As predicted in my book, “The China Crisis,” China’s economic structure is proving to be unsustainable. In my last post, I argued why the China Evergrande bankruptcy is not the end of the economic crisis in China but just the beginning.
Knowing that such predictions have been made in the past by China observers, including yours truly, why should anyone think that it’s happening today? A bit of historical context helps provide an answer to this question.
In 2012, I was asked by Wiley & Sons to write a book on China’s economic structure from my contrarian point of view. You may or may not recall that, at the time, China was the economic marvel of the world. Unlike most observers, I could see several critical problems with China’s political economy model and wrote about them in “The China Crisis.”
I identified seven key areas—given the basis upon which China or, more accurately, the Chinese Communist Party (CCP) operated—that made China’s economic model unsustainable. I wasn’t the first to see this. Gordon Chang wrote about it in 2001 in his book, “The Coming Collapse of China.” Mr. Chang predicted a collapse by 2011, which, of course, did not occur. This is an update of sorts.
Instead, China’s economic clout and technological prowess continue to grow and develop. That explains why, at that time and for the next seven years, all kinds of terms were coined to describe China’s burgeoning economic status. There was the “Beijing Miracle,” “The China Model,” “Chinese State Capitalism,” and other glowing pronouncements that gave near-unanimous affirmation of China’s progress and prognosis for a bright future.
In fact, many experts, economists, and observers were predicting that China’s state capitalism would be the model for emerging nations around the world because of how fast it had transformed China’s economy. It was also predicted that China would soon eclipse the United States in GDP and replace it as the global hegemon.
Regarding this last prediction, it’s important to acknowledge that it appears as if it’s actually coming to fruition. In that regard, however, keep in mind that it’s mostly due to U.S. policy failures rather than what China is doing.
But even our leaders’ traitorous actions that have aided our adversaries in Beijing can’t compete with or prevent the venal nature and deleterious policies that the CCP has inflicted upon the Chinese people for many decades. The United States and other Western nations’ financial and technological investments have certainly delayed the inevitable but won’t stop it.
At its root, of course, is the corrosive nature of corruption. For the CCP, corruption in the form of political graft, wholesale theft from the private sector, and abuse of the financial system are the means to maintain control and gain wealth. Obtaining absolute power is the end goal, not a healthy economy.
Below is a brief look at how seven factors erode the social and economic sustainability in China.
1. Excessive Overuse of Factors of Production
When greasing the palms of Party officials is the main requirement for a project or policy, waste and fraud are not only unavoidable but lead to inefficiency in leveraging factors of production. In 2013, China used 10 times more factors of production than the United States to produce the same product. Has that improved? It’s hard to say, as accurate statistics that reflect poorly on the CCP and Xi Jinping, in particular, are difficult to find.
2. Inefficient Allocation of Economic Goods, Activity
This is related to No. 1 and is manifested in many ways, such as the theft of profitable companies by the Party and turning them into inefficient, debt-ridden “zombie” state-owned enterprises that destroy value and efficiency. It also transfers wealth from the middle class to the Party elite.
3. Stifling Innovation in Middle Class
Lack of freedom of information and the punishment of violators stifles innovation and creativity. Individuals are not allowed to solve problems by themselves. Successful private firms can count on being confiscated by the state at some point. Successful entrepreneurs who speak out about the abuses of the CCP are disappeared and reeducated. This engenders total fear of and reliance upon the state, both of which are what the CCP wants. Crushing individual creativity and innovation stifles a nation’s greatest resource—its people.
4. Lack of Enforcement of Regulations, Standards
From critical areas such as food production to pharmaceuticals, corners are cut, and quality is compromised. Over the years, this not only negatively impacts the health and safety of the people, but it undercuts the authority and legitimacy of the Party.
5. A False Economy: Debt-based ‘Growth’ Is a Cancer on Economy
In a capitalist economy, most development is based on market need, which is determined by local prices and market conditions, which then attract capital. Distorted “development” driven by political expediency isn’t development but a waste of time, money, and resources.
The Evergrande collapse is a prime example of the CCP’s distortion of the economy. China’s overreliance on overdevelopment could be compared to healthy growth in muscle tissue from working out versus that of a cancerous tumor from exposure to toxicity. The former builds up strength and vitality; the latter destroys it. Thus, at some point, even state-owned debt from a state-owned central bank becomes unsustainable.
