Robert Zoellick the president of the World Bank is leading a global search for the replacement of the American consumer. The American consumer served the world well over the past decade. They bought in large quantities, extravagantly and indiscriminately. They bought regardless of where the product came from, what it did for them and whether they had place in the house to keep it – which led to their having to buy larger and larger houses to keep the things that they bought.
The workers in far off lands of China, India and Africa toiled away in Dickensian conditions to satiate the American consumer demand. They worked 12 hours a day in sweltering workshops, with no overtime or social security to provide affordable goods to American consumers, who in turn obliged by consuming prodigious quantities of them. However, it is felt that American consumer can not do an encore of this remarkable performance in the coming decade. A desperate need exists to find a replacement. Someone, who could continue to fuel the global growth that we benefited from in the last decade – or else the world faces a recession.
The Chinese candidacy
In a number of circles the name of the Chinese consumer is being whispered as a possible candidate this role. Can the Chinese consumer spin the same magic as the American consumer and keep us on the growth trajectory? The advocates for designating the Chinese consumer as the replacement of the American sustainers of world economy argued, that the fact that there are four times as many Chinese as Americans is a good starting point and makes the Chinese consumer a good potential candidate. “But they don’t even have one tenth of the purchasing power,” argued Robert Zoellick. “That money is required to make a purchase, is an old-fashioned concept and is has been clearly demolished by the American consumer,” argued the advocates. Anyway money is a nebulous concept, we have seen trillions go here and there and none is wiser as to why and where it went and how it seems to be re-appearing again. What we do know is that when it re-appears it does seem to gravitate to the bonus packages of the American bankers. In fact sometimes it reaches the banker even before it reaches the bank, which itself needs to be kept afloat by funding from the State.
The clinching argument came from those who triumphantly revealed that it was anyway the Chinese money that the Americans were spending. Hence it wasn’t really the American consumer but actually the Chinese consumer who was providing the growth to the world economy. The Chinese consumers toiled in sweatshops and gave a part of their hard-earned money to Americans who used it to buy the goods that the Chinese workers sweated to produce. So it all worked out quite well – Americans did what they did best and are known for, and the Chinese did what their culture and tradition guided, giving them satisfaction of following their values of hard work, thrift and moderation.
Then why bother to change? Change will mean that both Chinese and American consumers will need to go against their grain. Imagine embarrassed and flustered Chinese moving through the supermarket aisles and staring at large packs of frozen dumplings or dried beef that they know they will not be able to eat, or looking at toys for their only child who they know does not need any more. At the same time, American consumers having to change their perception of a bank to a place where they save their money than where they borrow money from (and take out sub-prime mortgages from), is also an uphill task. Given the current image of the banks and the federal bail-outs, how will American consumers have the heart to trust their own money with a bank? For decades they have been guided by a belief that it is better to have the bank’s money with them than have their money in the bank and it will not be easy to change this principle which has served them so well over the years..
Still immersed in deep reflection, Rober Zoellick concluded,” The solution is status quo - and even more status for the Americans and more quo for the Chinese”. Let Chinese workers labor more and produce even cheaper and better goods for the American consumers. Let them lend more money to their American brethren so that they can continue to stuff their large houses with more toys, electric drills, synthetic carpets and dildos made by Chinese factories. Only the Americans have houses large enough to accommodate more shopping any way.
President Obama congratulating Ben Bernanke on being the Person of Year for the TIME magazine for 2009 said, “Ben, you do us proud. You have done well so far. If you need more money – go East, young man. Work closely with your runners up in TIME magazine – the unnamed Chinese worker – and you might just save the world.”
Written by Ashok Sethi