefully, is being exposed for the hack that he is.

    Apparently, there are those of his ilk who would prefer to go hat in hand to China, begging for handouts, then to do the right thing and get our own financial and regulatory houses in order. We’re so addicted to our ruinous entitlements, that we are willing to sell out to an evil, atheistic, human life-degrading, authoritarian empire.

    You know, there is another alternative. Do the right thing — get rid of unfunded entitlements, cut regulations, reform the tax code so that it actually promotes productivity, allow Americans to use the natural resources our country has been blessed with, and watch our economy grow, jobs return to the U.S., productivity soar, and our deficit disappear. What a concept!

    Of course, what I said above also mostly applies to Europe, though not so much as to natural resources. The cradle to grave social welfare mentality is an utter failure. The evidence is in. It’s long past time to reform, rather than sell out to China.

  • DonS

    What a pathetic state of affairs. And Fareed Zakaria, hopefully, is being exposed for the hack that he is.

    Apparently, there are those of his ilk who would prefer to go hat in hand to China, begging for handouts, then to do the right thing and get our own financial and regulatory houses in order. We’re so addicted to our ruinous entitlements, that we are willing to sell out to an evil, atheistic, human life-degrading, authoritarian empire.

    You know, there is another alternative. Do the right thing — get rid of unfunded entitlements, cut regulations, reform the tax code so that it actually promotes productivity, allow Americans to use the natural resources our country has been blessed with, and watch our economy grow, jobs return to the U.S., productivity soar, and our deficit disappear. What a concept!

    Of course, what I said above also mostly applies to Europe, though not so much as to natural resources. The cradle to grave social welfare mentality is an utter failure. The evidence is in. It’s long past time to reform, rather than sell out to China.

  • Steve Billingsley

    Tom @3
    Go to the Federal Register and do a search for all of the existing and proposed rules, the listing of headings alone runs more than 6,000 pages, containing more than 61,000 items. That is just the headings. The Register itself takes up about 30 feet of shelf space. Deregulation is not the problem. There are particular decisions that could be characterized as deregulation (such as the repeal of Glass-Stegall) that I think were horrible mistakes, but that decision didn’t deregulate as much as it just created a new set of rules and regulations to replace the old ones. Sarbannes-Oxley, No Child Left Behind, Medicare part D, Dodd-Frank, Obamacare, the Patriot Act and the creation of the Department of Homeland Security are all legislative acts within the past 10 years that have added all kinds of rules to the way business is conducted in various sectors of our economy. We actually need serious deregulation because the way it stands now, the regulatory climate doesn’t hurt huge corporations and Wall Street firms nearly as much as it hurts small and medium sized enterprises and lower and middle wage earners.

    G.K. Chesterton’s quote is quite apropos, “A society that won’t follow the Ten Commandments will get the tens of thousands of commandments.”

  • Steve Billingsley

    Tom @3
    Go to the Federal Register and do a search for all of the existing and proposed rules, the listing of headings alone runs more than 6,000 pages, containing more than 61,000 items. That is just the headings. The Register itself takes up about 30 feet of shelf space. Deregulation is not the problem. There are particular decisions that could be characterized as deregulation (such as the repeal of Glass-Stegall) that I think were horrible mistakes, but that decision didn’t deregulate as much as it just created a new set of rules and regulations to replace the old ones. Sarbannes-Oxley, No Child Left Behind, Medicare part D, Dodd-Frank, Obamacare, the Patriot Act and the creation of the Department of Homeland Security are all legislative acts within the past 10 years that have added all kinds of rules to the way business is conducted in various sectors of our economy. We actually need serious deregulation because the way it stands now, the regulatory climate doesn’t hurt huge corporations and Wall Street firms nearly as much as it hurts small and medium sized enterprises and lower and middle wage earners.

    G.K. Chesterton’s quote is quite apropos, “A society that won’t follow the Ten Commandments will get the tens of thousands of commandments.”

  • http://www.toddstadler.com/ tODD

    DonS said (@7):

    The cradle to grave social welfare mentality is an utter failure. The evidence is in.

    I mean, consider Germany!

  • http://www.toddstadler.com/ tODD

    DonS said (@7):

    The cradle to grave social welfare mentality is an utter failure. The evidence is in.

    I mean, consider Germany!

