Sure – probably a lot of the low-end jobs done by Mexicans and other immigrants, who don’t have an ocean to walk across, would be captured by Chinese. But who would they work for? GM? What’s left in the US is service industries. China could house Americans, working or retired, at a quarter of the cost of living in Las Vegas, with minimal taxation and crime, and make a profit at it. In a fantasy world in which these barriers are gone, other countries would be sucking the whole population out of North America.

The disinterest in the productive sector by the way is in anglo-american phenomenon, not a western one.

Well, it’s not a German one, in any case! Except to the extent that Germany has been Anglo-Americanized…

the share of trade with China of the GDP is not so immense. Your sentence

"Ergo, the Western regimes are bleeding out their financial system in a desperate attempt to keep their loyal citizens satisfied with cheap consumer goods from the East"

is simply wrong. And as there is still unemployment in the west, it would be not too difficult to make even most of this tradeable goods.

The main reason for western "lazyness" is, that most people in the west are so rich, that they have everything they really need. Why should we work more than necessary to earn enough to buy everything we need?

The disinterest in the productive sector by the way is in anglo-american phenomenon, not a western one.

labor would flow from China to the US, of course, if there would be free movement. As long as the wages in the US are higher than in China the suppliers of labor – most humans of age before retirement – would like to get the higher wage, not the lower wage. There would be a motivation for Chinese to move to the US, until the productivity differences are gone.

But another issue is of course, that the federal gov will transfer money from California to New York, via taxes, not via borrowing.

http://www.chinadaily.com.cn/bizchina/2008-04/14/content_6615277.htm

why would any talented american or european work for a western firm, knowing that it will be asked to close the US and european factories and move them to asia. There is no growth to share in the western world now.

Besides capitalist growth is under question with all the ecological crisis hitting us (global warming, no more fish, soil erosion, air pollution …)

It s better either to flee that capitalist system or to try to get control of the political system and change the rules to make them more adverse to the "free business" that is destroying our planet.

In China it s different, they are gaining world dominance through business. Of course they are also destroying their environment big time, but well, still much less than any US citizen does.

It’s rather fortunate, at least from an American perspective, that there are barriers to the free flow of capital and labor between the US and China. I suspect that most of both would move from the former to the latter. "Relatively" capitalist is the operational word – while I’m certainly under no illusions that China is some kind of libertarian paradise, nor was the US in the days of Coolidge, when "the business of business was business" – a motto I suspect would appeal greatly to the PRC’s oligarchs, if somehow it could be attributed to Marx.

If I had to single out one salient cause for the disparity, I’d say it’s that America’s most talented young people, in my experience, have little interest in productive employment. Either they want to be scholars or artists, or they seek to wield power via the political system (mostly in NGOs these days), or they are satisfied with mere hedonism. The contrast with China today, or America a century ago, could not be more stark.

hope this helps.

I am a human being.

I declare myself a nation, called “MyNation”.

My GDP is equal to the value of my services to my employer. It is also equal to the income I receive from him.

My employer is part of another nation I’ve constructed, called “TheRestofYou”.

Together, MyNation and TheRestofYou constitute the entire world.

My GDP consists entirely of an export to TheRestofYou (the value of my services).

All my expenditures are imports from TheRestofYou (everything I buy).

Unfortunately, my expenditure exceeds my GDP. My finances are in full balance, except for one thing.

I bought a big screen TV that I put on my credit card.

Along with everything else, I imported the TV from TheRestofYou.

But I had no income left to pay for it, so TheRestofYou financed my big screen TV.

MyNation has a current account deficit equal to the cost of my big screen TV.

MyNation has a capital account surplus equal to my credit card bill.

I’m OK with all this except for one thing.

Every so often, a guy knocks on my door.

I answer, and he says,

“Hi. I’m from TheRestofYou, and I’m here to help you. We have money to blow – in fact we have a global savings glut.”

I’m puzzled. I say, “So what?”

He says, “We want to you borrow more of our money.”

I say, “I don’t need it right now. I have my TV and I’m OK for now. I’ll let you know when I want to spend some more. Besides, I use my credit card.”

Moral of the Story:

Current account deficits cause capital account surpluses.

And there is no such thing as a global savings glut.

the obvious difference between California and China is that California is part of the political unit of the united states and there is free mobility of labor and capital within that political unit. That isn’t true for china and the US. And i think most optimal currency theories would argue that china should have its own monetary policy, as it isn’t exposed to the same shocks as the US.

i doubt you will buy this, but i would argue that the extension of credit to households (or now to the government to give to households via the rebate) is driven in part by the high level of savings in china and the gulf.

And i would take issue as well with the characterization of China as capitalists — capitalists banks don’t accumulate depreciating dollars to help the government out. nor do they happily accept super-high reserve requirements that crimp lending growth. state ownership of the banks is critical to china’s ability to use the banks as a tool to support its exchange rate policy.

and then there are the price controls and the government monopoly on land ownership …