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Old August 11, 2019, 08:44 AM
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ToBeFair ToBeFair is offline
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Trump's trade war brilliantly explained in this article

Quote:
America’s chief competitor in the trade war is obviously China, which subsidizes not just worker costs but the costs of its businesses. The government owns 80% of the banks, which make loans on favorable terms to domestic businesses, especially state-owned businesses. If the businesses cannot repay the loans, neither the banks nor the businesses are typically put into bankruptcy, since that would mean losing jobs and factories. The nonperforming loans are just carried on the books or written off. No private creditors are hurt, since the creditor is the government and the loans were created on the banks’ books in the first place (following standard banking practice globally).

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China thinks this is a better banking model than the private Western system focused on short-term profits for private shareholders. But U.S. policymakers consider China’s subsidies to its businesses and workers to be “unfair trade practices.” They want China to forgo state subsidization and its other protectionist policies in order to level the playing field. But Beijing contends that the demanded reforms amount to “economic regime change.” As Hudson puts it: “This is the fight that Trump has against China. He wants to tell it to let the banks run China and have a free market. He says that China has grown rich over the last fifty years by unfair means, with government help and public enterprise. In effect, he wants the Chinese to be as threatened and insecure as American workers. They should get rid of their public transportation. They should get rid of their subsidies. They should let a lot of their companies go bankrupt so that Americans can buy them. They should have the same kind of free market that has wrecked the US economy. [Emphasis added.]”

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To understand what is happening here, it is useful to review some history. The free market model hollowed out America’s manufacturing base beginning in the Thatcher/Reagan era of the 1970s and ’80s, when neoliberal economic policies took hold. Meanwhile, emerging Asian economies, led by Japan, were exploding on the scene with a new economic model called “state-guided market capitalism.” The state determined the priorities and commissioned the work, then hired private enterprise to carry it out. The model overcame the defects of the communist system, which put ownership and control in the hands of the state.

The Japanese state-guided market system was effective and efficient—so effective that it was regarded as an existential threat to the neoliberal model of debt-based money and “free markets” promoted by the International Monetary Fund (IMF). According to author William Engdahl in “A Century of War,” by the end of the 1980s, Japan was considered the leading economic and banking power in the world. Its state-guided model was also proving to be highly successful in South Korea and the other “Asian Tiger” economies. When the Soviet Union collapsed at the end of the Cold War, Japan proposed its model to the former communist countries, and many began looking to it and to South Korea’s example as viable alternatives to the U.S. free-market system. State-guided capitalism provided for the general welfare without destroying capitalist incentive.

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Just as the U.S. had engaged in a Cold War to destroy the Soviet communist model, so Western financial interests set out to destroy this emerging Asian threat. It was defused when Western neoliberal economists persuaded Japan and the Asian Tigers to adopt a free-market system and open their economies and companies to foreign investors. Western speculators then took down the vulnerable countries one by one in the “Asian crisis” of 1997-8. China alone was left as an economic threat to the Western neoliberal model, and it is this existential threat that is the target of the trade and currency wars today.

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The implication is that China, being too strong to be knocked out of the game as the Soviet Union was, needs to be coerced or cajoled into adopting the neoliberal model and abandoning state support of its industries and ownership of its banks. But the Chinese system, while obviously not perfect, has an impressive track record for sustaining long-term growth and development. While the U.S. manufacturing base was being hollowed out under the free-market model, China was systematically building up its own manufacturing base and investing heavily in infrastructure and emerging technologies, and it was doing this with credit generated by its state-owned banks. Rather than trying to destroy China’s economic system, it might be more “favorable to U.S. interests and values” for us to adopt its more effective industrial and banking practices.
https://www.truthdig.com/articles/ne...atch-in-china/
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