collision course

We are on a collision course with China. Yet nobody is taking any corrective action. Quite to the contrary. We keep on pouring money into China in the hopes of making a quick buck. And so far that has been a highly successful strategy. At least for those lucky enough to have an inside track. But sadly enough, we are once again funding something that we will have to deal with later on in a rather unpleasant way. Only this time it could be quite serious.

The trouble is that China is not some small middle Eastern country, or a banana republic. It is a formidable empire, whose strength is intensifying daily. It occupies a vast area that is only slightly smaller than the US, and it has well over 1.3 billion people. Its population is also younger than ours. The Chinese government can easily mobilize these people to do what ever it desires to do. And the Chinese won't flinch for a mere 3,000 casualties like we do. It won't even make headlines over there.

Although China has vast natural resources, and especially dirty coal, it needs to import many necessary items. And by increasing its standard of living it is putting undue stress on global supplies of basic materials. And that means there will be less to go around for everyone. Given what we currently know, there are not enough readily accessible resources on the planet to bring everyone up to our standard of living. Every significant step China, or India, takes will mean a step back for us.

That will not go over well. But we won't be able to bully the Chinese around like we do with Iran, Libya, Iraq, or any Latin American country that does not toe the line. Quite the opposite. The Chinese are already throwing their weight around and we are cautiously avoiding confrontation. Not because we are afraid of them (at least not yet) but because we do not want to antagonize what our businesses see as their best future growth market. Ironically enough we are locked in with the Chinese here.

From a US (or any Western) corporation's perspective, China represents a tremendous growth opportunity. And it is one of the very few left. China is where we can open millions of Starbucks, or sell millions of cars, or cellphones, or computers. Because the Chinese market is vast and it has huge unmet needs. Here, the words "unmet needs" refer to whatever the Chinese would need to come up to our standard of living. And perhaps most importantly, the Chinese consumers increasingly have the cash to buy these goodies.

But delivering the goodies will mean shortages in basic materials. And those shortages will drive up prices of everything else. But we will no longer be able to bully the supplier into giving us things for free (or nearly free). Already oil is in short supply and that drives up oil prices. We can move into the Middle East and secure our claim, but that has proven rather pricey, and so far we have seen little payback.

We also responded by looking into ethanol and that has driven up food prices everywhere. Especially in poor countries that can ill afford to pay for food. Poor countries that have lots of young adults, who are also out of work. Young adults that can quickly be converted into terrorism.

Chances are none of that has had any -or only a very minor- effect on you and me. But you can see where we are going. And it is only a matter of time before it does.