Interesting Times

Shanghai in 2009 is New York in 1929 – in a manner of speaking.

Shanghai owes the shiny new tower blocks on its waterfront to China’s booming economy of recent years just as New York owes its Manhattan skyline mainly to the booming 20s. 

And, by curious coincidence, Herbert Hoover, the US President in 1929 was a  geologist as is Chinese Premier Wen Jiabao.   A fluent Mandarin speaker, Hoover was instrumental in founding one of the companies that later merged to form Rio Tinto – in which a state-owned Chinese company Chinalco has just bought a large stake.

Fascinating but irrelevant trivia. 

Of more immediate concern, however, is what might happen in the near future: China in 2010 certainly does not want to be where the USA was in 1932.   But, as Patrick Chovanec, of Tsinghua University points out  the slowdown in the West started at the top as the result of extreme foolishness (and, I would add, not a little corruption). 

In the West it is essentially a financial panic and the first layoffs have been bankers.   However, in China it started at the bottom and is a collapse of demand that is chopping the economy off at the knees with migrant workers the early casualties.   The political and business elites are still partying – for now at least.

The implicit contract between rulers and ruled (we give you jobs/you leave politics to us) is being stress tested.   These are indeed interesting times.

We shall see.  My guess is that the parallels between 1930s USA and modern China have a way to run yet.


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