Different diagnoses, different cures

23 Jul 2014

Has feckless Australia set itself up for a post-boom slump? Two new books see the prospects quite differently

In June 1853, Karl Marx wrote a dispatch for the New York Daily Tribune under the title “Revolution in China and Europe.” Written in the teeth of recent defeats – Marx had described the Parisian uprising in the summer of 1848 as “the greatest revolution that has ever taken place” only to find himself composing its unhappy obituary a year or so later in his Eighteenth Brumaire – this may have seemed, even from the point of view of a professional revolutionist, rather optimistic.

But the spirit of insurrection, extinguished in Europe, had already set the Celestial Empire alight. Marx predicted that the Taiping Rebellion would prompt the nervous Chinese to begin holding on to their cash, with the result being a slackening in demand for items that the British had customarily exported to China – mainly textiles, that is to say, and Indian narcotics (although here the demand was, shall we say, more inelastic). This, combined with a diminished supply of “so indispensable an article as tea,” would lead ineluctably to “the explosion of the long-prepared general crisis” in Europe.

The equivalence between the position Australia now finds itself in and the one Marx forecast for Britain is not exact (all things being equal, we would prefer the Chinese people to keep saving) but it would be interesting to know if Xi Jinping remembers the importance that the father of scientific socialism placed on the state of Chinese domestic conditions for the economic stability of the West. China’s need for steel – or, to be precise, the iron ore and coking coal needed to produce it – has dragged Australia along for a very enjoyable ride. But the next stage of Chinese development will likely see its citizens spending more on consumer goods and a reduced, though still significant, demand for the raw minerals that Australia has been shipping off in bulk…

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