GREG SUITOR

Dear Peter

I am now in China again, visiting friends and helping them with various matters, having a look and experiencing life here as usual. There are lots of concerned comments being made to me about the situation in Melbourne and accusations about racism and demonstrations about that. What’s happening in Australia with international students is the main question. The recent tragic circumstances reported about the murder in Hobart of a Chinese student have added fuel to the concerns . Our governments must take truly positive restorative action. Recent comments from the Tasmanian parliament are useful steps in the right direction, but this is a major story in the China Daily.

I have been here now for a few weeks looking at the people go about their daily activities. It seems to me to be not very different to what I have observed on previous visits, but the general standard of living seems to have improved. It is much tidier. There is less obvious rubbish about. The streets are cleaner. But the same levels of struggle exist, involving constant hard work and the like, 10-16 hour days, 7 days a week for most of the people. Education is still highly valued as the number one priority. Those becoming unemployed, because of the downturn in exports and imports , either seek out a living in the cities doing what they can, or return to the family farm, where there is accommodation and food.

Across most of China is stored up to 3 years of food in silos and sheds. Farm houses are often large enough to accommodate the extended family. Every family has 1 hectare allocated. It can only be sold to the government. There is a serious attempt by the central government to shift demand to the domestic economy, although I don’t think exports are as a significant part of the economy that the western media lead us all to believe. I think it is probably less than 10% of the whole economy and falling fast. China (if not already) is fast becoming the continental economy that the US had been for most of last century. There are no unemployment benefits as we understand them, just government funded work. No work no pay. Just recently older rural people have been allocated a small pension for the first time. They think this is wonderful.

Saving money still runs on average at about 25%- 35%, with older people saving well over 50% of income. Debt is well covered by traditional Chinese financial prudence. The Chinese save for hard times, not expecting any government help. So if harder times come, there are savings to draw upon, and the extended family all chip in if necessary. We cannot say these things about Australia , which it seems is quickly using up all our savings. Those who have no savings at all must surely fare worse.

On the home front I continue to be astounded and amazed at the general media and government views on the world economy. ”Our economy will come through this better than elsewhere. Green shoots of recovery… should be recovering by Christmas… markets have bottomed … etc, etc“. It doesn’t matter which state or country, the local message is the same. Belief without question illustrates our media’s and our own stupidity. Our sense of necessary skepticism in the face of the evidence confronting us (especially increasing unemployment) seems to have deserted us.. Read news on the internet for goodness sake!

On the one hand we have almost universal consistency in trends and forecasts, one year past and three years hence for rising unemployment, falling production, income and spending, savings rising and debt growing. All these trends mean further decline into depression! Ignorant statements like “falls worse than expected”, “not anticipated”, and the like, won’t change the situation.

How can economic production go upwards when unemployment is climbing faster than a rocket towards space, when total income is falling, and total spending is falling everywhere, (despite government stimuli increasing debt), and international trade is simply declining? Where in the blue blazes is there any increase? I always thought that when production and spending and income go downwards, unemployment goes up. The economy generally deflates. Silly me, I suppose, to believe such simple things.

Yet the positive spin from governments, parroted by mainstream media headlines is in the other direction, no doubt fuelled by the recent trends in world stock markets. It just can’t go on. Someone, and then someone else, and then someone else and so on, is going to suddenly wake up and we will see an almighty plunge in stock markets and commodity markets as people with any wealth left scurry to save what they can, and the subsequent flow on effects and the reality of what is bubbling away in real economies dominates behaviour again. This combined with the spending wave declines and other phenomena I have talked about previously surely must add more fuel to the fire.

Barry Eichengreen and Kevin H. O’Rourke are developing a classical economic historical comparison of current times with those of the Great Depression which is most revealing In their view we are now in a similar situation to 1929, the preliminary stage of the 1930s depression.

The ridiculous expectation that China is going to save the day for the whole world also indicates just plain basic ignorance .China will/may save itself but it just not big enough to save the world. Simply ask yourself the question, why would an economy, large and vibrant as it is, be able to do something that the much larger European Union, and the US cannot? Where is the logic in that? This is grasping at straws. Desperate times lead to desperate and hopeful statements. This suggests to me an even more convincing argument of the deflation to continue.

