China contemplates America’s potential collapse and what it means to them

This is an intriguing article from China Daily, written by a government researcher. It sheds some light on the question the whole world has been wondering about lately, i.e., how will China react to the collapse of America’s leading financial institutions at a time when it’s so heavily invested in US dollars? I am wondering if it’s representative of the government’s concerns, and whether it’s hinting at things to come.

The US government has its own criteria in determining what it ought to rescue, and Lehman Brothers was left to its own devices because of its high proportion of foreign investment.

As a result, foreign investors suffered more than their US counterparts from the collapse of the century-old financial body.

As the crisis unfolds, more American financial bodies are expected to follow in Lehman Brothers’ footsteps, with Asian nations and oil exporters holding a large sum of dollars expected to be the greatest victims….

The US financial crisis leads us to ask some questions.

First of all, is it the end of US financial hegemony? In addition to the latest financial crisis, the US has so far experienced another financial crisis since the turn of the century – the bursting of its technological bubble. Many foreign investors have suffered heavy losses in these two crises. Some economists even warned that such cyclical formation of bubbles will seriously compromise foreign investors’ confidence in the US financial market.

Second, what losses have Chinese financial bodies suffered as a result of this crisis? Available data shows that Chinese financial bodies had not purchased that many mortgaged US financial derivatives, and will therefore not suffer too many losses from this crisis. So, it is impossible for the country to be plunged into an economic recession like Japan in the 1980s.

More questions, more reflection, and a few hints of the usual propaganda (sense of victimhood, China is invulnerable to recession, conspiracy to protect US investors at foreign investors’ expense) so you may want to read it all. As my source [blocked in the good old PR of C] for this article writes,

What could be more unnerving than having your largest creditor begin pondering your financial demise?

“Indeed.” If this writer is speaking for the Chinese government, there are some grim implications here.

______________

Richard Burger is the author of Behind the Red Door: Sex in China, an exploration of China's sexual revolution and its clash with traditional Chinese values.

The Discussion: 32 Comments

Several days ago, there was a discussion among Chinese “experts” on Chinese CCTV about what China should do with its US dollar holdings in light of the US financial crisis. Two views were expressed: One view maintained China should immediately divest itself of its US dollar holdings to avoid further losses. A counter argument was presented that immediate divestiture of US dollar holdings by China would only amount to China shooting itself in the foot as this would lead to rapid depreciation in the value of China’s US dollar assets. According to this view, a better approach would be for China to divest itself of its US dollar holdings more slowly in a measured way.

Some time ago on Bloomberg TV, a US financial “expert” (It was the “experts” that got us into this mess.) said that the “best case” outcome of the US financial crisis for the US economy would be several years of economic malaise (1% – 2% growth) but this “best case” outcome was dependent upon the Chinese, Japanese, Russsians, etc. continuing to finance the US budget and trade deficits.

September 28, 2008 @ 11:26 am | Comment

By adding another trillion US dollars to the US national debt with the Wall Street bailout, Paulson/Bush may actually be precipitating a financial crisis by driving foreign creditors (like China) away from risky US debt.

Is The Bailout Needed? Many Economists Say ‘No’
by Kevin G. Hall

WASHINGTON – A funny thing happened in the drafting of the largest-ever U.S. government intervention in the financial system. Lawmakers of all stripes mostly fell in line, but many of the nation’s brightest economic minds are warning that the Wall Street bailout’s a dangerous rush job.

President Bush and his Treasury secretary, former Goldman Sachs chief executive Henry Paulson, have warned of imminent economic collapse and another Great Depression if their rescue plan isn’t passed immediately.

Is that true?

“It’s more hype than real risk,” said James K. Galbraith, a University of Texas economist and son of the late economic historian John Kenneth Galbraith. “A nasty recession is possible, but the bailout will not cure that. So it’s mainly relevant to the financial industry.”

The Paulson plan will get some bad assets off the balance sheets of troubled Wall Street institutions and commercial banks. That may help thaw the lending freeze.

But it wouldn’t reduce the crush of homes in or near foreclosure, said Simon Johnson, a professor at the Massachusetts Institute of Technology. That’s a problem that will surely grow worse if the U.S. economy enters recession, leading to greater job losses, which feed a vicious downward spiral of even more foreclosures and defaults on car loans and credit-card debt.

