One of the recurring subthemes in the news lately has been the need for China to develop a consumer economy. The latest to exhort the Chinese and their consumers about their frugal ways is The New York Times in a front-page article earlier this week titled “As Its Economy Sprints Ahead, China’s People Are Left Behind.”
The argument in the story is familiar: The policy of the Chinese government to keep interest rates low to consumers and feed Chinese industry with cheap state loans has sent Chinese inflation higher than what the average consumer can earn in a bank account. The result is a population that hoards money instead of spending it on raising their standard of living or quality of life. The couple whom the article features saves two-thirds of its income. The article never points out that the United States faces the same problem of bank interest being less than inflation.
The article then asserts that to keep its economy growing, the Chinese must develop policies that encourage their consumers to spend more of what they make. It warns that if the Chinese consumer doesn’t get off its duff and start buying things then China will go the way of Japan, which has only the third largest economy in the world.
The underlying premise of the article is that without growth, an economy must suffer. It’s the basis of most economic text books and all economic planning in the United States. It’s taken for granted in virtually every political debate and news story. No politician ever leaves economic growth out when talking about his or her plans. Even thoughtful progressive economists such as Paul Krugman often advocate policies based on the idea that the only strong economy is a growing economy.
But in a world of rapid climate change and diminishing resources, continued growth based on fossil fuels will lead to an ecological disaster for the human race. As a species and as individual nations, we have to learn to manage economies that do not have to grow to thrive.
While the makers of waffle irons, video games and golf clubs might not be as happy, wouldn’t the world be better off in the long run if the Chinese people maintain their frugal ways, which stem as much from ancient traditions as they do from active government policy?
Isn’t it possible that the Chinese government has peered realistically into the cold hard facts of the looming ecological disaster, instead of swerving away in disbelief as Americans seem to be doing. After all, the Chinese currently invest far more money into alternative energy like wind and solar each year than any other country. China tried with some success to curb population growth for years by implementing a one-child policy. Throughout the ages, population growth has been the primary but not sole instigator of economic growth.
There is also no doubt that the Chinese are doing their share of polluting, but they spoil the air, land and sea less per capita than we do in the United States. If the consumer remains frugal, the Chinese carbon footprint could stay fairly small, and get smaller as the country transitions to alternative energy and makes its industrial processes more environmentally friendly.
I hope that the Chinese government eventually rewards small savers for their service to the country’s growth spurt by raising interest rates on savings deposits. But other than that, I see very little wrong with the current Chinese economic policies. Chinese politics, internal security and free speech issues—now that’s a different story.