Salus Publica Suprema Lex

There was a recent post by Mr Krugman castigating China, Germany and the Republican Party which was perhaps the strangest group of bedfellows one could imagine.

The thrust of the blog was that the three were trying to bully the Federal Reserve into calling off its efforts to create jobs through the means of Quantative Easing II.

Okay, let us reflect for a moment on the nature of man. There are those who think that the only way forward is to co-operate and at the extremes are willing to sacrifice oneself for the good of the community. And there are those who think the way forward is to have the community work for them and at the extreme are willing to sacrifice the community for their own good.

China is strange in that it is nominally a communist country and yet is aggressively using capitalist means to ensure that the Chinese Communist leadership stays in power. One of their key triggers to remaining in power is to try and provide for full employment. To achieve this goal they have even go so far as to send Chinese workers to work in Chinese firms abroad. They claim this is because the local workforce, wherever they are, is not skilled enough. What they are actually doing is exporting excess workers.

So let's reflect for a moment on China. They have pegged their currency to the US dollar at a rate favorable to their exports. They pay their domestic workforce relatively poorly which exacerbates the problem of their trade surpluses, and they use some of their surplus to finance foreign direct investment and export their own workforce.

This is a very interesting take on the idea that the welfare of the people is the ultimate law. It leaves one wondering who the people are, and in the case of China leaves one questioning just who is benefiting.

Then we turn to Germany. They too run large trade surpluses. But their currency is relatively strong, and their workforce is reasonably well paid. They actually run a form of market socialism, although since reunification and the cost of incorporating East Germany they have come to realise that their social system is becoming overly burdensome and so they have instituted some austerity measures.

No one is accusing the European Central Bank (ECB) or the Germans for that matter of manipulating (intentionally weakening) the Euro to further export growth.
And no one has accused the Germans of paying their workforce substandard wages.

The Germans do get accused of producing quality, precision goods; of being efficient; of being relatively thrifty; and of benefiting from the Euro in that other European nations can no longer devalue their currencies to compete with the Germans. And of course, the German State does get accused of being more concerned with the welfare of German citizens than they do of Americans.

I think it is wrong of Mr Krugman to put the Germans and the Chinese in the same pot. The Chinese elite is concerned with the Chinese elite. Everything they do is to stay in power. Admittedly to do so they need to try and keep the masses content. But this is an authoritarian government and it is incorrect to throw them together with the Germans just because they run trade surpluses.

I do however think Mr Krugman is on the money to bunch China and the Republican leadership. They are both authoritarian. And they are both only concerned with their own personal situation.

Republican self-interest is such that whatever Obama does, they will attack, unless they think it will fail. This approach extends to the Fed. If the Fed helps the economy under an Obama presidency, this will damage Republican chances. So, despite the fact that the US$ fell over 30% under Bush, and that inflation was at 5%, the Republican leadership kept quiet as long as the economy was churning. They were in power, and anything that would help keep them there was OK.

Once Obama got into power, the story changed. Suddenly it was the deficit, stimulus spending or bank bailouts. Now it's currency debasement and inflation. It doesn't matter what it is. If they think something is good for Obama, they will combat it. It's not even ideological, unless greed and power count as an ideology.

Come to think of it they do- I think it's called fascism.