Niall Ferguson gives an interview with business journalist Consuelo Mack of the PBS program 'WealthTrack'. In it Ferguson does his standard song and dance about the origins of the strife between the USA and China or what he ofter refers to as Chi-merica. He sternly admonishes those who feel that the current recession/depression is over and the classic 'V' shape recovery is occurring. Paul Krugman, who has been having a public feud with Ferguson, addresses both topics in his NY Times column (respectively here and here). In both cases, Ferguson and Krugman are basically on the same page in offering both concerns and veiled predictions of weak American economic performance in 2010.
The take home message in my opinion, which comes near the end of the interview, is Ferguson's comparison of the current 'depression' with of the depression of 1873. This particular event, which is almost never referenced in the press, involved depressions emerging in both America and Europe. In America, construction work lagged, wages were cut, real estate values fell and corporate profits vanished. A total of 89 railroad companies went bankrupt, 18,000 businesses failed between 1873 and 1875, and unemployment reached 14% by 1876. Whereas in Europe, the Vienna stock exchange crashed, Viennese banks failed, speculative bubbles collapsed, and industries crashed. Deflation ensued for the next twenty years and an economic shift from Europe to America occurred.
In Ferguson's analysis, China plays the part which America played in the 1873 crash, in terms of the shift of industrial strength. He also believes that like the populist backlash that emerged in the first Gilded age, current day populist rage across the Western world arising from severe unemployment, decreasing social amenities, and the realization of the corrupt financial/governmental systems, could pose substantial risk for standing governments.
The second message, despite his early preening in the interview about the rise of the emerging markets and especially China, is in his own words, "I've been to Chongqing. I've seen the future and it stinks!" He concludes that China's communist party is incapable of fundamental reform or eliminating the rampant corruption that underlies the fabric of its merchantalist society. I have written a fair degree on China's corrupt business practices (here, here, and here for example) and believe likewise, that this facet of their culture will be one of the principle agents why the so-called Chinese miracle will not overtake the West.
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