Whither America without China?

Sharon June 16th, 2009

Someday, someone is going to ask me what happened to the United States – wasn’t it once one of the biggest economies in the world?  I’ve already got my answer ready – we sold ourselves to other countries for flat-screened tvs and other plastic toys.   And weirdest of all, for a long time, we actually thought we got the better of the deal.

Of course, that’s an over-simplified answer, but I think there’s enough truth in it that I can get away with it as a short answer.  We can see it right now.  In April, 2009, foreign purchase of dollars and related assets fell to 11.2 billion dollars – 1/5th of what it was just a month ago.  And this happened just as we desperately need more and more purchases – to afford our wild deficit spending and compensate for lost tax revenue.  Our credit limits are now being revoked. 

So what now?  As far as I can tell, the US government has two plans.  Restore growth so fast and so hugely that we just don’t even notice our giant deficit.  Anyone want to make bets on how likely that is?  Right now, there’s the real possibility that all the growth we’ve seen so far is illusory – the Wall Street Journal posted a few days ago that the entire stock market rally seems to be based on the stimulus package. Hmmm…what will happen when that money is spent?  The same could be said of housing starts and purchases…hmmmm…. The second plan clearly involves magic fairies, all the leaders of China suddenly developing brain damage and wishing really, really hard. 

So where do we go from here?  Nowhere good – all of the assumptions made by the Obama administration have included that idea that China needs us just as badly as we need them.  We are being told, quite bluntly, that’s not true.  As those foreign investments dry up and the dollar is increasingly not the currency of choice, we are facing a new world, no plan, enormous debts and little hope of growth.

What got us out of the Great Depression was a war economy and massive borrowing.  The difference is that we’ve already spent more than we spent on WWII, on nothing – on keeping the ride going around one more time.  We’ve already borrowed nearly as much as a percentage of GDP as we did in WWII – the difference is that we’re borrowing not from allies that need us desperately, in a position of strength, as the only untrashed major economy in the world, with the largest energy reserves available at the time, but as a begging creditor that have nothing to offer but an appetite for plastic.

The mere idea that America could flourish by becoming the best shoppers on the planet and not much more is bizarre, and yet it has held a grip on us for decades.  Our job is to consume, while China and other states produce for us.  The reality is that an economy based on devouring what other people produce, mine, build and make is ummm…due for a refit.

My suggestion is that we refit it voluntarily, and rapidly.  It is time and well past time to begin making things in the United States again.  And by making things I do not mean “asphalt paving and cars” – the private car is doomed, and none of us are made much richer by acres of highway, which only increase our dependency on foreign oil and its toxic cognates. 

By making things, I mean things we actually need. I’m sure you can think of some – socks and shoes and tools and trains; beer and books and beans and bikes; hoes and hats, fiddles and fishing poles.  And on a small scale, keeping fossil fuels to a minimum, near where you live and I do.   Because the other choice is this – we become China’s supplier of things they want that we have – food, mostly, since we’re the biggest exporter in the world, and they can’t feed themselves.  And we do it on China’s terms, at China’s prices, with all that that implies.  There’s a kind of horrible justice there, since we’ve been doing that through globalization to countless poor nations – but there are better things than ironic justice.

Point me to one single piece of evidence that suggests the US will be fine if other nations stop buying our debt, please.  Point me to our plan – one that doesn’t involve rapid growth or actual fairies.  Otherwise, better get started making something useful.

 Sharon

16 Responses to “Whither America without China?”

  1. Coleen says:

    AMEN!

    And how do we like our “change” now? We are not even going to be left with pocket change.
    Universal health care is too expensive even on our newly printed money, and ask a few more vets how well they are taken care of…not all of those answers, or the answers from the other countries who come here to get their surgeries done are positive.

    We are in for a world of hurt!

  2. kathy says:

    Oh Sharon. We are all so down today. The news is so universily bad. When I look for my own green shoots it is here I look; here and at Greg Jeffrer’s farm blog and at Chili Chews and Greenpa. Charles Smith Hughes at oftwominds did a piece a while back about the remnant. That’s us I think. We preach to our own choirs perhaps but preach and listen we do. We will make a new beginning. We will build lives and communities that work on a human scale. I wrote in my blog a while back about rainy days of the spirit. Today is one. I feel it everywhere. At the very least, please know that you do not stand alone. We are like the Who’s calling, “We are here. We are here. We are here.”

