The CHART OF THE DAY we ran today pointed out that in terms of consumption, China today is about where the US was in the early 60s.
But the Credit Suisse report from which that came makes what is perhaps an even deeper point.
Here, check out this cartoon from 1914:
Photo: Credit Suisse
Currency! Tariffs! Anti-Trust (see last night’s news).
Of course, it’s like China today.
CS makes an interesting point, then, about what comes next, when all this pump-pushing fails to keep working:
A lot of currently prominent political and economic institutions in US were created during
this period. For example, the Federal Reserve System was established in 1913 after the
two depressions in 1893 and 1907, while the powerful Food and Drug Administration
(FDA) was also established during this period, responding to the public concern of food
safety. On the political front, this was also the period in which women were allowed to vote
and senators were directly elected.
Due to differences in the historical context and the social / economic environment, it is
always difficult to draw an analogy between the historical changes in the US a century ago
to what is happening in China currently. However, in the context of change it cannot be
denied that there are also some similarities in terms of the major concerns of key policy
makers in China today with that period. Most notably, after the rapid growth of the Chinese
economy in the past three decades, China is also facing the problems the US faced by the
end of the “Gilded Age”: income inequality, food and other consumer product safety, rising
monopolies, corruption and the demand for government to provide public services, etc.
The establishment of a greater social role for government (ironic, since supposedly China was communist not long ago) is seen by many as crucial to cranking up the domestic purchasing engine (since a safety net would remove the need to save, somewhat).
Anyway, these kinds of analogies shouldn’t be overdrawn as there are numerous holes, but there’s enough in common to merit some pondering.