(Riffing on China and the origins of capitalism, 2009 and 2012)
China in one of its periodic surges–when Chinese civilization is on the upswing it’s unstoppable, though within a certain historically geographic space (they don’t do oceans well). This debt acquisition too–that is such an ancient trend. I know as far back as the Roman Empire western currency went east and Chinese products west. China becomes awash in western money (or now, bonds) while we continue to crave all that China produces. The only thing that can reverse it is political disorder within Chinese civilization itself. Which is a regular occurrence. You can’t say the patterns are like clockwork, but they do repeat themselves regularly, and follow the same pattern. It’s a kind of regularity that we in the west are not familiar with. China doesn’t suffer from variation and unpredictability. It is so amazing to see these ancient trends reasserting themselves. Sometime in the future, maybe decades, maybe centuries from now, China will dissolve again into warring states and the west will get all its money back again. Until a new regime unifies China again and all our money again goes east.
It’s funny but I think that the very creation of capitalism in medieval Europe was due in part to this imbalance of trade…there was such a shortage of specie in Europe in medieval times that other instruments of exchange had to be created. It’ll be interesting to see what we come up with now.
I think a lot of western journalists (and NeoCons) don’t understand just how capitalism itself developed….without that long term imbalance of trade there would not have been such a dire shortage of specie in the west, and without that shortage of specie there would have been no need to create instruments like bills of credit that could fill in for hard money being so short. We wouldn’t be who we are without the Chinese having most of our gold and silver.
Perhaps that is an over-simplification (ahem). But it wasn’t too many centuries ago that you went shopping in a Chinese city with a flattened roll of silver in your pocket and a big shears on a cord around your waist. You see some eggs you wanted, take out your silver and use the shears and slice off a stretch. The merchant would weigh it and see if you needed more. Think about it…they had so much silver that sometimes they didn’t bother with coinage at all, just carried around a foot or two of flattened silver cut into strips. And think about this…..very little of that silver came from China. It came from China’s trading partners. That was in the 1500’s, the Ming Dynasty. The Silk Road–which served like an ATM for the Chinese since Roman times–had been shut down (due to the rise of Ottoman Empire, mainly) so now Western traders sought out Chinese goods at Chinese ports. And the West had money to burn…all that silver pouring in from New Spain. It was like the West had won the lottery and went on a wild spending spree. They couldn’t get enough silk, porcelain, trinkets, whatever. Importers showed up with hard cash, you can imagine the inflation. So all that hard money pouring into western Europe not only didn’t stay in Europe, but what did remain set off crazy inflation and finally settled into a steady rise in prices that has never let up. The low level inflation that we all accept as a fact of life (it’s the high inflation that weirds us out) began about the time that American gold and especially silver hit Europe and was immediately forwarded (a huge part of it anyway) to China to buy non-essential goods for the rich or at least comfortably well off (the beginnings of the middle class). Maybe this is beginning to sound familiar. So when the Chinese went to market with a strip of flattened silver and a shears that silver had come from the mines at San Luis Potosi, sailed to Spain, and sailed from Spain to China. Capitalism didn’t really exist in China nor did “instruments of exchange”. An instrument of exchange was typically a piece of paper promising to pay x amount of dollars (or reals or ducats or guilders or whatever) that could be passed on until somebody finally turned it in for genuine money. An IOU put into the pot in a poker game is the same thing.) Chinese didn’t play that game, not did they especially invest in a venture with the idea of making more than they invested in the end (i.e., capitalism). They wanted silver. No silver, no deal. But Europeans loved silk and loved delicate little plates. Things like that. Trade thrived and money was exchanged as never before. The Silk Road had never dumped silver at this rate into China before. In China even peasants paid with silver. In Europe the shortage or precious metals continued. Smart bankers became immensely powerful as governments were forced to borrow from them. Commerce, always short of funds, turned increasingly to the local bourse–the stock market–to raise money. Governments centralized and enforced ruinous taxation. War became a vital way of raising revenue. A pattern was set in Europe that would eventually lead to the American Revolution, the French Revolution, Napoleon, and the birth of the modern world. By then, though, the trade imbalance with China had ended for a couple centuries. China, as it is wont to, disintegrated into warring states. Trade was severely impacted. Warlords spent their time fighting with each other instead of producing goods for trade. And the English discovered that the Chinese liked tea. Finally the west found something the Chinese wanted from them. Tea could take the place of silver (and probably also introduced the use of instruments of credit to the Chinese, but never mind that.) Then the English found out that the Chinese really liked opium. Now that’s a business model. England became the biggest drug dealer of all time. The government even went to war twice to force the Chinese government to allow the trade to continue. You’d have a hard time finding a sleazier economic policy than that. But it certainly took care of that balance of trade problem neatly. Between tea and opium all that extra silver disappeared.
Of course, you can’t do that anymore. Forcing the Chinese to buy narcotics is a no no. Plus if they wanted it that bad, they could probably make it themselves. They probably do. They make everything themselves. The west doesn’t make anything anymore. Most of us are in the service industry. That’s not, fundamentally, the greatest business model. I think the last time I had a gig that wasn’t in the service industry, that actually made something, was 25 years ago. But almost all the manufacturing we once did has been shipped abroad, mostly to China. They have all those people, ya know. They work ridiculously hard and for not much money. They made probably ever single thing I am using to write this blog.
You know what rich people do when they got so much money they don’t know what to do with it? They buy art. They don’t buy writing. If they did I wouldn’t be at this day gig. I’d be in some big office somewhere surfing the web while my gorgeous secretary typed this up. She’d typ this yp and correct all my spelling erors. She’d make it look nice. She’s bring me coffee and remind me I’m married. I’d apologize and think about the Chinese again. The rich Chinese. They have all that money, our money, and like rich people do they buy art. But not our art. They buy their art. The art of theirs that we have over here. Westerners did some big time looting after the fall of the Ming Dynasty. When a county is fucked there’s art to be plucked. And we did. Well, we’re the ones that are fucked now. And the Chinese are back here buying what we took. You can see it on Antiques Road Show. Guy brings in a doorstop and it’s worth five figures, six figures, more even. He near to swoons, the appraiser pisses his pants, and we all sit out there hating the guy because he’s suddenly a one per center because of that stupid doorstop and we’re working a day job, clacking away on a Chinese made computer.
Well, you’ll get yours, all you Chinese Chinese art collectors. All that stuff you buy back, it’ll be ours again. The present dynasty will fall and we’ll be back looting. Then you’ll buy it all back again. The cycle will continue.
Not now though. Clack clack. Clack clack clack. I wish it was Friday already.