6. Rampant Pollution Making China Unlivable, Causing Social Unrest
China is one of the worst polluters in the world. For example, it is rapidly losing its arable land to toxicity from mining, manufacturing, and desertification. This is happening because decades of state ownership have led to indifference about what happens to the natural resources, also known as the “tragedy of the commons.” Losing arable land by either toxicity or desertification is not easily reversible and leads to greater dependence on external food sources to feed itself.
Water pollution is another environmental disaster brought about by the CCP. When I wrote “The China Crisis,” about 40 percent of China’s waterways either could not sustain life or were unsafe for human consumption. Today, that number is up to 70 percent. Moreover, 80-90 percent of its groundwater is undrinkable.
China’s air pollution is known for being the worst in the world, responsible for millions of premature deaths. State officials claim that air pollution is decreasing in China. Yet, at the same time, China is adding more coal mines for energy production, leading to more pollution, not less. The CCP’s inability to address its pollution crisis reveals its economic model’s failures, adding to civil unrest rather than social support.
7. Dystopian Depression Among Young Generation
When young people lose faith in their nation, they lose faith in their future. One outcome of that pessimism is the decision not to have children. China is not alone in this phenomenon, but like South Korea and Japan, it’s a big problem. Without the energy, drive, creativity, and belief of the young, the fall in population and its effects on consumption, taxes, and other economic factors make China’s economic future bleak.
Unfortunately, its unbalanced social and economic structure will lead to more excessive actions, internally and externally, as economic and social conditions worsen.
About the Author
James R. Gorrie is the author of “The China Crisis” (Wiley, 2013) and writes on his blog, TheBananaRepublican.com. He is based in Southern California. Article cross-posted from our premium news partners at The Epoch Times.
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Five Things New “Preppers” Forget When Getting Ready for Bad Times Ahead
The preparedness community is growing faster than it has in decades. Even during peak times such as Y2K, the economic downturn of 2008, and Covid, the vast majority of Americans made sure they had plenty of toilet paper but didn’t really stockpile anything else.
Things have changed. There’s a growing anxiety in this presidential election year that has prompted more Americans to get prepared for crazy events in the future. Some of it is being driven by fearmongers, but there are valid concerns with the economy, food supply, pharmaceuticals, the energy grid, and mass rioting that have pushed average Americans into “prepper” mode.
There are degrees of preparedness. One does not have to be a full-blown “doomsday prepper” living off-grid in a secure Montana bunker in order to be ahead of the curve. In many ways, preparedness isn’t about being able to perfectly handle every conceivable situation. It’s about being less dependent on government for as long as possible. Those who have proper “preps” will not be waiting for FEMA to distribute emergency supplies to the desperate masses.
Below are five things people new to preparedness (and sometimes even those with experience) often forget as they get ready. All five are common sense notions that do not rely on doomsday in order to be useful. It may be nice to own a tank during the apocalypse but there’s not much you can do with it until things get really crazy. The recommendations below can have places in the lives of average Americans whether doomsday comes or not.
Note: The information provided by this publication or any related communications is for informational purposes only and should not be considered as financial advice. We do not provide personalized investment, financial, or legal advice.
Secured Wealth
Whether in the bank or held in a retirement account, most Americans feel that their life’s savings is relatively secure. At least they did until the last couple of years when de-banking, geopolitical turmoil, and the threat of Central Bank Digital Currencies reared their ugly heads.
It behooves Americans to diversify their holdings. If there’s a triggering event or series of events that cripple the financial systems or devalue the U.S. Dollar, wealth can evaporate quickly. To hedge against potential turmoil, many Americans are looking in two directions: Crypto and physical precious metals.
There are huge advantages to cryptocurrencies, but there are also inherent risks because “virtual” money can become challenging to spend. Add in the push by central banks and governments to regulate or even replace cryptocurrencies with their own versions they control and the risks amplify. There’s nothing wrong with cryptocurrencies today but things can change rapidly.
As for physical precious metals, many Americans pay cash to keep plenty on hand in their safe. Rolling over or transferring retirement accounts into self-directed IRAs is also a popular option, but there are caveats. It can often take weeks or even months to get the gold and silver shipped if the owner chooses to close their account. This is why Genesis Gold Group stands out. Their relationship with the depositories allows for rapid closure and shipping, often in less than 10 days from the time the account holder makes their move. This can come in handy if things appear to be heading south.
