Nero Returns!

You know the image: Nero, the Roman Emperor, who is famously remembered as focusing on his lyre as Rome burned to a crisp. Whether History (at least as we popularly remember it) does him justice, the myth is being re-enacted today in Washington. It all makes it it very difficult for all of us American expats who have so self-righteously preached to the Chinese for years that they should look to the U.S. model for China's future.

While I still hold on with one hand to the mantra of free and open markets, the banner has gotten a bit tattered of late. Open markets have their limits, and if you don't understand that, you've been asleep for the last few years. The Chinese have not missed that point, altho I'm not too convinced we always see the same limitations. Nevertheless, the main points have not been missed. The Chinese government is, of course, no stranger to the skills of managing economic growth. If anything, they're too good at it. Too much growth, after all, can be a bit hazardous, too. Maybe not as hazardous as too little, but the risks are unmistakable.

Many of my Chinese friends are looking on in bafflement today as the debate rages on in Washington about the details of the pending stimulus package. They aren't alone. Many expats are also a little baffled, but for different reasons. What they don't see the value of is the political give & take of a democracy. Here in China, the debates are usually behind closed doors and mostly pretty short-lived. And, once over, the debates are . . . well . . . over. Already, the effects of the Chinese government response to the economic chasm we're all teetering on the edge of is being felt. Whether China will avert the worst is unknown; no doubt, this will be a tough economic year. But no one here thinks the government is not concerned or that, if early efforts are inadequate, further action won't be taken. They will do whatever it takes. And they will learn their lessons well. Probably, they already have.

Meanwhile, back in Washington, the Democrats have watered down the fiscal package in order to attract Republican support. In the U.S. House of Representatives, it didn't work -- not one Republican supported the original House stimulus plan. In the Senate, support was minimal. In each case, the final bills became more skewed towards tax breaks. I like tax breaks! Everybody does; nobody likes to pay taxes. But anybody who thinks people worried about losing their jobs (and already having lost much of their retirement savings) will buy a new car because the taxes are now lower is an idiot. Likewise with real estate purchases. If you're worried about your family's economic viability, your first thought is NOT about buying a new house. Unless you're independently wealthy or just scammed the taxpayer out of billions in undeserved bonuses, in which case tax savings is, maybe, a pressing concern. And, if you think about it, in order to pay income taxes, you've got to have an income. The unemployed don't pay income taxes.

I read a note posted by an old acquaintance last week. He is convinced that this whole thing will be over by the end of 2009, no matter what the U.S. government does. In one sense, he's right: the U.S. will get thru 2009. And then it'll be 2010. Time marches on, no matter what. Its what happens in the meantime that's the issue. If the U.S. is to avoid running the American economic locomotive into a brick wall, Congress will have to be both decisive and effective. There is no guarantee that the U.S. and World economies will be better in a year. More likely, if nothing is done, they'll be considerably worse. The Chinese can see that very clearly, as they can also see the inevitable linkages between the two economies. What is much harder to explain to them is why some Americans, who they think should know better, seem to be working so assiduously for broad American failure and for their own narrow self-serving interests. Even Chinese friends here who dislike the "powers that be" here readily point out that, in this crisis, the Chinese government is doing the right things. Why don't all American politicians want to do what clearly needs to be done?

I have no answer.