Satyajit Das writes an opinion piece in The Independent stating that the reality is that a significant part of China’s growth since 2007-08 has been an illusion.
“The view that China, because of its large population, can compensate for a decrease in consumption in the developed countries is fanciful. China’s consumption is only a little more than France’s, a little less than Germany’s and around one eighth of US consumption.
“China’s median household income is around $6,000, less than 20 per cent of that in the US where it is $45,000. There is a growing number of consumers, around 100-150 million, which is expected to double in the next five years. But a large portion of China consists of “survivors” (a term coined by the research firm Dragonomics) whose income levels allow the purchase only of basic foods and other necessities, making them less interesting for foreign firms.
“A hard landing will be especially traumatic for the global economy, which has not dealt with its core problems – excessive debt levels, weak non-debt fuelled demand and global imbalances. The crisis and its effects have been masked in developed economies by artificial demand from government spending, which is proving increasingly difficult to sustain. In China, it was masked by debt fuelled investment. Now, that feast too is coming to an end.”
China has the same problem as all advanced economies whose products and services are increasingly being produced by technologically sophisticated machinery––the non-human factor of production or productive capital.
The potential for any of the modern economies to grow substantially and sustain growth is rooted in the application of advances in technological production processes that are capable of producing a quality material lifestyle for ALL people.
With modern economies still focused on “employment” as the ONLY means to earn an income for the majority populations, this results in the restriction of the potential for growth and prosperity. The result is that primary distribution through the free market economy, whose distributive principle is “to each according to his production,” delivers progressively more market-sourced income to capital owners and progressively less to workers who make their contribution through labor. What needs to be adjusted is the opportunity to produce, not the redistribution of income after it is produced.
The path to such prosperity requires recharting the financial system to empower ALL citizens to acquire long term viable private, individual ownership portfolios representing assets of new productive capital (the non-human factor of production embodied in superatomated and computerized processes that require less labor worker or no labor worker input) and pay for their acquisition out of the future earnings of the productive capital investments financed by insured capital credit. This will result in growth propelled by ever-expanding consumer demand and the ability through increasing income generated by capital investments to pay for the products and services produced.
For America, the accelerated growth rate, due to the the infusion of credit into productive capital investment, would result in a majority of Americans earning additional income from wages and salaries and dividend, interest, and capital gains from other opportunities created beyond the dividend income payout from the productive capital investments. The accelerated growth rate would produce jobs that pay well and would significantly expand markets due to rising consumer demand, which in turn would generate greater business profits and opportunity for more productive capital investment. Everyone would benefit––rich and poor. There would be lower unemployment (making for the elimination of make-work), higher personal incomes, lower deficits due to greater tax revenues, lower tax rates, and better government services, with every citizen benefiting from a higher standard of living.
Such a path to prosperity would empower ordinary citizens, the majority of which are capitalless, to own a substantial percentage of the future productive capital formation creating the growth of the economy. The GOAL would be to assure that every man, woman and child would be able to accumulate a portfolio of productive capital assets large enough to provide a secure source of income. After a few decades, dividend income from the ownership of productive capital assets would become the primary source of income, though well-paying job opportunities would be plentiful for those who want to work for the satisfaction that can come from employment, whether in business, education, healthcare, science, and government or other self-rewarding contributions to society.