  3. Heather says:

    Here’s to making more of our own things! This past Saturday I was spinning a bit of handpainted roving I got, rather more luxuriously than usual, from a lady in PA — she’s a friend of a friend so I thought I’d throw a little support her way. It’s been awesome to spin and I’m looking forward to making perhaps a sweater vest from it. I was spinning to take up some slow time while minding our farm’s spot at the farmers market, so a useful way to spend time. Also, a young lady I met there is now interested in learning to spin, so I’ll be bringing some extra stuff with me next time.

    Meanwhile, still using other people’s yarn to weave scarves — it’s still less expensive. At least I’m using mill ends, and the scarves are quite durable. I think I’m paying myself less than minimum wage most of the time, but whatever. It gets them out to people and if we end up going to a barter system, they’re a known quantity in the local ‘market’. Oh, I also met some people who use as much unwanted or previously used fabric as they can for making little kids’ pants and skirts, so I’ll be culling some of my fabric stash to give to them.

    I’ve also just tested out a few pieces of copperware from a fellow who works in copper and tin and they’re great. He works alone as far as I know, so often you have to wait to get things from him, but they’re worth it. We wanted some camping gear that would last, and decided it was a good investment. And of course they’ll be handy as part of our bugout kits as well. I’ll have to have a little cookout or something soon — I’m afraid my experience with cooking over fire is still pretty limited.

    Now if only some of the local people raised Merino sheep…. sigh. Oh well, Shetland and Romney are nice too, and even Icelandic has its place as well.

  4. Kat says:

    Funny you should write about China today – I just had a conversation this morning with my 25 year old daughter about our (national) relationship with China. She has planted a little garden, and we’re going to trade goodies when things are ripe as she and I have planted different things. Last summer, when I was sharing my concerns about the economy and the state of our nation, nobody in my family wanted to listen. “Too depressing, and it won’t happen anyway!” Well, it did happen, and is happening and, as you have pointed out, it’ll take a lot of wishing when that bailout money runs out. As for depressing, I find it a lot more depressing to be totally taken by surprise and not be prepared for this. Fortunately, I read Depletion and Abundance last year, and have taken its message to heart. Although it would be so much easier to close my eyes and keep repeating to myself, “The government will fix this, the government will fix this, the government will fix this !” (perhaps while clicking my ruby slipper heels together three times!), I prefer a proactive approach. I’ve got my chickens (not brave enough to get the goats this year), a nice garden, and am making connections with other like-minded folks in the community. As Red Green says, “We’re all in this together!”

  5. Brad K. says:

    Sharon,

    I wonder when we stop recalling millions of pounds of food, or millions of products, because of 1 percent defect or less.

    Recalls are a strategy to bolster a “rich” marketplace. They impose a huge price on various producers, industries – and national trading partners.

    What happens the next time Tyson says, “Oops – ten bad chickens that week. Sorry.” Or China says, “ten bad tubes of toothpaste, huh? Don’t use them!”

    Is our economy ready for consumers to take responsibility for quality – and defects – in what we purchase as things get more scarce?

  6. Thanks for encouraging me as I stand with one foot in each world.

    It is so tiring, working full time to earn a paycheque, to pay down the debt, and to buy things like fence wire and posts. But, that work means we have money to invest in our small 6 acres, so that we are ready for “Friday” (once, you said that the world wouldn’t end until Friday at the earliest, and so that’s become the abbreviated term for “things getting really, really bad”, or “the Change” (not quite a la Stirling but…), or whatever … it’s just … Friday in our parlance).

    It is tiring, so tiring, to spend every weekend working on infrastructure, to spend evenings planning and worrying and thinking … but then …

    When Friday comes my kids will have eggs to eat, and the odd bit of chicken and lamb, and whatever managed to grow in the garden. When Friday comes, the pantry will at least have enough in it to hold us over for a bit. When Friday comes, we’ll have wool and the skills to turn it into clothing and blankets to trade with others who may have other things. When Friday comes, we’ll have the books to remind us how to do the things we’ve only tried once as an experiment.

    We hope. It’s hard work, but each step is the building of hope. Thanks for encouraging me to keep going. It’s a long hike, and I’m weary, and sometimes I want to believe that Everyone Else is right and it’ll all be okay soon and I’m just worrying for no reason … but I look at my kids and think … eggs. They should have eggs, at least. And lamb. And milk from the cow. And so it’s worth spending another weekend fixing fences – to hang in there.

