FacebookTwitterGoogle+RedditEmail

The Dollar’s Not Almighty Anymore

Shanghai

I was talking yesterday with the chief financial officer of a US-based drug firm that operates here in China, producing for the Chinese market, and got an up-close look at how bad things are for what used to be called the Almighty Dollar.

The company in question, a joint venture between a very profitable U.S. drug company and a local Chinese company, is quite profitable itself.

The guy was explaining to me that his firm needed to add another factory, because the one they had was running full-tilt and couldn’t keep up with demand. That might sound like a simple problem, and one that most enterprises would be happy to confront, but the shrinking US dollar, and concerns in China about inflation, complicate things.

You would think that it would be a simple matter of the parent company’s sending over the $50 million or so that it would cost to build the new plant and that would be that, but it turns out that the dollar is falling so fast against the Renminbi (RMB), the Chinese local currency, that no contractors or other vendors necessary for setting up a new facility are willing to accept it as payment. That means the company has to try and come up with the construction costs in local currency.

I won’t go into the arcane machinations that involves, except to say that because Chinese financial authorities and the country’ central bank, the People’s Bank of China (PBOC), aren’t letting local banks or foreign-owned banks with offices in China lend money without going through a tough approval process, the outcome of which is iffy, and they are setting interest rates at 6.5% for those loans they do approve, which is a pretty stiff rate to have to live with.

The important point here is that the dollar is being viewed here in China the way people in the U.S. have typically viewed Mexican pesos or Chinese RMB.

I remember back when I was a Fulbright professor at this city’s elite Fudan University, back in 1991-92, people wanted dollars so badly that you had to be crazy to go to a bank to change them at the official rate of about 8 RMB to the dollar. Practically anyone you met, even strangers on the street, were willing to swap you their RMB bills at a rate of 9 or even 10 RMB to the dollar.  I had an American friend who told me he was riding his bike into the city, and was on a crowded street packed solid with slowly moving bicyclists when everyone was forced to press to the side to allow a bus to pass. His bike ran up against a neighboring cyclist and the handlebar cut a gash in the man’s wrist, apparently severing a small artery, which began gushing blood. My friend, who like me spoke Chinese, began apologizing profusely, and was getting off his bike to offer help when the man began asking, “Change money? Change money?”

Today, if you’ve got dollars nobody wants them, but I’ve been told that if you have RMB, you will find the reverse situation, with just about everyone having dollars they are stuck with that they’re desperate to unload at way above the official exchange rate of 6.35 RMB to the dollar.

That should tell us Americans all we need to know about what is being done to our own economy and to our standard of living.  According to Business Week magazine, Americans will spend about $1.7 trillion on consumer goods, including gasoline and oil, this year. More than half of this amount is imported, meaning that we Americans are spending about $1 trillion a year on imported goods. As the dollar sinks — and it’s sinking because of the deliberate policies of the government and the Federal Reserve Bank — the cost of those goods rises (actually the costs of many other goods, seemingly locally produced, also rises because so many of the components–for example the parts that go into a supposedly US-made car–are imported from abroad).

For most of those goods — particularly oil and gas, but in fact most others too, from computers to televisions to small fuel-efficient cars to clothing — there are no domestic substitutes, because other deliberate government policies, such as the latest international trade pact President Obama and Congressional Democrats and Republicans reached with South Korea, have pushed or driven manufacturing overseas, effectively de-industrializing the United States. So we Americans have little choice but to pay more for the products we want or need. Either that or we cut back on our standard of living.

This is happening of course in a time of 20+ percent unemployment or underemployment, when wages are being hammered by greedy employers taking advantage of the desperate desire for jobs, and of the severely weakened labor union movement.

No wonder Americans are taking to the streets to protest Wall Street, and the bought-and-paid elected officials who have been stripping the economy like a demolition crew in a condemned building before the arrival of the wrecking ball!

