Sep 05 2007
Beijing Rhapsody: Wallersteinian Inflation?
Last night I came out a convenience store with a pound and half pastry in hand. I only paid less than $2 for all. That is supposed to be a good thing. But earlier, I learned an upper-middle level apartment—2500 square feet, in a good neighborhood with easy access to Airport Expressway—costs $400,000 in Beijing.
I remember when a comparable houses in Bellevue close to I-405 and I-90 intersection cost $400K. Still, even a piece of bagel cost more than a dollar back then. And what is per capita GDP in Beijing and Bellevue even after PPP?
It is easy to lament the bubble effect. Yet, not all bubbles are the same. As much a Marxist himself, Wallerstein argued in “The Modern World-System” that precious metal brought back by the Conquistadors was NOT the main source of capital that spurred capitalism in Europe—as Marx himself suggested. Instead, it was the widespread inflation on the continent that deprived the peasants of their wealth and channeled them to city centers.
I suspect the same is going on in China today. On the one hand, the peasants don’t own land and the state controls bulk of distribution channel—hence the price and ultimately, rural income. On the other, as far as I know, there is little or no subsidy for fertilizer, petroleum or farming equipments. This unequal inflation drains any agricultural surplus to feed urban middle class which, with excess wealth, can afford a so-so apartment worth 400 times of per capita GDP.
Furthermore, to sustain and to pacify rural population, there is an unholy alliance between the urban consumers and rural laborers: the peasants can live by if city folks consume more.
For example, there are millions of restaurants in big cities. Although per capita retail space in China today may still lag behind that of the U.S., it has increased by leaps and bounds from just a decade ago. What is more, there is so much waste along the retail chain, the same amount of consumables demand a much larger production base.
The net result is degradation of environment and natural resources. There is plenty of evidence to suggest that the government knows exactly what is going on but chooses to keep the status quo in order to stay in power.
A year ago, I wrote a paper about recent Chinese coal mine disasters. As I was putting all the research results together, I suddenly realized how the central government played a shell game in order to conceal its weakness and stay blameless.
Basically, by publicly humiliating local officials or selectively punishing a few while doing nothing really matters, the central government is putting on a show of being caring, honest but being taken advantage of by a few corrupt local officials.
The same thing is happening to the environmental issues, I suspect.