Peel back the fake wealth to reveal: Nothing
Like all Mercantilist nations, China measures its wealth in terms of productive capacity, not worthless dollars nor inert bars of gold
There is no such thing as "Free Trade"
Modern-day "Free Trade" aka. Globalization, is based upon the specious premise of Ricardian Comparative Advantage - the idea that two countries will engage in [balanced] trade despite one country being across-the-board more competitive on an absolute basis than another. The fundamental flaw in this theory is the critical assumption that there is an "opportunity cost" for a nation such as China to produce everything, and hence it makes sense to trade with less competitive nations to produce lower value-add products. Trade specialization. When of course there IS NO opportunity cost in producing everything. Fast forward 35 years and trillions in accumulated trade deficits and for some reason Econo-dunces ALL still pretend that comparative advantage works.
Modern-day "Free Trade" aka. Globalization, is based upon the specious premise of Ricardian Comparative Advantage - the idea that two countries will engage in [balanced] trade despite one country being across-the-board more competitive on an absolute basis than another. The fundamental flaw in this theory is the critical assumption that there is an "opportunity cost" for a nation such as China to produce everything, and hence it makes sense to trade with less competitive nations to produce lower value-add products. Trade specialization. When of course there IS NO opportunity cost in producing everything. Fast forward 35 years and trillions in accumulated trade deficits and for some reason Econo-dunces ALL still pretend that comparative advantage works.
HBR July 2009 2015
"The competitiveness problem didn’t go away. It was just hidden during the bubble years behind a mirage of prosperity, all while the country’s industrial base continued to erode."
"Beginning in 2000 [aka. George W. Bush], the country’s trade balance in high-technology products—historically a bastion of U.S. strength—began to decrease. By 2002, it turned negative for the first time and continued to decline through 2007."
"In making their decisions to outsource, executives were heeding the advice du jour of business gurus and Wall Street: Focus on your core competencies, off-load your low-value-added activities, and redeploy the savings to innovation, the true source of your competitive advantage. But in reality, the outsourcing has not stopped with low-value tasks like simple assembly or circuit-board stuffing. Sophisticated engineering and manufacturing capabilities that underpin innovation in a wide range of products have been rapidly leaving too. As a result, the U.S. has lost or is in the process of losing the knowledge, skilled people, and supplier infrastructure needed to manufacture many of the cutting-edge products it invented."
A "Middle Man" economy, based on Marketing and Finance, is overhead
"The electronics-outsourcing story exposes several pieces of conventional wisdom as myths. One is the popular belief that an advanced economy like the United States no longer needs to manufacture and can thrive exclusively as a hub for high-value-added design and innovation. In reality, there are relatively few high-tech industries where the manufacturing process is not a factor in developing new—especially, radically new—products. That’s because in most of these industries product and process innovation are intertwined. So the decline of manufacturing in a region sets off a chain reaction. Once manufacturing is outsourced, process-engineering expertise can’t be maintained, since it depends on daily interactions with manufacturing. Without process-engineering capabilities, companies find it increasingly difficult to conduct advanced research on next-generation process technologies. Without the ability to develop such new processes, they find they can no longer develop new products.
In the long term, then, an economy that lacks an infrastructure for advanced process engineering and manufacturing will lose its ability to innovate."
No country can compete directly with the Third World, without becoming a Third World nation itself. Mercantilists don't believe in comparative advantage, they believe in competitive advantage. In everything.