Meanwhile, here in China, where the country has been vacuuming up American dollars like an Orick TV commercial, people, at least in the big cities like Beijing and Shanghai, are looking incredibly well off. HuaiHai Road, a major east-west thoroughfare I remember from as late as 1996 as having been a drab street lined with dismal-looking noodle shops and stores selling shoddy tools and drab, poorly made clothing for the local market, and street vendors selling produce, is lined with top-of-the-line fashion stores thronged by women seeking the latest look and restaurants that charge almost New York prices.

Instead of fleets of bicycles, or even the motor scooters that throng streets in much of Asia, Shanghai’s streets are filled with new cars, many of them costly Toyotas, BMWs and Mercedes sedans. Of course the wealth gap in China is enormous — roughly what it has become of late in the U.S. — but even the working class here, at least in the cities, feels generally better off, because of where they’ve come from, while we in the U.S. are seeing ourselves sink.

All those dollars (and euros) pouring into China, and especially into cities like Shanghai and Guangzhou in the south, are also being put to use raising the standard of living in other more collective ways. Friends of mine here in Shanghai who used to live in cramped one or at best two-room bare concrete walled and floored flats, often with no bath and a shared community kitchen, are today ensconced in four-room apartments, nicely appointed, with tiled full bathrooms, spacious kitchens, and wood parquet floors. When they travel into the center of town, instead of riding a bike for two hours, they hop on a modern subway–part of a city-wide system completed in some 15 years’ time that now rivals the Paris Metro of the London tube, only with all glistening new stations and cars. There’s even a mag-lev segment to take people to the airport.

Schools have also received a tremendous amount of funding, from grade school through college. I could barely recognize Fudan’s modern campus with its towering new buildings and surrounding well-groomed parks and campus grounds.

I don’t want to overstate China’s progress. This country and its people face huge challenges. The environment has been raped and in many parts continues to be raped, there are beggars sleeping on the sidewalks, prostitutes proposition foreigners even on the better streets of Shanghai, and the air in this city, while perhaps a bit cleaner than I remembered, has me coughing and clearing my burning throat constantly after only a week here. It also continues to be a police state.

But the point is that despite all that, this remains a country that is improving the lot of its citizens, while the U.S. is clearly moving in the opposite direction. More importantly the impoverishing of Americans is happening, clearly, by design, as U.S. politicians act not in the interests of the many, but of the 1% who own them.

China’s political system is at least as corrupt as the U.S. system, but what is different is that the Chinese elite has a healthy fear of the wrath of the public. The violent risings of the Chinese masses, in the revolution that installed the Communist Party,  and in the Cultural Revolution of the late 1960s and early ‘70s, the peaceful but determined 1989 Tiananmen protests and the growing wave of rural and urban unrest by peasants, workers and even over-taxed shopowners, have all made rulers here acutely aware that they can only cling to power if they keep trying to improve broader living standards for the majority.

Just this week, for example, a mob of hundreds of angry shop-owners and residents of  Zhili, a town near Huzhou in Zhejiang Province, rioted over extortionate tax collections by local officials, overturning and burning several police cars and reportedly injuring some police officers and local officials — this according to local published news reports. Such events are not uncommon and serve to keep officials on their toes.

In the U.S. there is, or at least for decades has been, no such fear in the hearts of America’s ruling elite and their craven politician servants.

Perhaps with the advent of the Occupation Movement sweeping the country, this will change, though it remains to be seen whether a purely peaceful protest movement, with demonstrators passively accepting mass arrests by local police, will create enough fear in those avaricious hearts to bring an end to the current economic and political system of oligarchy, greed and exploitation that characterizes today’s United States.

DAVE LINDORFF is a founding member of ThisCantBeHappening!, the new award-winning independent online alternative newspaper. 

Exclusively in the new print issue of CounterPunch

One of the Greatest Descriptions of Farm Work Ever Written— Don’t miss Frank Bardacke’s marvelous account from the California fields. ALSO Linn Washington Jr. on the “Black Backlash Against Obama.”

Order your subscription today and get
CounterPunch by email for only $35 per year.

