“The time has come,” the Walrus said,
“To talk of many things:
Of shoes – and ships -and sealing-wax –
Of cabbages – and kings –
And why the sea is boiling hot –
And whether pigs have wings.”
— “Through the Looking-Glass and What Alice Found There,” Lewis Carroll, 1872
The tale of the walrus and the carpenter, how they used grandiose gibberish to induce a bunch of foolish oysters to be their supper, is an apropos political, economic and social parable that applies across the board.
On the macro level, we hear daily the pronostications of candidates, officials, religious leaders, economists and pundits. It is hard to tell which ones are the walruses and which the carpenters.
Although, the “bitter tears” and laments of the walrus, as he consumes the oysters, tends to make him seem more like a politician.
On the micro scale, stock pickers and friendly offers bombard us daily with the untold riches which await. Unfortunately, in desperate times we tend to be more susceptible to desperate measures, including taking foolish risks and believing foolish talk.
Why dwell on such a topic when this column is about China? Two reasons: the first we need to accept that things will not return to “normal,” even if it was never clear what that was. Second, to make sense of a changing world, you need to change also.
Return to “normal”
In China, as well as the United States, the people cry out for and populist leaders promise the “return to normal.”
For the United States, “normal” is more jobs, 3-percent annual growth, opportunity and a world where our ideas and power are accepted and appreciated.
For China, it is more jobs, 9.9-percent annual growth, opportunity and a world where their power and territories are respected.
As evidenced, “normal” is not a universally definable state. The good part is, as you can see, apart from significantly different expectations of “normal” annual economic growth and international outlook, we share more than we differ.
The bad part is we long for things that cannot be. As Goethe said, “There is no past that we can bring back by longing for it. There is only an eternally new now that builds and creates itself out of the best, as the past withdraws.”
But, many seeking to keep or have power seem to never tire of telling people that the past is not dead, just in need of someone who can resurrect it.
To give this some context, consider that between 2001 and 2011 the average annual increase in U.S. GDP was 0.7 percent which put us behind China at 9.9 percent, India at 6.1 percent, Russia at 5 percent, South Korea at 3.6 percent, Brazil at 2.7 percent, Germany at 1.2 percent and the United Kingdom at 0.8 percent.
In the previous decade, 1991-2001, when we experienced one of our strongest economic decades, the average annual increase in U.S. GDP was 3.3 percent. Interestingly, during this period, China also experienced its highest per capital GDP growth.
Ironically, part of the GDP growth was due to consumption, which was tied to increased profits derived from offshore sourcing from places like China and the rest due to real estate and technology bubbles. The idea that this was “normal” and that these conditions could or should be replicated is not rational. It is also worth mentioning that economic cycles are normal and that it would be abnormal, given history, to expect anything else.
To make sense of a changing world you need to change also.
The United States emerged from WWII as the dominant manufacturing economy and built an economic and political empire. We eclipsed our ideological rival Russia and watched as China accepted limited capitalism.
As the only superpower left standing, we watched the new millennium approach, confident that the dawn of a new U.S.-led era had begun. As the world’s leading manufacturer, we turned raw materials from home and abroad into finished goods, which we consumed or sold internationally.
We pushed for and made the World Trade Organization a desirable club. But the WTO, set off a global competition for low-cost sourcing. That was a competition we in the United States were not positioned to compete in, especially when it involved high levels of labor where the competitive edge belonged to the low cost producer.
China and India prospered because of the WTO, and they in turn drove growth in resource rich countries like Russia and Brazil. Their collective activities drove demand for machinery and technology from the United States, Europe, Japan and South Korea. Unfortunately, the merry-go-round stopped after we and Europe discovered we had over-indulged and were spending more than we were willing to pay for.
The first step to making sense of today’s world is to recognize and admit that things have changed? The second step is to figure out what the opportunities are, but I leave that to you. The alternative is to be an oyster.
My next Dispatch will be a primer on how to get your profits out of China. n
Einar Tangen, formerly from Milwaukee, now lives and works in Beijing, China. He is an adviser to Heilongjiang Province, Hebei Province QEDTZ, China.org.cn, China International Publishing Group, Beijing Baotong and DGI DESIGN. He is also a weekly public affairs commentator for CCTV News’ Dialogue and the author of “The Kunshan Way,” an economic development history of China’s leading county level city. While in Milwaukee, he was a partner at Jackson, Morgan and Tangen, president of E-Tech and a senior vice president at Stifel Nicolaus. He chaired various boards in Milwaukee and was a member of the Federal Home Loan Bank of Chicago. Readers who would like to submit questions or suggest areas of interest can send an e-mail to steve.jagler@biztimes.com.