There seems to be an increased interest from international money investing in Chinese activity, as a place where value might be stored away during this depression.

In China you have to buy plastic bags in supermarkets if you need them. There is increased usage of electronic means of communication. There is less paper usage, especially by the younger generations. In Changsha Hunan where I am at present, the air is much clearer and many people travel on electric powered scooters (they look a bit like the old Vespas, but no noise or exhaust, and they run for about 100ks, charge up about 14 hours, cost a cheap c.$500AU). There are lots of vehicles on the roads but there seems to be an attempt to shift the emphasis to new economy transport and communication. There is a belief in financial circles that the big steel / coal producers in Australia have made a huge mistake not taking good prices recently on offer for capital injections. Next year the offers will not be there, even at half the value . I tend to believe them.

How the Gunns’ pulp mill project, despite all the mammoth government subsidization, both state and now likely commonwealth, is going to get off the ground also beggars belief. All I can imagine is that governments have become so blinded by stubbornness to have some project get started. This is occurring despite dramatic falls in markets and all the opposition. They still are determined to go ahead anyway, perhaps just to spite the detractors. Nothing will stop them other than a wrecked economy. The cathartic market will do its worst, for all the signs are saying cease and desist. It could well reach a stage like General Motors in the US where the government has no option than to nationalize it.

We could well have a mill operating very efficiently, with a well trained staff, supported and maintained by government subsidy, but not actually producing anything- product nor pollution. This might keep most of the voters happy. No input, no output. But a mill and jobs. As with Graeme Wells’ Tasmanian subsidy issues paper -I haven’t seen any effective critique, so it must have hit the spot. Go to www.voxeu.org/index.php?q=node/3421 – 26k or do an internet search.

It is all a bit like the hospital from the Yes Minister series. As an aside I must admit that I visited such a hospital this week -The Alleviation Hospital. It has no patients, 60 staff, and has been operating very well for two months. It looks pretty good. Staff seem pretty relaxed and engaged. It’s on the market for a 40% interest. Expecting patients towards the end of the month. About the same time the pulp mill hopes to fix its final finance package. Anyone interested let me know.

Unless the mill is a post-industrial design and will have no impact on the environment no one will be willing to buy it in the emerging new economy. But maybe Forestry Tasmania can acquire it as a gigantic tourist attraction or symbol to the rust belt economy. As Wayne says, why do we do it?

The BIG trouble is that we all get drained and dragged down the dark and non-returnable plug- hole with it. What we need as a community is the command of those wasted resources for other projects to help us through this coming depression.

On another matter in relation to all the mill debate, I just could not resist penning the following square dance call. The situation seemed set up for it.

Apologies to Dave Groves and Mike Cassidy for the inspiration. Just get those feet a tappin’

Grab your partners, and here we go

Swing to the left and swing to the right

Spin around and around again

All clap hands and shout hurrah

Now we all do, a doh see doh

And of course, back again

Move on forward and move on back

Swing to the left, but not too far

Swing to the right and all link hands

And here we are, all here again

Grab your partners- some banks of course,

And now we do a don’t see doh

And if we spin just a bit too far

We might just walk on up our selves,

Now all join hands and around we go

Clap your hands and dance again, with a

Hoh hoh hoh and a hoh hoh hoh

Thats all folks! –Thankyee dancers.

The famous two fingers McGurk gave a similar call at The Big River Spectacular, there at Two Trees Valley -In the Grande Ole Serpentine. I was there.

I do despair however at our collective and individual stupidity. It seems as if we need to give ourselves difficult times as some sort of ongoing flagellation, because a bit of hardship is good (at least as long as it is not you or me, but it’s good for the other bloke though. Do him good it will).

This depression is going to sort a lot out, but the unnecessary human misery just abhors and annoys me. It is so unnecessary, created and exacerbated by wrong decisions!

How will people vote at the next election in the middle of all this? Plus ca change plus ca la meme change. And in China there is a similar saying. “Wan Bian Bu Li Qi Zong”, which means “There might be thousands of changes but now it is the same as the original.”

Cheers Greg

Greg Suitor in China