More accurately, the current financial crisis is a result of shared "efforts" by China and the US. China provided artificially cheap products due to an undervalued currency, the US provided willing buyers, China used the profits from these sales to buy US Treasury Bonds, and the US in turn kept its interest rates low and continued to buy Chinese goods. The results of these "efforts" were exacerbated by traditions in both countries: In the US - spend like there's no tomorrow; in China - save like today is as good as it gets.
The combination of cheap goods and cheap money (low interest rates) created excess capacity in corresponding sectors in both China and the US, and gave rise to an interesting social phenomenon - mis-allocation of talent.
In the US, being an investment banker became the new American dream.
The country's best and brightest majored in financing and went on to
devise exotic (and toxic) financial instruments and exchange virtual assets
across the globe. Most of these bright individuals are now out of work.
Most of them will find other jobs, but they have little hope to reach similar
income levels , even in the medium term.
In China, manufacturing was the industry of the future. Parents in rural areas sent their adolescent kids to work in factories in the Pearl and Yangtze River Deltas. These kids earned between US $50 to $150 per month (about a third of their parents' annual income), saved relatively high ammounts, and sent the money back home. Many of these kids skipped formal education. In fact - as Yasheng Huang points out in Capitalism with Chinese Carachteristics - the number of illiterates in China grew steadily between 2000-2005.
So, while China was progressing in nominal economic terms, it was also going through some kind of social regression. Since the beginning of 2009, about 25 million of these migrant workers lost their jobs. Many of them will find work in government projects or go back to work on the family "farm". Like their "counterparts" in the US, they have little hope to reach similar income levels , even in the medium term. In addition, the fact that many of them have limited formal education will hinder China's social development for a generation.
So, both China and the US now have plenty of promising people who spent the last 7 years learning (or not learning) the wrong thing. What both countries don't have at this point, is what they need most: teachers and medical staff. Still, it is easier to change the programs offered on in existing (US) universities than it is to turn (Chinese) factories into research facilities, just like it is easier for a Financing major to learn a new profession than it is for an semi-literate farmer to become a doctor or a teacher.
In China, manufacturing was the industry of the future. Parents in rural areas sent their adolescent kids to work in factories in the Pearl and Yangtze River Deltas. These kids earned between US $50 to $150 per month (about a third of their parents' annual income), saved relatively high ammounts, and sent the money back home. Many of these kids skipped formal education. In fact - as Yasheng Huang points out in Capitalism with Chinese Carachteristics - the number of illiterates in China grew steadily between 2000-2005.
So, while China was progressing in nominal economic terms, it was also going through some kind of social regression. Since the beginning of 2009, about 25 million of these migrant workers lost their jobs. Many of them will find work in government projects or go back to work on the family "farm". Like their "counterparts" in the US, they have little hope to reach similar income levels , even in the medium term. In addition, the fact that many of them have limited formal education will hinder China's social development for a generation.
So, both China and the US now have plenty of promising people who spent the last 7 years learning (or not learning) the wrong thing. What both countries don't have at this point, is what they need most: teachers and medical staff. Still, it is easier to change the programs offered on in existing (US) universities than it is to turn (Chinese) factories into research facilities, just like it is easier for a Financing major to learn a new profession than it is for an semi-literate farmer to become a doctor or a teacher.
