After the ball is over …
Monday, November 3, 2008 Free Headline Alerts
Sol Sanders writes the "Asia Investor" column weekly for EAST-ASIA-INTEL.com.
The truth is that this American presidential campaign just concluding is part of the whole Era of Extravagant Exuberance also drawing to a close in the U.S. and the rest of the world. The hundreds of millions of dollars lavished, particularly by the Obama campaign, on mass meetings that had more to do with the rock star culture than politics may not be around four years from now.
That’s not to predict breadlines and Hoovervilles soon dotting the landscape. There is as much an air of unreality in the panic that has set in among the financial markets as there is of the now revealed excesses of the subprime mortgage market. [What a lovely euphemism for pure, drop-dead dumb lending activities!].
All I have to do is walk out into the working class neighborhood I live in to understand that the end of the world — and that great American man-made notion, the death of the U.S. economy — has been more than slightly exaggerated. My neighbor, living a modest life as a retired military, has just driven off in his huge mobile home to see the leaves turn in the beautiful Shenandoah. [The gas price here has dropped, well under the national average for we have a refinery nearby.] Another neighbor, an elderly lady watches as her two noisy Daschunds, Max and Sys, are beating it up along the fence with my Airedales. [She has chosen to live alone rather than “impinge on her daughter’s self esteem”.] Down the street, the morning bus has arrived right on time, with all the traffic moving behind and against it stopped temporarily, for the kids, scuffling and kicking, to clamber aboard for their schoolday. Tonight the kids, got up in pretty elaborate costumes, came by and were handed their fullsized Snickers.
Martha Stewart had it partly right when she said wealthy billionaires such as herself would have “to suck it in” submitting to new heavier taxation. But if the Obamaites have their way, there would also be new [and as probably as unsuccessful as they were in the long post-Depression era before World War II] efforts to “spread the wealth around” through government fiat and “projects” — and ever increasing taxes for even the lower incomes to fund them.
But the incredible American entrepreneurial spirit will survive that, too, as it has the atrocious mismanagement of the Congress and the bloated Washington bureaucracy that brought on this crisis of credit, and then, of confidence. There are, after all, large pockets of fat and surplus, spread despite the claims of critics of the system, through much of the population. The comparisons of living expenditures, for example, even when adjusted for inflation of the currency, do not reflect the changed higher comfort standards between Depression America and the present lifestyle. It is something that all those foreigners trying to immigrate to the U.S. instinctively understand. Therefore, the vast distance from abject poverty and a sustainable level of a lower standard of living for most Americans [and Europeans] is obvious even if cutbacks must be made.
But as the world settles into the cleanup phase after the party, it is likely to be Asia, particularly the so-called developing countries, which are going to suffer.
For behind those gleaming new [and often empty] skyscrapers in Pudong and the palatial dwellings abuilding on Malabar Hill [by inheritors of a hard-working, simple-living Poppa’s crores], are the more than two billion who have barely profited, if at all, in the much touted Chinese and Indian boom economies. The continuing and snowballing food adulteration scandals with their hospitalized infant victims in China — how many never reached medical attention? — point to the total inadequacies of the China boom. There are the staggering statistics on continuing malnutrition for hundreds of millions of Indian children.
The East Asia miracle of the past three or four decades, beginning in Japan and spreading out by no accident to its neighbors as quotas were slapped on the Japanese, was built on the strategy of an export-led economy. Disprortionately, all the economies of the region were dependent on consumer goods markets, first in the U.S., and then increasingly in Europe. The harder and more complex and time-consuming balancing effort to create internal markets has not been achieved — or, indeed, pursued with any tenacity.
So, as the cliché goes, when the Americans catches a cold, the rest of the world gets pneumonia. The crowing in China’s official media in the aftermath of the descent into crisis on Wall Street and braggadocio about the benefits of the stability of their own “market socialist” economy were silenced before they could echo. Chinese gross national product — always a bad measurement of prosperity and stability even in the hands of more honest statisticians — is falling rapidly. That is because a third of it is created by exports. And, arbitrarily as is the want of the China watchers — both domestic and foreign — the game is to name an absolute figure as the danger point. That has been generally called at 8 percent and it won’t be long in coming. The efforts of the Beijing “planners” to bolster a long neglected domestic market — even gestures toward rural growth — Mao is roiling in his grave! — by a return to private land holding! — at best would turn out to very long term. Nor will new subsidies for exports and manipulation of the yuan in a ricocheting world currency market compensate. But certainly as already has been seen in the Pearl River Delta, unemployment will follow in the wake at the early onset of a worldwide recession and a dimming export market.
In India, the stock market — fueled disproportionately by NRIs [non resident Indians], many of them winners in the Silicon Valley sweepstakes — has collapsed. High-living professionals in Mumbai [Bombay], Bangalore and Hyderabad in the IT outsourcing industries will not be able to maintain growth based, again, largely on exports to the “post-industrial” countries of the West.
There is, too, again with the Obamaites the possibility — as there always is present with the already exhibited beggar-your-neighbor mentality of the European Union — of new efforts at protectionism. There will be a race for the bottom among overseas producers of low-labor cost manufactures for those diminished markets.
Hundreds of millions of others in Pakistan, Indonesia, Bangladesh, Burma, and Vietnam had not yet even yet begun to sup — even with a very long handled spoons – at the world export market are going to be in even greater trouble.
Official development assistance — government to government aid, as bad as it has been in actually creating development — is going to become more important. But legislatures in the West will look even more critically through a glass of export-subsidies. The World Bank, steeped in corruption and incompetence, might even shed its growing irrelevancy and take on a second life — although with governments pumping huge bailouts into their own banking systems, liquidity would not seem to be the issue. Perhaps more important, the end of the whole world of easy credit — undocumented lending — is going to take an even greater toll on the undeveloped world. [“Underdeveloped”, indeed! Is there any hope that in this new Era of Neo-austerity we get might some deflation of the economists’ language as well as their statistics?]
Much is going to depend on U.S. policy and strategies. Just as it was the Americans who led the world into the international credit crunch, it will have to be the U.S. economy which would lead it out.
At this writing, the winner of the American sweepstakes is still unknown. Yet the tendency to highlight the economic policy differences between the two candidates is probably exaggerated. Either would be a prisoner of events. It appears unlikely, for example, that Senator Barack Obama would get his head with his favorite tax and spend policies. The sizeable number of Blue Dog [fiscally conservative] Democrats in the anticipated larger Democratic majority in the House of Representatives where in constitutional theory all money bills must originate will act as a restraint. The power of the American people’s innate conservatism about government intervention/pure old populist chagrin at the perfidy and incompetence of the moneylenders in the Temple was heard clear and loud in the past few weeks. It won’t be any quieter with the onset of at least a measure of austerity in lifestyles for most Americans.
Nor would John McCain with his more traditional view of the economy be able to tell the country what he has not had the political courage to state clearly during the campaign, that it was not deregulation but government interference in market processes that largely brought on the current disaster.
It is, again, morning in America, as Ronald Reagan’s campaigners claimed, and won with it. But …
After the ball is over, after the break of morn,
After the dancers' leaving, after the stars are gone,
Many a heart is aching, if you could read them all—