By John F. Di Leo –
We are not in recession.
Frankly, in fact, we are not close to being in recession. While some of the indicators in our economy aren’t as exciting as they were a year ago, this is still a solid period of growth for the United States as a whole.
For political reasons, however, the Left wants the American voter to think that China’s downturn – yes, China’s – is a signal that an American recession is coming… and nothing could be further from the truth.
One key reason why things aren’t as exciting as they were a year ago is that the economy is settling into a new normal, and that’s not a bad thing. In 2017-2018, the economy was enjoying its newfound freedom, as it shook off the many chains with which it had been burdened by eight years of the Obama administration.
2017-2018 was a time of exuberance, as companies began to get used to the fact that the long parade of outlandish government projects like the 2009 ARRA, Obamacare, and Cash-for-Clunkers, was finally at an end. The horrific meddling in the economy, by granting taxpayer-guaranteed billion dollar loans to green energy companies and such for political reasons, was at an end. A parade of new domestic taxes was at an end. And in fact, tax cuts were arriving, finally, to make up for some of that pain, and to kickstart a renewal.
So, that is one reason why we’re still doing well, but some of the numbers aren’t as exciting as they were last year.
But there’s another big reason behind some of these “economist fears,” and this one is global:
Let’s begin by remembering that economics is truly not a zero-sum game, in general… but there are some times when one party does indeed benefit and another party does indeed lose. Not most of the time, but sometimes. China’s success, over the past 30 years or so, is such an example.
China has experienced huge growth for years, and they’re now having a downturn. This spooks some investment advisors because they are so used to China being a huge mover, and they have conditioned themselves to assume that if China isn’t selling, then that means other people aren’t buying.
But while that has often been true, it’s a false assumption this time.
China’s downturn is largely a result of Americans – and others too – finally, wisely, and adamantly, moving their sourcing away from mainland China to other origin countries.
Part of China’s meteoric growth over the past 30 years has been deserved, as it has industrialized and dedicated its population to modern manufacturing.
But much of China’s growth was not fully deserved, and only came because China was willing to fill the void as Western nations retreated from manufacturing, and destructively forced their own manufacturing sectors to move to the most welcoming (though incredibly dangerous) replacement possible: the corrupt, communist, People’s Republic of China.
This has been an error of colossal proportions – made not just by the United States but by most of the West – not only because of China’s notorious disregard for intellectual property rights, human rights abuses and currency manipulation, but for the fact that this concentration of manufacturing in China has obliterated the economic independence of the rest of the world. There are now countless products – from industrial to consumer, from components to finished goods – that are only made in China, and that fact is a recipe for future global enslavement.
What we are seeing today, primarily thanks to Donald Trump‘s tariff war, is a rightsizing of the sourcing process in domestic and international trade. Finally, for the first time in over a generation, buyers are being forced to remember one of the first lessons of procurement: Never to allow yourself to be dependent on a single source. For anything.
Because of this, yes, China must contract somewhat, as the world’s buyers of both components and finished products alike turn to the other 200 countries of the world for their sourcing.
Note: As much as each of the rest of us would love for lots of that new manufacturing to take place in our own countries, it doesn’t actually have to… as long as it takes place outside of China. If we make more here, and South Korea and Japan make more there, and Great Britain and Europe make more there, and Canada and Latin America make more there… this will right-size the world economy so that we are all no more so terribly dependent on one single country.
Even if China were a good, honest, honorable, free country, it still wouldn’t be good for the rest of the world to be totally dependent on it for so many products.
So, yes, China is suffering a bit. Finally. And yes, that change scares some economists… but their fears, in this case, are unwarranted, because they aren’t seeing the chess pieces moving behind the scenes… the engineering and design teams, the retail and wholesale purchasing departments, negotiating new contracts to buy goods from an array of other countries, from the first world to the third.
In short, while it is appropriate to be bearish on China today, the corollary is that it is time to be bullish on America, as well as on all the other countries benefiting from this correction – all the potential replacement sources that forward-thinking purchasing agents worldwide are, at long last, turning to for their future purchasing.
Copyright 2019 John F. Di Leo
John F. Di Leo is a Chicagoland-based international trade professional, writer and actor. His columns are regularly found in Illinois Review.
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