Americans are spooked by talk that financial Armageddon awaits.

The global financial system nearly melted down last week when investors pulled out en masse from money market funds and the short-term debt markets that help corporate America fund its day-to-day needs.

These traditionally have been viewed as safe investments for ordinary Americans, so the flight from them struck fear in the hearts of policymakers.

Few economists, including Galbraith, are willing to discount completely the chance of a financial collapse, given the turmoil in credit markets and banking.

“My sense is it will delay a disaster, given that you only have three months left in this administration. But it will not cure the problem in the (financial) industry or prevent the shakeout and downsizing of the industry,” Galbraith said.

Many lawmakers also expressed skepticism.

Coming out of the White House on Thursday, the ranking Republican on the Senate Banking Committee, Alabama’s Richard Shelby, held up what he said was a five-page list of economists opposing the rescue plan.

“This is not me. This is economists at Harvard, Yale, MIT, University of Chicago, our leading universities,” an exasperated Shelby told reporters. He called the administration plan “flawed from the beginning.”

Johnson, a former assistant director of research for the International Monetary Fund, said: “I think the main problem is what they have on the table is not truly comprehensive, and I think it’s probably not decisive for that reason.”

With the problems in money market funds and the fact that banks have stopped lending to each other except at high rates, the global financial system is as weak as it has been in modern times, he said.

“It’s a very dangerous situation. I would not recommend doing nothing. The world financial markets were in cardiac arrest last week,” Johnson said.

What Congress and the administration failed to do, Johnson said, is develop a mechanism to quickly modify distressed mortgages and prevent even more empty homes from being dumped into real-estate markets in freefall. The plan also doesn’t help banks bring in new capital to boost lending; instead many are sitting defensively on their reserves to offset expected loan defaults.

“I think the rush that happened this week is unfortunate,” Johnson said. “I don’t think it is enough.”

Another doubter of the Great Depression theme is Kenneth Rogoff, a Harvard University economics professor, who thinks the intervention may prevent or delay the necessary failure of weak financial institutions.

“It is time to take stock of the crisis and recognize that the financial industry is undergoing fundamental shifts, and is not simply the victim of speculative panic against housing loans,” he wrote in a syndicated column. “Certainly better regulation is part of the answer over the longer run, but it is no panacea. Today’s financial firm equity and bond holders must bear the main cost, or there is little hope they will behave more responsibly in the future.”

Some analysts think the most important steps to avoid another depression may have already occurred without the $700 billion bailout.

“Last week we came real close to a financial economic meltdown because of the run on money market funds, resulting from the bankruptcy of (investment bank) Lehman Brothers, and I think insuring the money-market funds was enough,” said Ed Yardeni, a veteran Wall Street analyst. Last week the Treasury announced a $50 billion insurance plan for money market funds, which restored confidence in them. “It wasn’t necessary to move to Plan B.”

Doubting the financial Armageddon scenario, Yardeni said another measure that could have the same effect as the $700 billion rescue plan is simply to change accounting rules for bad assets – mostly bonds with mortgages as their collateral.

Right now, banks and others with this toxic debt by law must write down losses every quarter. They are forced to put a present-day value on these assets. Yardeni thinks suspending this rule could do the job without taxpayer money.

“There are quite a few of us who think that could have stabilized the situation quite effectively,” he said, adding, “I think it (the bailout) was rushed, and certainly we didn’t give other reasonable, cheaper alternatives a chance. But at this point it is what it is, and we all have to pray that it works.”

September 28, 2008 @ 11:59 am | Comment

Appreciate your comments, but please include a link and then just snip a graf or two, instead of pasting the whole article.

If I recall, this is from the WSJ, which has its own vested interest in seeing the bailout rushed through.

September 28, 2008 @ 12:22 pm | Comment

The article above is from: © 2008 McClatchy Newspapers

How does one “include a link” to articles in posts?

September 28, 2008 @ 12:27 pm | Comment

Just cut and past the link.

September 28, 2008 @ 12:32 pm | Comment

But some publications don’t let readers in unless they subscribe (and pay) or at least register.

