The desire to return to business as usual isn’t restricted to the obscenity of bankers’ bonuses. That same desire is shared by unemployed potters in Stoke on Trent, car workers in Detroit, and the governing politicians in London and Washington who are presiding over their people’s misery.
However, for the millions in China’s (not to mention India’s and Brazil’s) rural hinterland who have never lived much above the bread-line, some having experienced genuine famine, working on an iPad production line in Shanghai, or the like, may not pay much by Western standards, but it’s a huge improvement on business as usual.
United States Treasury Secretary, Timothy Geithner’s problem right now is that the Chinese are taking American jobs, pushing unemployment in the US to unacceptable levels. And that means more quantitative easing to prod the US economy into life. And he knows America can’t afford that. And he also knows it probably won’t work anyway. For him, the problem is that the fiendishly cunning Chinese have manipulated their currency down to levels 40% below what it should be and therefore are able to undercut American producers. So he wants the G20 nations to impose a cap on trade surpluses, despite the danger of inviting currency wars.
But it’s a much more basic problem than that. The level of Chinese exports to America is much more to do with the fact that Chinese workers earn in a year barely one twentieth of what American workers earn in a month? Dickering around with exchange rates won’t alter that simple fact. America and the West may have unacceptable levels of unemployment among people who are used to being employed and earning a reasonable standard of living. But, the Chinese (and Indian and Brazilian) poor, who have never before had the merest whiff of affluence, may be just as deserving as the West’s unemployed?
The problem, for Geithner and his like, is that these inequalities and resultant huge and persistent trade imbalances, risk plunging the global economy, disastrously (to use his word), back into protectionism. Well that would be a disaster for the free market dogma. And that might be pretty unfortunate for the West’s fat cats. But Keynes argued that a bit of protection might be no bad thing, if it meant countries were able to maintain reasonable levels of domestic employment. Moreover it might also slow down the currently unsustainable rates of pollution and resource depletion, and give time for a more considered approach to how best the global economy might be encouraged to develop.