- Allen Czermak
The Battle For Economic Prosperity In The USA & China
Anyone in the logistics industry is well aware of the skyrocketing cost for shipping containers from China to the United States. Many local businesses that are reliant on product exports from China have their hands tied and are forced to foot the bill. The other option of closing up shop is not feasible as the U.S. consumer is itching to purchase products. According to a report from CNBC, U.S. retail sales unexpectedly grew by 0.6% in June due to the steady demand for goods. The only challenge is for the stores to actually have products on the shelf. The pandemic, tariffs, worker shortages, oil prices, and high traffic at water ports have all contributed to many items not being in stock across multiple industries.
The only solution for U.S. business owners is to give into the demand from Chinese manufacturers and pay a higher price. It was the same story pre-pandemic, if there was an opportunity to raise the price the Chinese would capitalize on it. They would simply not release the shipping container until the payment was received. Now the Chinese do not even have to play the game, as there are many valid reasons to raise prices on products and delivery. Currently it costs around $20K to ship a container from China. Businesses across the U.S. have no alternative but to increase pricing, and customers are now beginning to notice it.
So it seems that China plays a very important role in our local economies in regards to stability and prosperity. However, is the China model which is at the root of their economic success a better solution than an economy which is based on the democratic principles of capitalism? There is definitely an advantage of authoritarianism, as a government can be more in control of economic success. Global economists anticipate that by 2030 the Chinese economy will have overtaken that of the United States of America. But there are still many who speculate if the China model is a long-term solution for economic stability and prosperity. With the growth and success of the Chinese economy its people will become more educated and begin to question the fundamentals of the communist regime. At that point, the Chinese will have to decide how they will want the world to view them. Do they want another Tiananmen Square event or will they normalize how they handle those who question their fundamental principles of Communism? Until then the U.S. and China economies will continue to compete at a very intense level.
How Did The Chinese Economy Evolve To Being So Successful?
Until the 1960’s China was ignored as an important player in the global economy. The people who lived there were subjected to harsh communist policies that led to poor living conditions and not enough food to eat. Leaders like Mao Zedong attempted to implement programs like the Great Leap Forward, only to be proven as a failure like so many other plans from communist regimes. According to an article by Ilya Somin of the Washington Post, Mao’s policy of the Great Leap Forward policy led to the deaths of up to 45 million people, making him one of the greatest mass murders of all time. Instead of feeding his people from the food produced in China, it was exported to other countries and only those in leadership roles were to gain. Only after the death of Mao Zedong, would the foundation for a fruitful Chinese economy be laid down.
Deng Xiaoping had become the new leader and began to implement reforms that would stimulate the growth of the Chinese economy. At the same time he would take on a more friendly relationship with leaders around the world including President Jimmy Carter. The Chinese leader was committed to economic growth even though it meant going against core communist ideology. Historian's say that it was he, Deng Xiaoping, that was responsible for the economic miracle that we see today in China. For the very first time in their 3,500 year history China was put on the stage for global investors to view. This brought into the country private businesses and foreign investors. The Chinese government would invest in port cities to test the waters for economic gain. If successful, China would simply replicate the project into other major cities. Eventually all throughout the country were these economic models setup that led to a better quality of life for all its citizens. At the same time, roads, rails, and ports were set up to bring business into the mainland. Over the next four decades the economy grew ninety fold, making it one of the biggest global economies with a recorded annual GDP in 2019 of $14.4 trillion USD.
How Do Communist Policies Support The China Model?
Here is the interesting thing about the success of the Chinese economy. The ideas of the communist party actually help its economy grow. With more control over its people, China can flex an economic system that continues to see exponential growth over the past decade. No one can question government policies which allow them to invest in areas where opportunity is fertile. So while citizens are making a decent living in major cities like Chongqing, there are peasants going hungry in the mountains of Kangding. According to the World Food Programme, approximately 150.8 million people in China are malnourished. From an economic perspective, China is looking really good but socialist policies are not appearing to be that socially friendly after all. Even with citizens in the big cities earning decent salaries, it’s the Chinese government and those in positions of power that are becoming rich.
What Is The China Model?
The China Model is a blend of state directed capitalism and political authoritarianism that focuses on four key elements, the economy, national pride, political party discipline, and no challengers. The latter two are fundamental ideas of a communist regime that gives the government endless powers to maintain control of its people.
There is no protest about inequalities and absolutely no rioting to interfere with policy that can perhaps infer on a successful economy. Therefore most citizens are forced to accept the country's fate of Communism in order to receive a better quality of life. Tiananmen Square was definitely a part of the Chinese government showing its resolve to not allow any challengers of its policies. If that means placing military tanks on city streets or going as far as firing on demonstrators, political intolerance is totally unacceptable. In addition, there was a firm crackdown on free speech that ultimately led to the termination of these demonstrations. From the government's perspective, these people that were protesting in the street against its policies were causing a hindrance to economic growth and had to be shut down. Something like that can only take place in a socialist society.
Living In The United States of America Has A Price Tag
On March 23, 1775, Patrick Henry uttered the famous words "Give me liberty, or give me death!". Ever since then, liberty has been the core policy of the United States of America regardless of what political party one is affiliated with. If we see something wrong, we have the right of free speech to protest it, regardless if it's against the government's best interest. Protests and demonstrations can ruin local economies as we saw from the BLM protest in Minneapolis, Minnesota and Kenosha, Wisconsin. Many Black-owned businesses were burnt to the ground and livelihoods were lost. We may or may not agree but the government has to allow non-violent protest to go on. Unfortunately, it’s difficult to weed out the agitators who escalate these protests that cause damage and loss of life. But according to the United States Constitution free speech will always be allowed without any contention.
The fact that we have such policies has led to the protection of rights of our citizens and workers. This means that employers must conduct a safe work environment and pay a minimum wage to its employees. All of these protections are the cause for increased labor costs which is why it's more expensive to manufacture something in the United States. The fallout of this is that Fortune 500 companies have outsourced their production to China and import it back to the United States. Businesses across every sector have become so reliant on China that they are now forced to pay $20,000 to ship a container from China. It’s very frustrating for local businesses that they now have to pay more for the products they manufacture in China to get them here but the right for liberty is the primary cause for that. People of China will never be allowed to stand up to their government and demand greater liberties. True, we are living in very challenging times of global uncertainty and economic instability, but as citizens of the United States of America our freedoms are still protected. For that we have to pay a price and this is what we are now seeing across the manufacturing and logistics sector. We will pull through but at the same time we need to think about becoming independent of communist countries like China.