September 28, 2008 @ 12:34 pm | Comment

Buck, it doesn’t matter – just include a few sentences or paragraphs like bloggers and commenters do. Not a big deal, but it’s considered bad form to print entire copyrighted articles. I used to do it myself but have stopped. Would prefer we include a small piece of the article, a link, and offer our own comments about it. Thanks.

September 28, 2008 @ 12:44 pm | Comment

[...] China contemplates America?s potential collapse and what it means … By Richard … had not purchased that many mortgaged US financial derivatives, and will therefore not suffer too many losses from this crisis. So, it is impossible for the country to be plunged into an economic recession like Japan in the 1980s. … The Peking Duck – http://www.pekingduck.org [...]

September 28, 2008 @ 1:23 pm | Pingback

I’m actually sad that this deal went through. Why should joe average bail out the execs and companies who screwed up? Why not use the money to pay off the mortgages upon which these ill-advised investment derivatives were based? And why are they still talking severance packages? If creating a mess like this is not sufficient and legitimate cause for dismissal, I don’t know what is.

September 28, 2008 @ 2:22 pm | Comment

If the US had an American economic Sun Zi, Machiavelli, or Bismarck as a “great helmsman,” the US could consider taking a hit by declaring bankruptcy. China, Russia, the various oil states, and other US creditors would be severely damaged.

Of course, the US would suffer temporarily but it would fatally damage, if not destroy for good, the economies of neo-Soviet Russia and Communist China.

Ultimately, the US would be able to recover. By creating a program for rebuilding its infrastructure and manufacturing base, it would provided a fresh economic foundation for renewing its leadership sans Communist China and neo-Soviet Russia.

The winner in a nuclear war is the country that can rebuilds first. This same principle can be applied to the US declaring bankruptcy. (-;

September 28, 2008 @ 2:31 pm | Comment

I find it hard to believe that there is not a financial crises of their own lurking in China’s future. There must be a lot of the chinese dollars and euros disappearing into swiss and cayman island bank accounts. with no transparency who knows how many minor mishaps have occured in PRC banking system. they do have the ability to socialize the loses more effectively than the US and to shoot the average citizen if he complaigns.

September 28, 2008 @ 3:11 pm | Comment

they are not paying off execs in wallstreet. they are planning to unravel the complex ball of yarn they have knotted up with derivatives and mezzanines of bundled mortgages. one that is straigntened out then the legitimate credit and financig activity can resume.

they should spent more time on how to title the bill and explain to average people.

more like a $700B anti to get the jokers on wall street to show blackjack dealer paulson their cards.

the part that is missing is making sure paulson publicly busts the cheaters and makes sure no one wins except the treasury. problem is china and other countries are some of the big boys with some money riding on some of the banks hands.

if the chinese are more clever than the us in finance then why are they holding risky derivatives, mezzanines of cdos?

they could let the chinese buy some of the failed banks, but imagine the letter writing to congress would surpass the current flood

September 28, 2008 @ 3:24 pm | Comment

When one owes the bank a few million, one can be said to be “owned by the bank.” One one owes the bank nearly a trillion, the the debtor can be said to “own the bank.” The relationship between China and the US is one of parasitic symbiosis. Each, without, the other will probably perish.

September 28, 2008 @ 3:25 pm | Comment

“Isn’t it true that one of the major reasons the USSR fell was because they bankrupted themselves on super weapons and a stalemated war in Afghanistan?

— Anne”

http://norris.blogs.nytimes.com/2008/09/25/the-decline-of-american-financial-power/#comment-6560

September 28, 2008 @ 3:41 pm | Comment

It looks like dems and repubs have agreed on the Wall Street bailout. What a rip off!

http://hk.youtube.com/watch?v=kJ4SSvVbhLw&feature=related

September 28, 2008 @ 3:41 pm | Comment

Ok, this is a link related to conspiracy material. I’ve never believed in such things, all my life. Only recently in the last year did I start looking at these “theories”… But the thing that scares me, is that more and more, it seems to unfold in the way “predicted” by these peoples.