More articles by:

Dave Lindorff is a founding member of ThisCantBeHappening!, an online newspaper collective, and is a contributor to Hopeless: Barack Obama and the Politics of Illusion (AK Press).

December 10, 2018
Jacques R. Pauwels
Foreign Interventions in Revolutionary Russia
Richard Klin
The Disasters of War
Katie Fite
Rebranding Bundy
Gary Olson
A Few Thoughts on Politics and Personal Identity
Patrick Cockburn
Brexit Britain’s Crisis of Self-Confidence Will Only End in Tears and Rising Nationalism
Andrew Moss
Undocumented Citizen
Dean Baker
Trump and China: Going With Patent Holders Against Workers
Lawrence Wittner
Reviving the Nuclear Disarmament Movement: a Practical Proposal
Dan Siegel
Thoughts on the 2018 Elections and Beyond
Thomas Knapp
Election 2020: I Can Smell the Dumpster Fires Already
Weekend Edition
December 07, 2018
Friday - Sunday
Steve Hendricks
What If We Just Buy Off Big Fossil Fuel? A Novel Plan to Mitigate the Climate Calamity
Jeffrey St. Clair
Cancer as Weapon: Poppy Bush’s Radioactive War on Iraq
Paul Street
The McCain and Bush Death Tours: Establishment Rituals in How to be a Proper Ruler
Jason Hirthler
Laws of the Jungle: The Free Market and the Continuity of Change
Ajamu Baraka
The Universal Declaration of Human Rights at 70: Time to De-Colonize Human Rights!
Andrew Levine
Thoughts on Strategy for a Left Opposition
Jennifer Matsui
Dead of Night Redux: A Zombie Rises, A Spook Falls
Rob Urie
Degrowth: Toward a Green Revolution
Binoy Kampmark
The Bomb that Did Not Detonate: Julian Assange, Manafort and The Guardian
Robert Hunziker
The Deathly Insect Dilemma
Robert Fisk
Spare Me the American Tears for the Murder of Jamal Khashoggi
Joseph Natoli
Tribal Justice
Ron Jacobs
Getting Pushed Off the Capitalist Cliff
Macdonald Stainsby
Unist’ot’en Camp is Under Threat in Northern Canada
Senator Tom Harkin
Questions for Vice-President Bush on Posada Carriles
W. T. Whitney
Two Years and Colombia’s Peace Agreement is in Shreds
Ron Jacobs
Getting Pushed Off the Capitalist Cliff
Ramzy Baroud
The Conspiracy Against Refugees
David Rosen
The Swamp Stinks: Trump & Washington’s Rot
Raouf Halaby
Wall-to-Wall Whitewashing
Daniel Falcone
Noam Chomsky Turns 90
Dean Baker
An Inverted Bond Yield Curve: Is a Recession Coming?
Nick Pemberton
The Case For Chuck Mertz (Not Noam Chomsky) as America’s Leading Intellectual
Ralph Nader
New Book about Ethics and Whistleblowing for Engineers Affects Us All!
Dan Kovalik
The Return of the Nicaraguan Contras, and the Rise of the Pro-Contra Left
Jeremy Kuzmarov
Exposing the Crimes of the CIAs Fair-Haired Boy, Paul Kagame, and the Rwandan Patriotic Front
Jasmine Aguilera
Lessons From South of the Border
Manuel García, Jr.
A Formula for U.S. Election Outcomes
Sam Pizzigati
Drug Company Execs Make Millions Misleading Cancer Patients. Here’s One Way to Stop Them
Kollibri terre Sonnenblume
Agriculture as Wrong Turn
James McEnteer
And That’s The Way It Is: Essential Journalism Books of 2018
Chris Gilbert
Biplav’s Communist Party of Nepal on the Move: Dispatch by a Far-Flung Bolivarian
Judith Deutsch
Siloed Thinking, Climate, and Disposable People: COP 24 and Our Discontent
Jill Richardson
Republicans Don’t Want Your Vote to Count
John Feffer
‘Get Me Outta Here’: Trump Turns the G20 into the G19
FacebookTwitterGoogle+RedditEmail