Surely, it’s time that the saying, “When Wall Street sneezes, the rest of the world catches pneumonia”, was updated.
It retains some veracity because the New York Stock Exchange is the biggest in the world, US banks are the largest and the US economy is the global heavyweight.
But what about China? What if Beijing and Shanghai sneeze, which countries will catch pneumonia?
This week Australians were presented with the harsh reality of China’s slowdown and how it is impacting on the Oz economy. A continuation of the slowdown in 2016 will have a dire impact across the world – including Asia, Africa, Europe and North and South America.
Chinese capital and state enterprises are so embedded in the global economy that when China stumbled a year ago the whole world held its breath. Initially, the Australian economy was more exposed than most because our national budget is a one-trick affair – exporting raw minerals to China.
When prices fell so did Australia’s tax revenue. The GDP and the budget deficit blew out to an eye-watering $33.7 billion. All this has occurred while China is in the very first stages of its downturn. It will slide further.
Instead of giving a factual account of the parlous state of the Chinese economy, the local commentary has been dominated by arid scepticism: either 1) Beijing’s statistics can’t be trusted, or 2) China will spend its way out of the “passing difficulties”.
The trouble is that China’s economic crisis is very real. It is also an immense political crisis because the Communist Party’s ruling elite has lost credibility in the eyes of the country’s 2.1 billion people.
Attempts to drive domestic spending and clean up industrial-scale corruption have met with stubborn resistance. People aren’t spending, they are saving; and corruption is growing beyond Beijing and Shanghai and spreading across the country. Visitors returning from the “Middle Kingdom”, as it is known, report that completed skyscrapers are empty, work has stopped on other massive building projects while factory estates are packed with thousands of unsold, brand new tractors, cars and trucks.
Economy in shambles
While media pundits say China’s booming “first world” economy is overtaking the US, the reality is that China’s economy is a total shambles.
Its economy is divided into many sectors. Some are purely feudal and others are the very worst examples of crony capitalism. Then there is a massive state sector where command economics rigidly govern production, employment, wage levels, investment and innovation.
In the middle of these chaotic economic conditions, capitalism is flexing its muscles and millionaires are being created at a rate never seen before in world history.
In other words, China’s chaotic economy is unique in world history: a mix of feudalism, free market capitalism, rigid state socialism and corrupt nepotism. And all are tugging in different directions – a recipe for chronic instability and unpredictable shocks.
Having prospered from the 19th century gold rushes, then lived off the sheep’s back (exporting Merino wool) and recently the mining boom, Australia is saddled with an economy that is shallow, short-term and opportunistic. When it is robbed of profits from mining (quarrying?), what is left to fall back on?
Perhaps Australia should try the renewable energy industry and become the world leader.
Saudi Arabia stirs
Goaded by Western politicians, diplomats and media to “do something” to fight ISIS terrorism, Saudi Arabia has announced a coalition of 34 Moslem countries to coordinate military action.
Armed with some of the most sophisticated warplanes, rockets, missiles, tanks and guns that money can buy, the alliance of Saudi Arabia, Egypt, Kuwait, UAE, Pakistan, Turkey and several others represents a formidable military force. On paper!
The project got off to a shaky start when Pakistani, Malaysian and Indonesian leaders said the first they heard of the proposal came via media inquiries.
All the countries in the Saudi-led coalition are Sunni Moslem. None are from the Shi’ite community which dominates Iran, so sectarianism has raised its ugly head.
The House of Saud initiative is led by King Salman, 79, who succeeded his half-brother, 90-year-old King Abdullah, in January. Salman wants to dig his kingdom out of the depravity, feudal backwardness and corruption of recent decades. That’s why women candidates were allowed to stand in the phoney “parliamentary” elections last weekend and that’s also why he is taking up arms against ISIS.
It follows years of unchallenged accusations that his fellow countryman, the late Osama bin Laden, built his al-Qaeda terror group with Saudi oil money.
However, celebrations in Washington and London over the formation of Saudi-led Sunni military pact seem awfully misconceived.
ISIS members are predominantly Sunni so should we expect the Saudi-led alliance to start killing ISIS members? I think not.
But I can envisage the Saudi coalition attacking Shi’ite-linked groups like Syria’s Alawites, Lebanon’s Hezbollah and Iraq’s Mahdi Army and Badr Organisation. What a firestorm that would cause, and where would it end if Tehran came to the rescue of its besieged co-believers?
Perhaps the House of Saud’s Sunni military alliance should concentrate on helping its terrorised brothers and sisters in occupied Palestine but that doesn’t appear to be on its agenda.
Sir Alex unplugged
Go into any high street or airport bookshop and I bet you’ll be greeted by book covers featuring Alex Ferguson, the legendary former manager of Manchester United.
Published in 2014, Alex Ferguson: My Autobiography, enjoyed enormous sales around the world. It has been succeeded by Leading which chronicles his theories on mentoring players and teams.
In retirement, Sir Alex has become a motivational guru giving lectures at the Harvard Business School and corporate seminars.
Sometimes the advice of the Glasgow-born roughneck can be very direct. When the British cycling coach Dave Brailsford asked for his tips on being a coaching success, “Fergie” replied: “Get rid of all the cunts.”
I wonder whether he delivers the same unflinching message to Harvard undergraduates or to ambitious CEOs at dreary rubber chicken lunches?