Crack-up in China

The global depression has left 26 million Chinese workers unemployed. Contemplate that staggering number. Years ago these millions left desperate lives in rural China and moved to the industrial cities in what was the largest human migration in history. The economic boom of the 90s--the age of credit bubble after credit bubble--led investors to out-source whole industries to China to exploit this colossal population of cheap labor. As von Mises explained long ago, the boom phase of credit expansion is really mass malinvestment that cannot be sustained when the boom craps out. The present desperate plight of 26 million unemployed Chinese ex-factory workers is stark proof of that explanation. These people are now stranded in their own country--there's really no place to return to in the rural areas and they'll slowly starve in the industrial cities without work. And, as I keep writing, we're only in the beginning stages of this depression, which will last for many years, probably decades. Millions more will soon swell the numbers of the unemployed. Apparently social violence has already broken out despite the best efforts of the government to suppress any word about it. This is a disaster in progress and nothing good will come from it.

As a post script, I think the problem is much worse than the Chinese government publicly states. I thoroughly disbelieve the government's claim of a 6.8% growth, for example. Exactly how is China's export-intensive economy growing in the midst of world-wide decline in growth and consumption--which is, after all, what a recession/depression is? And unless the Chinese government is substantially more truthful than the American (which is possible), the 26 million figure must be in actuality much higher. The American government continually lies about real unemployment here in the USA. John Williams at ShadowStats computes that at present we have an true unemployment/underemployment rate of about 17%, which was the unemployment rate in 1931. I don't expect bad news gets reported objectively in Beijing but not in Washington, D.C.


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