And if it was true ? And if all what we so easily dismiss as being pure Internet bullshit, was roted in some truth ? I am just asking the question here.

http://www.infowars.net/articles/august2007/150807Corsi.htm

September 28, 2008 @ 3:59 pm | Comment

Ok, this is a link related to conspiracy material. I’ve never believed in such things, all my life. Only recently in the last year did I start looking at these “theories”… But the thing that scares me, is that more and more, it seems to unfold in the way “predicted” by these peoples.

And if it was true ? And if all what we so easily dismiss as being pure Internet bullshit, was rooted in some truth ? I am just asking the question here.

http://www.infowars.net/articles/august2007/150807Corsi.htm

September 28, 2008 @ 3:59 pm | Comment

Sorry for the double post, FF hiccup.

September 28, 2008 @ 4:00 pm | Comment

in the words of stephen colbert…”we’re about to give an $85 bil loan to someone who couldn’t run a business…isn’t that a risky loan for the US? don’t we have a bubble-bubble?”

and that was only $80 bil for AIG. Now we’re talking 10x as much? bubble-bubble indeed. and the whole lehman vs. AIG thing is great too. the message is clear: if you’re gonna !#@$ up, do it so badly that the gov has to bail you out of fear.

September 28, 2008 @ 4:06 pm | Comment

“There is going to be a grab on this property by people who have cash, and that’s not going to be the middle class. People will lose their homes if they have large mortgages that they cannot comfortably sustain or pay off.

There’s going to be a grab where the institutions and the people already wealthy will only gain, it’s not going to be an opportunity for the average person to gain.”

Btw, this was written in 2007, August.

September 28, 2008 @ 4:06 pm | Comment

I notice that the article poses questions and then doesn’t answer them – I wonder how usual that is for Chinese opinion pieces. I know Chinadaily does that a lot. If he is speaking for the Chinese government does that mean they don’t have any answers themselves?

By the way I read something in the Times that suggested the UK could benefit from this – I hope that is the case!

http://tinyurl.com/4bv55h

September 28, 2008 @ 5:31 pm | Comment

Capitalism means survival of the fittest.

Losers should’nt be bailed out for their mistakes.

September 28, 2008 @ 6:43 pm | Comment

What gets me is that more Chinese than not would be delighted – at first – at a US collapse. Generally speaking, they would gleefully watch the US go over a cliff. It is not “Live and let live”. It is something else entirely, along the lines of “One world one delusion”.

September 28, 2008 @ 10:58 pm | Comment

They would not be delighted. They are too smart, and they know where their bread is buttered. They may feel a momentary sense of glee, or at least schadenfreude (I still remember my employee telling me how she and her classmates were cheering in class the day after 911) – until they realize what it actually means for them and their loved ones.

September 28, 2008 @ 11:10 pm | Comment

This has all been extremely instructive(no..depressing). Something mentioned more than once on this site is the egyptian nature of the financial sector in the u.s. Surely there are strict laws in place to deter and punish those who engage in criminal activity via such simple, egregious and immoral methods as to make the initial transaction nothing more than fraud. As a backup… Pyramid schemes are illegal in the u.s. ..i think?

Moreover, it is clear, to my mind, that terrorists could do no worse harm to the American people than that wrought by the major financial institutions now begging for AMERICAN TAXPAYER HELP

September 29, 2008 @ 1:01 am | Comment

Unfortunately, with de-regulation the waters were muddied about what was and wasn’t legal. So it’s not that cut and dry. Lawyers can argue the details were all there in the fine print, but there is no doubt that those handing the documents to the homebuyers misled them, and that those who created the document templates designed them to be misleading and to take the buyer for a ride. The joys of The Ownership Society.

September 29, 2008 @ 1:09 am | Comment

Fair enough. Though at the bottom tier the people being signed up to a mortgage are akin to sheep queuing to be fleeced. I was thinking more top end. Surely there is/are legal instruments in place to bring the most highly rewarded and responsible for this catastrophe to book. Gambling legislation, terrorist legislation, prudential legislation, corporation legislation, business legislation, something?

It seems unreal that the smartest guys in the room with commensurate egos and packages can hold one hand up and say “mea culpa” while the other hand holds a pistol to the congress’ head and says “more money, please, and no we are not going take responsibility for our own mistakes but thanks for standing by while we sucked wealth to the top.”

I’m baffled.

