Daily Archives: January 18, 2012

The slowdown in China’s economic growth last year has fostered mixed reactions. Some argue the recently-released 9.2 per cent annual rate exceeds expectations and is consistent with a soft landing. Others see the fall from 10.4 per cent in 2010 as an indication that a sharper drop is still to come.

Without actions to support growth, the pace may fall below eight per cent in 2012. Beijing is likely to lower taxes and consider special incentives to spur consumption. But the real challenge is to encourage less frugality among the Chinese, especially among migrant workers. Policies must be designed to deal directly with the exceptionally high rates of saving by people and corporations. This would have big implications for the trade balance, a contentious issue with the west.

Providing migrants with more security and encouraging higher corporate dividends could increase consumption by some five percentage points of national output. This could turn China’s current trade surplus into a deficit. These distinct and politically sensitive reforms would also lessen China’s alarmingly high income disparities. This strategy, with benefits for all, contrasts with that of pressuring China to strengthen the renminbi, perceived by Beijing as benefiting the US at China’s expense. Read more

Capitalism earns its keep through Adam Smith’s famous paradox of the invisible hand: self-interest, operating through markets, leads to the common good. Yet the paradox of self-interest breaks down when stretched too far. This is our global predicament today.

Global capitalism has mostly shed its moral constraints today. Self-interest is no longer embedded in higher values. Consumerism is the world’s secular religion, more than science, humanism, or any other -ism. “Greed is good” is not only the mantra of a 1980s Hollywood moral fable: it is the operating principle of the top tiers of world society.

Unless we regain our moral bearings our scope for collective action will be lost. The day may soon arrive when money fully owns our politics, markets have utterly devastated the environment, and gluttony relentlessly commands our personal choices. Then we will have arrived at the ultimate paradox: the self-destruction of prosperity at the very moment when technological knowhow enables sustainable prosperity for all. Read more