Business » Finance
Author`s name Dmitry Sudakov

When the smoke clears, who will still be standing?

The Bank Panic of 2008 will once again prove what should be common knowledge: a nation that makes nothing is worth nothing. It will also prove what the British Empire learned after parliament in 1861 allowed British business to go to the colonies to seek cheap labor: impoverishing your own people for the sake of a small elite and de-industrializing all lead to disaster. A nation of shop owners is just that, a nation of shop owners. It is not a nation of power. Long ago, if the British had not become obedient lap dogs of the Americans, Britain would have become a quaint little second/third rate European power.

As it stands, the zenith of British power was fully demonstrated for the world in the Falkland Wars where the British strained every resource they had just to reach the islands and then fight a second rate and half way demoralized Argentine army. Yes they won, but that was as much of a victory worth celebrating as the American victory over the Iraqis.

So again, the question stands, who will be left standing when the last crag of the dieing financial empires falls from the weight of its own paper and the dust finally settles upon it? It will be the nations that have retained or built up their industrial base and who first and foremost service their own citizenry. Thus it will be Japan, South Korea, Taiwan, Russia, Germany and France and maybe just maybe India but not China nor America.

First and foremost, Japan, Korea, Taiwan, France and Germany have an updated industrial base that first services their own population and then that of the export markets. In other words, they can meet their own needs. The Germans in particular were also very careful about their banking behavior. The central German bank will spend a whopping $12 billion over two years to fix up the economy and that's $12 billion it actually has and does not have to borrow.

Russia too, with an old Soviet industrial base, that was ravaged by the West, has been rebuilding its foundations for the past 9 years, with an annual rate of industrial growth of 7-8%. It too is now in a position where it first and foremost services its own internal demand. To most Anglo-Saxons, this may come as a shock, as the propaganda they have been fed is of a collapsed Russian economy dependent only on oil. However, the Russian boom started in 1999, long before oil broke $20/barrel.

India will be harder pressed as much more of its industry is based on export. However, unlike China, it has not developed as much consumer goods industry solely for exports and is still more focused internally. This may give it a fighting chance to come out of this disaster poorer but with a foundation to build on.

China is a disaster in progress. Over 100,000 factories have closed, civil unrest is sky rocketing and a possible civil war is never out of the question. This is because, outside of the 200 million that make up the Chinese middle class, the billion plus can not buy nor afford the trinkets that the industry produces not to mention the more expensive items. With American and, to a smaller extent, European demand drying up, at an incredible rate, the Chinese production capacity, which fed them, is a pointless weight. The local population can not afford to absorb the capacity, since wages were kept as low as possible, many less than $.25 per hour. The working poor now being laid off will only grow angrier and more rebellious.

As for the Americans and the British, this is a disaster from which it will take generations to recover. Both nations have de-industrialized and can barely provide the base necessities of industrialized goods for their people. By bare necessities, we do not mean TVs, electronics and other such things, but processed foods, clothing and shelter. Even their defense industries are dependent on foreign subcomponents. Luxury items, such as consumer electronics, furniture, etc are all imported. The Anglo-Sphere has long ago built its future on the false promise of paper wealth, a wish that while at first bringing a sweet high like heroine, in the end will cost dearly in withdrawal.

The Americans in particular will now face the same challenge as the Soviet Union, a nation which while it still had some capacity to produce large heavy machinery and military equipment, was totally unable to satisfy its people's cravings for consumer goods and who with little real wealth available, was no longer be able to purchase it abroad. It is moments like these that even the tame peasants of the Anglo-Sphere may actually rise up in rebellion.

In the end, the Anglo-Sphere's and Sino-Sphere's economic theories of paper wealth and mass export industrialization will be both proven to be evolutionary dead ends. Once more merchantalism will be proven as one and sure economic end game that has and still does work.

Stanislav Mishin

The article has been reprinted with the kind permission from Stanislav Mishin and originally appears on his blog Mat Rodina

Several years ago, a prominent Indonesian businessman who now resides in Canada, insisted on meeting me in a back room of one of Jakarta's posh restaurants. An avid reader of mine, he 'had something urgent to tell me', after finding out that our paths were going to be crossing in this destroyed and hopelessly polluted Indonesian capital.

Capitalism reduced Indonesian cities to infested carcases

Several years ago, a prominent Indonesian businessman who now resides in Canada, insisted on meeting me in a back room of one of Jakarta's posh restaurants. An avid reader of mine, he 'had something urgent to tell me', after finding out that our paths were going to be crossing in this destroyed and hopelessly polluted Indonesian capital.

Capitalism reduced Indonesian cities to infested carcases
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