China: Redistribution of Wealth Has Begun

Saturday, August 01, 2009

Referring to the header of my blog that presumes that we are experiencing a global redistribution of wealth towards Asia I came across the following article in the Chinese paper Sohu. Turn off your lying TV, trash the weekend paper you may be reading: This is nothing else then a declaration of economic war by China. The reasons why Michael Jackson died are completely irrelevant to your future.
This article is:
The total population of China and India now exceeds two billion. Now that they are beginning to compete for resources with people in Europe, the U.S. and Japan, the world's wealth will be redistributed. The direction of the flow of wealth has begun to reverse itself after two hundred years.

In ancient times, production equipment had not yet been developed. Natural resources would not have been able to feed the entire population and wars among countries were usually battles for resources.

The competition for survival of the fittest encouraged scientific and technological progress, as well as the development of civilization.

The Industrial Revolution began in Europe. Over the course of two hundred years, every country in Europe took advantage of the Industrial Revolution to strengthen its military might. Europeans nearly conquered the entire world as their colonies grew and the world's resources were sent to Europe.

On the other hand, the Industrial Revolution tremendously expanded the scale of the economy and an enormous amount of capital was required for investment in factory equipment. Thus, a capital market was effectively born. Profits made in the capital market enabled large transnational enterprises to emerge. European countries lost control of their colonies and could no longer use their guns to gain access to resources. Instead, they began to use economic means to determine who would have access to resources. Transnational enterprises played an important role in this transition.

Thirty years ago, the economic growth rate of the European, American and Japanese economies far exceeded that of today's developing countries. The U.S., Europe and Japan acquired both resources and wealth.

Thirty years ago, Europe, the U.S. and Japan produced two thirds of the world's steel. Even today, the U.S. is home to only five percent of the world's population but consumes 25 percent of the world's available resources. Thirty years ago, I was studying in the northeast of the U.S. In winter, the temperature was minus ten degrees outside, but inside it was warm as summer. I had to wear short sleeved clothing.

Over the past thirty years, the poorer countries have begun to develop their economies. The overall standard of living needed to be improved. Therefore, additional resources were necessary. The world's wealth must be redistributed now that more than two billion people in China and India have begun to compete with the six hundred million people living in Europe, the U.S. and Japan for resources. Fortunately, this redistribution of wealth constitutes economic warfare rather than an all-out war of guns, and will be carried out according to economic laws.

In the competition for resources, prices will be responsible for redistributing resources. Cheap labor from developing countries replaces European and American labor, allowing developing countries to earn foreign exchange. Developing countries also compete for resources with Europe and the U.S. in the global market, leading to the price hikes of natural resources in the past few years. The world's wealth is gradually flowing to developing countries from Europe, the U.S. and Japan.

Wealth starts to reverse its direction of flow within two hundred years. Europe, the U.S. and Japan can no longer maintain the same standards of living as in the past and heat in winter will not be enough. However, no country will simply sit by and watch its standard of living deteriorate. Thus, frictions and conflicts among nations begins. In response to the huge trade deficit in the 1980s, the U.S. placed a limit on Japanese cars, making the dollar stronger than the yen and leading to economic stagnation in Japan for 20 years.

The best solution is that Europe, the U.S. and Japan utilize science and technology to assist developing countries with their own productivity and let them have experience economic growth even while these developed countries prosper.

However, the human history is one of constant competition for resources. The tidal wave of wealth redistribution has begun.
I presume regular readers of my blog do not need any additional explanation what this means. For those new to my blog I recommend to browse my archive or do a "China" label search.

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