“The world is being swamped with Chinese goods, and the United States, Europe and Japan are right to worry about it.” Those are the opening words of a recent Washington Post editorial about Chinese production. The bet here is that the writers of the editorial could be persuaded to rethink their pessimism. Production is always bullish, by definition.
For the Post’s editorial board to disdain substantial Chinese production for the rest of the world is for those same editorialists to disdain the division of labor that is at the root of all productive advance. By extension, it’s for the Post’s editorial board to disdain the automation of work and thought that awaits us since what enhances the productivity of humans (automation of work and thought) promises herculean leaps of productivity in the United States, Europe, Japan and China that will make the present appear impoverished by comparison.
Whether those producing for us are located across the street or on the other side of the world is immaterial. What matters is that there’s production, and growing amounts of it. To the extent that there is, we all get a raise as the costs of goods and services decline at the same time that our odds of doing the work that most associates with our unique skills and intelligence skyrockets. That’s the case because imports, much like work divided, make it possible for us to specialize to a greater and greater extent, and when we’re able to specialize, we’re able to produce exponentially more such that our compensation soars.
The editorial goes on to report that “China’s exports overall grew about 13 percent last years,” and that the latter was by central decree. In the words of the editorialists, “China’s economy remains in the doldrums,” and “In hopes of pulling the country out of this hold, Chinese leaders are stepping on the gas for exports.” The bet here yet again is that the writers could be persuaded to rethink their pessimism about production and exports, including Post columnist Heather Long.
Recently Long channeled the aforementioned editorial with confident commentary asserting that “The Chinese economy is struggling, and, rather than spur Chinese consumers to buy more, President Xi Jinping is once again trying to undercut other countries by ramping up exports.” Long too, could perhaps be persuaded to rethink her analysis.
For one, if China’s would-be central planners or producers were really “trying to undercut other countries,” they wouldn’t be doing it by “ramping up exports.” Quite the opposite. It’s a lack of production outside a country that saps that same country’s economic vitality. Again, work divided is the biggest driver of productivity leaps, and nothing else comes close.
Next, it cannot be stressed enough that to produce is to import. In other words, there’s no such thing as “ramping up exports” without ramping up imports. No doubt Long and her fellow editorialists might respond that owing to the desperate poverty that was the norm in China not terribly long ago, the Chinese tend to save the fruits of their exports. Ok, but even if true, no act of saving ever subtracts from demand. Money saved is immediately loaned out by financial intermediaries (think banks) to those who have near-term consumptive desires. What’s not spent by the productive is immediately shifted to those who will spend.
Which brings us to the editorial’s assertion that “China’s economy remains in the doldrums,” and that “The Chinese economy is struggling” (Long). Both assertions are rooted in the belief that the Chinese aren’t matching their production with consumption. No, that’s an impossibility. Bullish production is consumption, always and everywhere. China’s problem is economists, and their models, not its economy.