Tuesday, February 17, 2009

What Will China Do?

There's been a lot of speculation, in the press & elsewhere, about what the governments of every major country will do to respond to the current global economic crisis. Not only are specifics eagerly sought and eagerly speculated upon, but there is also (it seems to me) a lot of noise under the surface regarding two other aspects of the current situation. The first is about whether governments really understand what's going on. The answer to this one is two-fold, and they are both pretty straight-forward. No one knows what will happen over the next year and a half and governments are no different. Is this a severe recession with Global Characteristics? Certainly, it is. Is that all it is, or will things take a turn for the worse and will we irretrievably move away from "the world as we have come to know it"? And here is where things get tremendously speculative because, unless you can find Merlin the Wizard, or some soothsayer in a cave in Tibet, everyone is just guessing. For some its an educated guess. For others, its a wild stab in the dark. But no one I know can tell the future. And I've been to some of those caves in Tibet; they aren't talking about the global economy there. While there's a lot of guessing going on (although we might be better off calling it "scenario building"), the uncertainty remains high and the predictions are unreliable at best.

The second subject of background noise regards whether or not governments know what to do and (if they do) whether they have the will do what needs to be done. Here is where it gets a bit dicier. Certainly, there's a lot of policy debates in process. And a number of major decisions have been made. But: it ain't over yet! Like a very long and slow-paced movie, the story takes a long time to develop. Even if governments aren't quite sure what will happen next, they are certainly trying to figure out what to do to right the ship. They really have no choice. But it also seems to me that policy makers are feeling their way and searching for the right solutions for the major challenges before them. As we've seen in Washington, London, Berlin, Paris, Ottawa, and elsewhere, politics intrudes. That's the nature of a democracy.

The second & closely related question has to do with political will. Presuming the effective steps are known, do the governments of the world's major nations have the political will necessary to do what needs to be done? In my opinion, this is the major question. There is no doubt at all that, given the scope of this crisis, some -- and in all likelihood, a great many -- of the things that will be required will be difficult and sometimes unpopular.

Of one thing there is no doubt in my mind: when it comes to China, the Chinese government has the political will to take the steps it will need to take to build momentum towards economic recovery. Whatever it takes. No doubt in my mind.

None at all.