Lots of Potable Water
One of the biggest shocks that hit new preppers is understanding how much potable water they need in order to survive. Experts claim one gallon of water per person per day is necessary. Even the most conservative estimates put it at over half-a-gallon. That means that for a family of four, they’ll need around 120 gallons of water to survive for a month if the taps turn off and the stores empty out.
Being near a fresh water source, whether it’s a river, lake, or well, is a best practice among experienced preppers. It’s necessary to have a water filter as well, even if the taps are still working. Many refuse to drink tap water even when there is no emergency. Berkey was our previous favorite but they’re under attack from regulators so the Alexapure systems are solid replacements.
For those in the city or away from fresh water sources, storage is the best option. This can be challenging because proper water storage containers take up a lot of room and are difficult to move if the need arises. For “bug in” situations, having a larger container that stores hundreds or even thousands of gallons is better than stacking 1-5 gallon containers. Unfortunately, they won’t be easily transportable and they can cost a lot to install.
Water is critical. If chaos erupts and water infrastructure is compromised, having a large backup supply can be lifesaving.
Pharmaceuticals and Medical Supplies
There are multiple threats specific to the medical supply chain. With Chinese and Indian imports accounting for over 90% of pharmaceutical ingredients in the United States, deteriorating relations could make it impossible to get the medicines and antibiotics many of us need.
Stocking up many prescription medications can be hard. Doctors generally do not like to prescribe large batches of drugs even if they are shelf-stable for extended periods of time. It is a best practice to ask your doctor if they can prescribe a larger amount. Today, some are sympathetic to concerns about pharmacies running out or becoming inaccessible. Tell them your concerns. It’s worth a shot. The worst they can do is say no.
If your doctor is unwilling to help you stock up on medicines, then Jase Medical is a good alternative. Through telehealth, they can prescribe daily meds or antibiotics that are shipped to your door. As proponents of medical freedom, they empathize with those who want to have enough medical supplies on hand in case things go wrong.
Energy Sources
The vast majority of Americans are locked into the grid. This has proven to be a massive liability when the grid goes down. Unfortunately, there are no inexpensive remedies.
Those living off-grid had to either spend a lot of money or effort (or both) to get their alternative energy sources like solar set up. For those who do not want to go so far, it’s still a best practice to have backup power sources. Diesel generators and portable solar panels are the two most popular, and while they’re not inexpensive they are not out of reach of most Americans who are concerned about being without power for extended periods of time.
Natural gas is another necessity for many, but that’s far more challenging to replace. Having alternatives for heating and cooking that can be powered if gas and electric grids go down is important. Have a backup for items that require power such as manual can openers. If you’re stuck eating canned foods for a while and all you have is an electric opener, you’ll have problems.
Don’t Forget the Protein
When most think about “prepping,” they think about their food supply. More Americans are turning to gardening and homesteading as ways to produce their own food. Others are working with local farmers and ranchers to purchase directly from the sources. This is a good idea whether doomsday comes or not, but it’s particularly important if the food supply chain is broken.
Most grocery stores have about one to two weeks worth of food, as do most American households. Grocers rely heavily on truckers to receive their ongoing shipments. In a crisis, the current process can fail. It behooves Americans for multiple reasons to localize their food purchases as much as possible.
Long-term storage is another popular option. Canned foods, MREs, and freeze dried meals are selling out quickly even as prices rise. But one component that is conspicuously absent in shelf-stable food is high-quality protein. Most survival food companies offer low quality “protein buckets” or cans of meat, but they are often barely edible.
Prepper All-Naturals offers premium cuts of steak that have been cooked sous vide and freeze dried to give them a 25-year shelf life. They offer Ribeye, NY Strip, and Tenderloin among others.
Having buckets of beans and rice is a good start, but keeping a solid supply of high-quality protein isn’t just healthier. It can help a family maintain normalcy through crises.
Prepare Without Fear
With all the challenges we face as Americans today, it can be emotionally draining. Citizens are scared and there’s nothing irrational about their concerns. Being prepared and making lifestyle changes to secure necessities can go a long way toward overcoming the fears that plague us. We should hope and pray for the best but prepare for the worst. And if the worst does come, then knowing we did what we could to be ready for it will help us face those challenges with confidence.