September 29, 2008 @ 3:29 pm | Comment

Though at the bottom tier the people being signed up to a mortgage are akin to sheep queuing to be fleeced.

Oldest story on earth, true in the US, in China and everywhere else: the consumers and little people, the ones putting up the money, are always the ones who get fleeced. A famous book form the 1950 about investment bankers are their con game is titled, “Where are the Customers’ Yachts?” It’s the brokers and the Wall Street gang who get super-rich, while Joe Citizen gets fleeced. You can’t fight city hall. The Treasury plan will be passed and we will all pay and the homeowners will be fucked. Get used to reality.

September 29, 2008 @ 4:33 pm | Comment

Yes, they would be delighted. Until it hit home.

September 29, 2008 @ 10:53 pm | Comment

Like Bao, I never put much stock into the “tinfoil-hat” crowd. But after questioning the facts around 911 I started to realize that there are a lot of huge lies being told to us and the the predictions being made by the crazies seemed to be happening as predicted.

I started reading all of it and all of the pieces fit together in a frightening way. My new rule is to ignore nothing I hear; the truth in all of this is probably pretty hard to believe and even harder to accept.

Alex Jones is one of the crazier of the crazies. He is loud, obnoxious and very American, but he has an incredible database of facts and from all of these facts, he compiles a scenario that is, at the very least, worth considering.

http://www.infowars.com
http://www/prisonplanet.com

September 30, 2008 @ 6:53 pm | Comment

If you have an interest in this kind of stuff, I recommend you watch End Game – Blueprint for enslavement.

http://www.youtube.com/watch?v=aHJ2joOSSGw

Alex Jones is either a total bozo, or a scary visionary. And yes, China is part of the “plan”…

3 hours watch, but very interesting.

October 3, 2008 @ 4:25 pm | Comment

Can Sustainable Cities Save The Planet?

By Walter Libby
http://theendpoint.blogspot.com/

Can sustainable save the planet? This is a good question and it deserves a good answer. But a more relevant question is, can sustainable cities save the United States? Our rising unemployment rate in the global economy has finally caught up with us—we are out of bubbles and are now a nation at risk. With nine straight months of job losses and a looming financial crisis, our prospects look grim—despite the efforts being made to prop up our financial system.

The problem is we are in liquidity trap. Here, despite low interest rates, the infusion of new blood, the cash that is being pumped into banks will just sit in their vaults as recession forces consumers to cut back on spending forcing firms to cut back on production, investments and workers perpetuating the cycle pushing the economy ever deeper into crisis.

