The thing that scares me most is the prospect of another world war. I'm sure there are a lot of folks to whom that prospect is terrifying, but I'm not talking about the type of war you might expect. There's a lot of reasons that a war between the major powers fought with the most destructive military arsenals money can buy would be horrifying, but the war I refer to could end with nary a shot being fired. This is beyond World War Three. My greatest fear is the First World Economic War.
Fighting with guns, and ships, and airplanes - and nowadays with satellites, robot bombers, and directed-energy weapons - is nothing to scoff at. The nuclear considerations aside, even the conventional weapons of armies worldwide have become so destructive it's hard to describe in terms that most Americans could truly relate to. There are artillery shells that rain down thousands of miniature yet highly destructive bombs with a single volley, bombs dropped from planes that can hit a mailbox from 40,000 feet, and guided missiles that can do the same from thousands of miles offshore. But the sheer power of this force aside, consider just how much more destructive a war which could damage the very foundations of not just a building, but of a nation. A war which could cause worldwide famine, depression, epidemics, and societal collapse, but not a shot gets fired between nations. Or a war which turns you and everyone you know into a slave to the ink on an accountant's pen. I'm talking about an economic war, and in later days I'll be discussing this topic much more.
For the moment, I want to focus in on a nation which might someday be our prime nemesis in just such a conflict. China is undoubtedly the rising star of Asia at the moment, with an economy that grew by an impressive 8.7% in FY2009 (FY stands for Fiscal Year - in case you didn't know). The year before, China managed to buck the collapsing economic trend as well with a 9.6% GDP growth. Though not as imposing as the 11.4% growth reaped by Beijing in 2007, and certainly a downer from their previous 5 years of double-digit expansion, these numbers are not to be taken lightly. While boom times in developing nations are often fleeting things, China is an oddball for many ways. On March 5th, the Chinese Premier Wen Jiabao delivered an address to the Communist parliament in the Great Hall of the People which decried the growing gap between the rich and the poor in the country, reviewed the phenomenal growth statistics for the consumption of the masses, and promised action to combat the rising unemployment. These are all major problems for the Communist government. The chasm between the living situation in a village in the Chinese hinterlands versus a coastal megalopolis like Shanghai or Nanjing is a wide one. The population is stratified in many places, such as northern provinces where there's a large presence of ethnic Mongols (one of China's neighbors), and to the western spur of the country with large Turkic and Nepalese populations. In major cities there's also a huge disparity, and this is China - we're talking a lot of people. And despite the relatively low unemployment rate (reported) of 4.35%, let us remember we are speaking of Commies. It wasn't Benjamin Franklin who once said, "It doesn't matter who votes, it only matters who counts them." It was a Commie (Stalin, to be precise). The unemployment figures, like the value of the renmibi, are sketchy at best. We do know that on October 8th, the China Post ran a story highly critical of government policy concerning underemployment and the wealth gap, which mentioned that 70% of the Chinese population is still in a state of rural development, working on family farms and kollectivs in the interior of the nation. What would America look like if 7 out of 10 citizens were farming for beans in their backyards?
Despite these problems, the foundations of the Chinese economy are strong. The Chinese have a solid resource base, and are the worlds largest exporter of rare earth minerals. These exotic semi-metallic substances, like gadolinium, neodymium, and samarium, are highly valued for their uses in high technology fields like radiology, energy and fusion research, and computer hardware of all kinds. A rumored trade halt to these minerals is currently spooking nerves in the aerospace and computer chip industries, and though the US has ample reserves of it's own, it is naturally cheaper to buy these metals from China. China is also a net exporter of oil and natural gas, and has a fair amount of proven reserves, though the true figures might not be honestly disclosed. We do know that the Chinese have been active in the South China Sea, attempting enforcement of their territorial claims around the Spratly Islands, the Paracel Islands, and the seabed gas fields at Malampaya. Such a conflict might lead one to believe that the Chinese petroleum reserves are close to hitting their peak and then dwindle down over the coming decades, which is a strong possibility. Beijing has taken a harder line on their territorial claims on the Spratlys recently, prompting fears of economic or military retaliation against the Phillipines and Taiwan for their competing interests in the region. President Aquino of the Phillipines raised the issue at US-ASEAN convention in New York in September, though so far no action has been taken other than for the US to issue a statement two weeks ago calling for the parties of the non-binding Spratly Islands accord of 2002 to produce a stronger, potentially binding pact. If this eventually does happen, it will likely be four or five years in the future.
Manufacturing is China's strong arm, of course, and produces a large segment of their GDP. Roughly 45-47% of the Chinese economy is industrial, both heavy and light, and they manufacture almost every type of good that can be found in the entire world. Televisions, computers, airplanes, and ships - the Chinese heavy industry is a powerhouse exceeded only by the industrial capacity of the United States in the years following the Second World War. When you factor in construction and housing, the segment of industrial and development makes up roughly 60% of the Chinese economy. This figure is balanced out by the fact that this sector also provides only about 17% of the employment available in China, which means that agriculture and far lower paying service jobs are still the primary employers in that nation of billions.
What does all this mean in terms of an economic war? Well, it means that China has a strong foundation and room to falter. These are luxuries that we can only make dubious claims to at the moment, given the skyrocketing cost of servicing our national debt, our yearly deficits, and the fact that Obama has spiked our national debt by over $3 trillion since taking office. China is a third largest economy in the world and a leader in manufacturing. They have extensive shipyards and a strong rail system, and though development has outpaced proven growth in many parts of China, this will not always be the case. Though in a pure trade conflict, the US has the capability to hurt China badly, given our status as their primary exporter, it is unlikely that this advantage alone would be enough to secure a true victory for America - and in a wider trade war involving currencies and exchanges, this picture becomes grim. Help from the Japanese and the South Koreans would be essential in this type of conflict.
So what is a "true victory" in a trade war? Is such a thing even possible? How would an economic war affect my life? I'll save those answers for a later installment, but for now, try out a little thought experiment: Imagine your life without anything stamped or stickered "Made in China". What do you think the shelves of most megastores would look like if such a world came about? And where does the money go from those products after you take them home and put them to use?
That's my piece.
Kyzernick
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