  7. Sharon, I read your posts out of order — Orlov came first and now this one. The good news is that the faster the economy goes belly up, the better off we are: “A fast collapse is the optimistic scenario. The alternative is a nasty ‘slow burn.’” So maybe Obama is doing everything right after all!

    In the meantime, I come here for reassurance that I am not as crazy as family and friends think I am! Thanks for being there for all of us:)

  8. ‘Apple Jack Creek’ – only Robinson Crusoe got everything done by Friday ;-)

  9. WNC Observer says:

    Past behavior is the best predictor of future behavior. The people at the top, our so-called “leaders, don’t have a plan and won’t have a plan, because they never have had a plan. The only type of planning they have ever done is planning how they themselves can get into their positions of “leadership” and stay there as long as possible. Stay there they will, until events reach a crescendo and sweep them out of power, one way or another. That seems to be the universal pattern seen throughout history.

    Yeah, we’ll have to make more stuff again. The other side of that coin is that we’ll never be able to make all the stuff that we are consuming now, so we’ll also have to learn to make do with less stuff. I have been saying that the 21st century is going to be one long exercise in giving up things, and this is part of what I mean by that. People will have to give up worthless, easy fantasy jobs and put their shoulder to the plow, maybe literally. People will have to give up leisure time and spend any time not engaged in paid employment producing for their own use in their household economy. People will have to give up simply having as much stuff and as high a standard of living as we have been accustomed to, and learn to live on a lot less.

    As a very rough rule of thumb, I am suggesting that people think in terms of a US median per capita GDP of somewhere in the area of $10,000 per year, in real 2009 dollars. That is about 1/4 of what it is now. Of course, “median” suggests that there will be people above that level – and people below it. How lucky do you think you will be? I am not saying how soon we will reach that level, or how we will get there, or whether or not we will level out there. I do very much doubt that we can sustain anything much above that level, which means that circumstances will force us down to at least that level sooner or later, and probably sooner. I don’t know what things will be like for people a century from now, but this is something that people living right now might have to look forward to, and not all that far into the future.

    One thing that I am doing, while I have the money to do it: I am trying to acquire good, sturdy, reliable tools and equipment, and good “how to” or “DIY” books. As I said, a lot of that production that is going to have to be done will be in the homestead economy. The better equipped one is, the wider the range of things that one might be able to produce for oneself. Some might find later that they can’t put every tool to good use, but that is OK – good quality tools will make very, very good trade goods. One of the most stupidist things of all we have done here in the US is to offshore our tool production capability. We apparently don’t even have the capability to produce drill bits anymore – they are ALL made in China!!! When those imported drill bits are only available at a price of $100 each, people are going to be wishing that they have stocked up. Drill bits are not the hardest things in the world to make, but neither are they the easiest; it will take us quite a while to rebuild our capacity to produce basic things like that. In the meantime. . .

  10. Isis says:

    WNC Observer:

    “People will have to give up worthless, easy fantasy jobs and put their shoulder to the plow, maybe literally. People will have to give up leisure time and spend any time not engaged in paid employment producing for their own use in their household economy.”

    Oh, I don’t know. As more and more 50+ hrs/week paper-pushing jobs go away, people are likely to have more, rather than less, free time. Now add some blackouts to that (i.e. no TV and no Internet), and most people are likely to wind up with more free time than then will know what to do with.

  11. WNC Observer says:

    We have only had the 40 hour work week for the past 60-70 years. That has corresponded with the peaking of fossil fuels, and is sure to go away when they do. For most of human history, 12 or even 16 hours per day for six or even seven days a week was pretty much the standard for wage earners (or slaves, which in many cases was pretty much the same thing).

  12. Heather says:

    As far as I can tell, at least around here, 40 hour weeks are only for people who are paid hourly. Salaried people work more like the so-called old-time 50-60 hour weeks. And I’m not even sure about the hourly-paid jobs…. just found out this past May at town meeting that one of our police officers was putting in 60 hours/wk even though she was only getting paid for 35 hours because she felt the work needed to get done. She’s now salaried as of that town meeting, because as long as the town can afford it, she’ll be paid for all the work she’s doing!

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