The question now becomes, how do we get out the trap? We can’t look to a turn around in residential construction. But we can look to a turn around in our thinking as we shift from urban sprawl to the development of new cities designed along sustainable lines. So together with their development and the investments in renewable energy they will begin to pull us out of the trap.
The advent of peak oil has convinced venture capitalists to get busy in saving the planet. Now we have to sell the idea of new cities to investors, developers, and the people, and that requires a model that captures their imagination and investment dollars. So following in the footsteps of Ebenezer Howard, here’s how I see cities of tomorrow: clusters of neighborhoods (linked by elevated transportation arteries shared by electric vehicles, bikes, pedestrians and rapid transit systems) will form the city. These neighborhoods are large terraced multi-storied structures sheltering thousands. Here their terraces are reserved for greenhouses and homes and their centers for factories and fully controlled-environment farms.
So, as you walk out into your neighborhood you encounter not hallways but wide walkways, allies and breezeways lined with trees and plants, schools, hospitals, libraries, theaters, businesses, shops, and restaurants—all within walking distance, or a short elevator ride. And when you go to the first floor, at ground level you find barns (for pigs, beef and dairy cows, and chickens that are harvested next door) opening onto natural habitant mixed with organic farms, orchards, parks, playgrounds, and golf courses. Here, instead of sending our table and produce straps, our unwanted leftovers, dry bread, spoiled fruit to landfills, we recycle them to neighborhood barnyards or to community organic orchards and gardens.
Once there is a sufficient population, a larger central city is built. This is the cultural center of the whole. Here you have universities, the larger hospitals, museums, aquariums, zoos, sports stadiums, theaters for the performing arts, large central parks, plazas, street performers, and so on.
New cities are going to play a significant part in our economic recovery. And they are not going to be connected by super highways but by railroads carrying passengers, cars, trucks, commodities, construction equipment and freight.
New cities, as an alternative to unsustainable urban sprawl, by itself is a strong selling point. Add to that greater efficiency, lower taxes, and a mix of town and country. But its best pitch to the captains of industry is that they are necessary for our national security and confidence in general—for Wall Street and Main Street, and for those in the world who doubt that America can resolve its economic crisis, our ability to bootstrap our economy.
Yet, while the development of new cities will rev up our economy structural problems still plague the global economy—it’s unbalanced and so unsustainable as witnessed by our mounting trade deficits. And given that the financial crisis was brought on by our loss of jobs to the global economy (the housing bubble was the result of the Fed lowering interest rates to rock bottom in a desperate and vain attempt to avoid recession following the collapse of the dot.com bubble), we have to ponder the question, is capitalism collapsing? And this poses challenges not only for America and democracy in general, but for communist China, Russia and Venezuela as well.
China, having taken the capitalist road, has pretty much captured the means production as multinationals, in a race to the bottom, in a race to China to beat their competitors, have left in their wake socioeconomic crisis in their respective countries—notably in the U.S. In the process China has pretty much become the factory to the world. And in doing so have created a contradiction in the global economy—who are going to buy its products? This is a contradiction that threatens China.
And Russia and Venezuela, as oil prices plummet with a global collapse, face economic ruin—along with the rest of the oil producing countries. We need a new global order, a new world agenda.
Mikhail Gorbachev has stated such in The Search For A New Beginning: Developing A New Civilization.
Essentially, Gorbachev is touting sustainable development. Yet, he says “It has been the fond hope of many that the end of the Cold War would liberate the international community to work together to avert threats and work in a spirit of cooperation in addressing the dangerous problems that affect the world as a whole. But, despite the numerous summit meetings, conferences, congresses, negotiations, and agreements, there does not appear to have been any tangible progress… Between the old order and the one lies a period of transition that we must go through—moving toward a new structure of international relations marked by cooperating, interacting, and taking advantage of new opportunities. What we are seeing today, however, looks rather like a world disorder.
It is my belief that today’s policy makers lack a necessary sense of perspective and the ability to evaluate the consequences of their actions. What is absolutely necessary is a critical reassessment of the views and approaches that currently lie at the basis of political thinking and a new combination of player to envision and carry us through to the next phase of human development.”
The next phase of human development is the development of new sustainable cities throughout the world. As a start we should also pursue the moral equivalent of war. The industrialized nations should form an economic coalition to assist the Palestinians, the nations of Afghanistan and Pakistan, and other nations in turmoil, in the development of new cities. Peace through prosperity.
The idea of cooperation didn’t begin with Gorbachev, it began with the atom bomb—war was out and cooperation was in. So after World War II, The World Bank and the IMF (International Monetary Fund) came into existence. Their combined mission is to foster economic growth, high levels of employment, while providing temporary loans and financial assistance to relieve debt.
While that mission remains the same its focus should now be on the development of sustainable cities. The world faces an energy crisis as the production of oil peaks and then declines, as well a looming water crisis exacerbated by the increasing threat of droughts. Their mission should be now to focus on the development of renewable energy to power control-environment farms. And then add on the neighborhoods.