  • http://www.biblegateway.com/versions/Contemporary-English-Version-CEV-Bible/ sg

    Germany has debt. It’s debt to GDP ratio is worse than ours, even though they don’t fund a military.

    http://en.wikipedia.org/wiki/List_of_sovereign_states_by_public_debt

  • http://www.biblegateway.com/versions/Contemporary-English-Version-CEV-Bible/ sg

    Germany has debt. It’s debt to GDP ratio is worse than ours, even though they don’t fund a military.

    http://en.wikipedia.org/wiki/List_of_sovereign_states_by_public_debt

  • Tom Hering

    Ah, but look at the number of welfare states on that list with less debt than the U.S. Some of them are doing comparatively well these days. As is Germany, with more debt.

  • Tom Hering

    Ah, but look at the number of welfare states on that list with less debt than the U.S. Some of them are doing comparatively well these days. As is Germany, with more debt.

  • http://www.toddstadler.com/ tODD

    I see, SG (@10). So the countries whose economic policies we should be emulating are … North Korea, Libya, Oman, Azerbaijan, Uzbekistan, …

    Wonder why I don’t hear more about those awesome countries?

  • http://www.toddstadler.com/ tODD

    I see, SG (@10). So the countries whose economic policies we should be emulating are … North Korea, Libya, Oman, Azerbaijan, Uzbekistan, …

    Wonder why I don’t hear more about those awesome countries?

  • SKPeterson

    Well, I’m pinning my hopes on Bachmann so she can be our Evita and we can go the way of Argentina. Ole!

  • SKPeterson

    Well, I’m pinning my hopes on Bachmann so she can be our Evita and we can go the way of Argentina. Ole!

  • kerner

    SK @13:

    Don’t cry for meeee Minnesotaaaaaa…The truth is I never left youuuuuu…

    sk:

    tODD has a point. I don’t see much correlation between debt/GDP ratio and economic health from that list. What should we make of that?

  • kerner

    SK @13:

    Don’t cry for meeee Minnesotaaaaaa…The truth is I never left youuuuuu…

    sk:

    tODD has a point. I don’t see much correlation between debt/GDP ratio and economic health from that list. What should we make of that?

  • Joe

    We should look at Europe because there is a great lesson to learn there. For the most part, Europe created lots of wealth using basic normal capitalist free trade free market principles. Once they had this wealth the continent (almost in unison) went the route of social democracy (i.e. socialism light) and the continent got poorer and their economies suffered. And, then the countries largely took one of two routes. Some embarked on a return to free markets and free trade (not all the way but to a considerable degree) and others doubled down on the socialist light model. Those who re-embraced free markets and free trade are doing well (i.e Scandinavia, Germany) and those that did not are doing very poorly (i.e. Greece, Portugal, Spain).

    Sweden is actually a very good example of a country moving back toward a free market and experiencing a lot of growth because of it.

    http://reason.tv/video/show/andreas-bergh-inteview

  • Joe

    We should look at Europe because there is a great lesson to learn there. For the most part, Europe created lots of wealth using basic normal capitalist free trade free market principles. Once they had this wealth the continent (almost in unison) went the route of social democracy (i.e. socialism light) and the continent got poorer and their economies suffered. And, then the countries largely took one of two routes. Some embarked on a return to free markets and free trade (not all the way but to a considerable degree) and others doubled down on the socialist light model. Those who re-embraced free markets and free trade are doing well (i.e Scandinavia, Germany) and those that did not are doing very poorly (i.e. Greece, Portugal, Spain).

    Sweden is actually a very good example of a country moving back toward a free market and experiencing a lot of growth because of it.

    http://reason.tv/video/show/andreas-bergh-inteview

  • SKPeterson

    kerner (and Todd) – The issue isn’t debt in relation to GDP per se, but what is the nature of the debt and the character of the debt-GDP ratio. The debt we have accumulated recently (say the last 20 years or so) has been directed more towards consumption and has not been invested in capital. As a result, we have been allowing our capital stock to deteriorate and undercut our productive capacity which translates into our ability to shoulder debt burdens. For a variety of reasons, Germany has not followed this model. (However, they are underwriting an awful lot of it in Greece, Portugal, Spain, and Italy, for now)

    So, we have increased our debt in order to have more tv’s, etc, but failed to invest in tv, etc manufacturing. While increasing debt in order to consume is not inherently wrong, doing so for extended periods does result in capital deterioration; usually increased consumption is funded by increased incomes associated with increased output. We’ve had stagnant income growth, except in those areas of the financial sector which make money by artificial manipulation of credit. Germany, not so much. Now, China has invested its money, but much of this has been government-directed, not market-directed, so China has created vast seas of empty office space and deserted shopping malls – malinvested capital on a large scale. Now, to their benefit, they have invested some of this into real productive capital, but China is sitting on debt bubbles of their own so I don’t see too much help from them.

