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Old 09-08-2012, 12:04 AM   #21
Recycles dryer sheets
Join Date: Dec 2011
Posts: 388
Originally Posted by Cut-Throat View Post
The Chinese government is worried about this contracting their economy, they are considering a National Pension Program to get the money flowing. If you don't have the masses of people spending money, the capitalistic system doesn't work at all.

Having all the money in the hands of a few, does not move markets. The rich can only eat so many steaks, drive only 1 luxury car at a time and only sleep in 1 house a night.
The Chinese govt is apparently committed to adopting a social safety net, but that's not because "capitalism" necessarily needs to be driven by consumer spending. It's because the current Chinese mercantilism is vulnerable to recessions among their customers, such as in 2008. It remains to be seen if the Chinese will make good on their promise. However, the current mercantilist system has been working extremely well for the past thirty years. It depends on low cost capital from the very high precautionary savings (I have seen 30% to 48% estimates) of Chinese households for which they receive negative real rates of interest from the state-owned banks. So the high savings have not prevented growth in the economy to date because their foreign markets supply enough customers. Similarly, high levels of inequality in China are not so detrimental as they are in the US because manufacturing does not depend on domestic consumption to the same degree.

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