The thing is it may well beyond the scope of the World Bank and the IMF to implement. Therefore we need a summit meeting of the industrialized nations to forge a consensus along with working out just how this is to be accomplished.
That said, however, the first condition of the summit should be that loans or direct investments tied to the development of natural resources in the developing countries require that their leaders will channel their revenues into the development of sustainable projects while ensuring the workers receive wages sufficient for the necessities of life along with low interest loans to purchase their new homes —this means that the enlightened nations will only support democracies and work together to convince dictators and corrupt officials to rethink their positions.
There is also something that all nations should consider: that it is in their best interest that they shift to a global economy where trade is no longer a zero-sum game, but a sustainable end game where everyone wins–it’s about cooperation and balancing trade
There is a huge amount of work (enough to keep us all busy) to make the transition to would-be sustainable cities throughout the world, and that requires that nations with a trade surplus, who are shifting their economies (their workers) to the development of new cities, turn to those nations with a trade imbalance–an imbalance in employment–take their foreign reserves and invest in or directly trade for whatever is necessary to facilitate and expedite the building of their cities.
Thinking that pressuring China to revaluate its currency as a solution is wrong-headed. It will only create unemployment for China and inflation for others.
And for those who think that the conflict Marxism and liberal democracy as inevitable, they should think again—think about where sustainable are heading.
Sustainable cities are on built on three legs: they have a source of renewable energy, produce their own food, and have the ability to manufacture their own necessary consumer goods. Today we have the technology for the first two and eventually tomorrow’s technology will replace low-wage workers with robots as the final assemblers in fully automated factories–automated factories that can be scaled to provide the necessary consumer goods on a local level—eliminating middlemen and transportation costs.
When that day comes their will no be longer a struggle over the means of production and we’ll find ourselves at the end of history—the end of the historical ideological battle between liberal democracy and Marxism. And when that day comes we’ll also see the world’s population stabilizing just as in the industrial nations populations have stabilized (the U.S. the notable exception—but that works as it allows us build new cities) as they modernized and urbanized.
Here, Marxism finds its final resting place in the dustbin of history. Seeing history as written in stone—seeing conflict as the final solution—is a bad idea.
On other hand it is democracy, freewill, that puts forward the ideas to meet the challenges that a fast changing presents. But here too we have an ideology based on self-interest that is false and cowardly. Self-interest rightly understood is a collective-free-market-will that puts aside the issues that divides us and focuses on the ideas that insure the integrity of whole. The “invisible hand” as it guides ”the butcher, the baker, the brewer” has to be replaced with the hand of reason—hopefully enlightening those who subsist on corruption and greed
Humanity was conceived ignorance. As such Gorbachev reflecting on the past tells us ”Conflicts and wars have been an organic part of history.” Another way of saying it is that “there will be trials and tribulations.”
So we have choice, on both sides, continued conflict, continuing ignorance, or emerging cooperation. If conflict remains in place there’s another determinism to be considered—the historical determinism of weapons—best expressed by the dialectics of Marxism. The United States (the thesis) was followed by the rise of the Soviet Union (the antithesis) who together cannot exist without constantly revolutionizing the means destruction and exchange—nuclear weapons and ICBM’s. Eventually their numbers will reach a critical mass, and a great leap occurs, leading not to a synthesis, but the victory of matter over mind, the end of all history. This was “the backbone of perestroika.” It is why the Soviet Union was allowed to collapse. It is why Gorbachev posits a new world order. As I see it, a new world order where sustainable cities mark the beginning of a new epoch that not only saves the planet, but also saves us our from ourselves.
Footnote
Controlled-environment farming: In a world facing the challenges of severe droughts and extreme weather, looming worldwide water shortages, along with rising oil costs and rising food prices controlled-environment farms are being touted as the answer. While there are variations of indoor farming, they all are pretty much based on hydroponics and tout the same economic efficiencies. They all can be located within cities or neighborhoods. They all run on electricity, require no pesticides, herbicides nor fertilizers (all derived from fossil fuels). They produce crops year around, and depending on the technology, use from one-tenth to one-twentieth the water of conventional farms. They not only use less water, they can use recycled water from the surrounding communities.
One up and running venture was the Phytofarm (re: Discover magazine December 1988, The Green Machine: Indoor Farming). This is a fully enclosed farm fed by artificial lighting where one acre can produce 100 times the yield of conventional farms (day or night). And while it was geared to produce leafy greens and herbs, there is practically nothing that cannot be grown indoors—albeit it would require a shift to growing some food in composted earth pots. Yet, while the project had a successful run, producing sought-after high quality crops, for a number of years, in the end it lost out due to high-energy costs and closed its doors in the early 1990s.
Today, vertical farms are being touted along the same sustainable lines. Essentially these are high rises with greenhouses stacked on one another. Yet, they have not attracted any investors and so their technology remains in doubt. But phytofarms are a proven technology and they too can be stacked on one another. And they can start producing with the completion of the first floor. As such, the investment here can play its role in a sustainable economic recovery.

October 8, 2008 @ 10:54 pm | Comment

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