    This video (it’s an hour long, but quite good) of a talk by Kevin Dowd addresses much of this. He’s Irish and the audience English and there’s annoying noises in the background, but the talk is still pretty good.

  • SKPeterson

    kerner (and Todd) – The issue isn’t debt in relation to GDP per se, but what is the nature of the debt and the character of the debt-GDP ratio. The debt we have accumulated recently (say the last 20 years or so) has been directed more towards consumption and has not been invested in capital. As a result, we have been allowing our capital stock to deteriorate and undercut our productive capacity which translates into our ability to shoulder debt burdens. For a variety of reasons, Germany has not followed this model. (However, they are underwriting an awful lot of it in Greece, Portugal, Spain, and Italy, for now)

    So, we have increased our debt in order to have more tv’s, etc, but failed to invest in tv, etc manufacturing. While increasing debt in order to consume is not inherently wrong, doing so for extended periods does result in capital deterioration; usually increased consumption is funded by increased incomes associated with increased output. We’ve had stagnant income growth, except in those areas of the financial sector which make money by artificial manipulation of credit. Germany, not so much. Now, China has invested its money, but much of this has been government-directed, not market-directed, so China has created vast seas of empty office space and deserted shopping malls – malinvested capital on a large scale. Now, to their benefit, they have invested some of this into real productive capital, but China is sitting on debt bubbles of their own so I don’t see too much help from them.

    This video (it’s an hour long, but quite good) of a talk by Kevin Dowd addresses much of this. He’s Irish and the audience English and there’s annoying noises in the background, but the talk is still pretty good.

  • http://www.biblegateway.com/versions/Contemporary-English-Version-CEV-Bible/ sg

    Thanks for the link, SKP

  • http://www.biblegateway.com/versions/Contemporary-English-Version-CEV-Bible/ sg

    Thanks for the link, SKP

  • http://www.biblegateway.com/versions/Contemporary-English-Version-CEV-Bible/ sg

    @12 trying to limit the stream of consciousness here. All the wretched hives you noted don’t have cradle to grave social welfare states like the US and Germany. So the point is that while some are proud of the uh, health of these places, the fact is they can’t really afford it because they have to borrow to pay for it. Germany doesn’t even defend itself and is still in debt.

    When I was in high school I remember thinking that the beauty of debt was that someone else actually worked to provide all the stuff that I consumed while just gave them a potentially worthless IOU. Potentially, because I could die and never be able to repay. They of course could not ever get back the time they spent providing the services. In the case of sovereign debt, we are taking but not giving, defaulting through QE, which is about as immoral as my beauty of debt thinking.

  • http://www.biblegateway.com/versions/Contemporary-English-Version-CEV-Bible/ sg

    @12 trying to limit the stream of consciousness here. All the wretched hives you noted don’t have cradle to grave social welfare states like the US and Germany. So the point is that while some are proud of the uh, health of these places, the fact is they can’t really afford it because they have to borrow to pay for it. Germany doesn’t even defend itself and is still in debt.

    When I was in high school I remember thinking that the beauty of debt was that someone else actually worked to provide all the stuff that I consumed while just gave them a potentially worthless IOU. Potentially, because I could die and never be able to repay. They of course could not ever get back the time they spent providing the services. In the case of sovereign debt, we are taking but not giving, defaulting through QE, which is about as immoral as my beauty of debt thinking.

  • helen

    The Scandinavians couldn’t be in better shape because ALL of them pay their taxes at a fairly high rate
    while in the Medterranean tier (and some other places I could mention) only dummies do that?

  • helen

    The Scandinavians couldn’t be in better shape because ALL of them pay their taxes at a fairly high rate
    while in the Medterranean tier (and some other places I could mention) only dummies do that?

  • http://steadfastlutherans.org/ SAL

    I suspect we’ll have a global economic collapse in my generation. That means we probably fall back in development (worldwide) a few decades and we have something new as our economic system besides the current form of capitalism.

    I don’t think there’s a historical parallel as we were never so connected that each nation faced economic collapse simultaneously. It seems probable that most of our modern economic institutions will die.

  • http://steadfastlutherans.org/ SAL

    I suspect we’ll have a global economic collapse in my generation. That means we probably fall back in development (worldwide) a few decades and we have something new as our economic system besides the current form of capitalism.

    I don’t think there’s a historical parallel as we were never so connected that each nation faced economic collapse simultaneously. It seems probable that most of our modern economic institutions will die.

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