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Europe may not have a current account deficit, but "the West" in its entirety does.  And that means there are limits to how much the West can possibly compensate the Chinese for their loss of trade income, particularly since the only real net value to having a positive current account is to buy things in other countries instead of domestically. Compensation in that case entails giving the Chinese free stuff, and depending on what that stuff is, it might hinder domestic economic development as much as help it, and, because they're not foolish, Chinese authorities know that.  

Also, it makes sense, strategically, for the Chinese to slow their own transition to more costly forms of greener energy as long as they know that others are doing it more quickly and that they can expect lower costs of such transition in the future as technologies and methods become more mature. The problem, of course, is that it creates a prisoner's dilemma situation between the Chinese and already industrialized countries that can jeopardize any progress.

by santiago on Fri Aug 7th, 2009 at 11:58:44 AM EST
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In the case of the West vs. China, the stuff we give them via our current accounts deficit is largely the colonial tribute that we're extracting from the Southern Hemisphere.

From the perspective of The WestTM, that train has sailed. If the dollar crashes, we'll lose the third-world debt service colonial tribute just as surely as if we simply hand it to China.

From the perspective of China, keeping the US$-based system, even beyond its useful life as a trading framework, allows them to kick the Weimar-style currency meltdown in the US a little bit down the road. And, probably more importantly, avoid being seen as the people who pulled the trigger on that meltdown.

As for green technology being expensive... well, that depends on what you mean by expensive. If they get the production licenses gratis from Europe, then the only resource in which high-tech energy sources are more expensive is man-hours. In terms of basically everything else - steel, coal, copper, rubber, etc. - rail is cheaper than car, efficient power plants are cheaper than inefficient, wind is cheaper than coal, solar is cheaper than oil, and so on and so forth and etcetera. And China has a lot of man-hours to go around.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Aug 7th, 2009 at 07:40:49 PM EST
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