Red Star Rising...But Not Over the Thames?

Ah, my old comrade Martin Jacques is back on his favourite subject today I see: China. & a good deal of sense he makes on the subject even if, let's be fair about this, there is a lot of truth in the accusation that he has something of a 'tin ear' about the regime's various inadequacies and human rights abuses. Nor does he often mention the periodic simmering unrest, in the manner Blood and Treasure so usefully does. Jacques' focus is always on the sheer world changing scale and speed of the economic rise of China.

Today, he's on about how the Americans will have to concede a degree of control over the IMF - and more widely, over any international settlement designed to be the Bretton Woods II - to the Chinese. This seems broadly inevitable to me - eventually. But I never discount the ability of power politics or a brute refusal to accept economic facts to get in the way of reality. Jacques argues that the alternative is trade war and Depression. Well, the Chinese do hold an awful to of their wealth in American assets, after all...

& it looks as though they plan to continue to do so. The FT says,

"Luo Ping, a director-general at the China Banking Regulatory Commission, said after a speech in New York that China would continue to buy Treasuries in spite of its misgivings about US finances.

Mr Luo, speaking at the Global Association of Risk Management’s 10th Annual Risk Management Convention, said: “Except for US Treasuries, what can you hold?” he asked. “Gold? You don’t hold Japanese government bonds or UK bonds. US Treasuries are the safe haven. For everyone, including China, it is the only option.”

He sounds a lot less keen on propping up the UK, doesn't he? & if you accept the general line that the City of London has very largely provided a 'semi-offshore' playground for Wall St then perhaps there will be less American money around to restore the British financial services industries to their, er, 'former glory' after this recession. All of which tends to point to a switch in the balance of activities which make up our national economy as we work through this recession.

Bear with me on this, as it could just be a failure of my imagination, but I have real difficulty with all this post-industrial economic development stuff. Yes, I can accept that English, as a language, gives us certain competitive advantages in the global market and that this can be traded in the form of widely accepted cultural products, be they films or anything else. I can even, just about, understand the idea of culture led regeneration, even if part of me thinks it boils down to little more than an extended riff on the theme of "Wouldn't It be Nice if Everywhere Was A Bit Like Hoxton?"

What I can't quite grasp, no matter how I try, is the idea that the relative income and wealth generated by such activities should indefinitely remain so much higher than that generated by, say, making things like clothing or electronic goods. Why should we get paid more for inessentials than a Chinese, Brazilian, Korean or Indian worker who makes necessary stuff? I can see that for as long as the City of London was a primary global financial centre the money men could, in effect, impose their own terms of trade. But if that declines and we're dependent on - I dunno, lets say software, films and, ahem, premier league highlights - I can't see why we should continue to be able to buy as many white goods per copy of Grand Theft Auto or Ronaldo goal.

Plus, of course, it is becoming increasingly easy to pirate (ignore copyright of) films, games and music, and no-one has a convincing argument on how to deal with this as Will points out .

OK that's me revealed as a economic ignoramus. But I would like someone to explain this to me.