08 May, 2010

China rules through our Cargo Cult addiction

Melbourne Herald Sun, 3rd January 2010

On New Year 2008 I described the state of world business as “Cargo Cult Economics”. Remember those natives of war-time New Guinea who believed that wealth was delivered by the gods? The planes would always land, bringing them food, clothing, machines - it was magic, they came out of thin air.

But once the war was over, the goods stopped coming. So the natives made gifts to appease the gods. They built aeroplanes out of straw and copra, radios out of coconuts, control towers out of bamboo poles. They believed that the cargo would always come.

So in our cities and Wall Street we believed that income would continue to grow, share prices would never fall, houses were solid investments.

By New Year 2009 the economic tsunami had demonstrated the flimsiness of our beliefs. Superannuation was supposed to be rock solid but it dissolved like sand. Banks crashed. Share prices crumbled, much of the world went into recession. At last we could see through all these financial facades and concentrate on building something real.

But wait a minute - here’s New Year 2010 and what do we see? All those coconut and banana structures are being rebuilt. Everybody is triumphant at having successfully saved our sacred cargo cult. The control towers are still built of bamboo and straw, the radar is a spinning gourd shell.

But the natives are living well. We have ample supplies of any goods we fancy. Beautifully made and very cheap, kindly provided by the hard working gods from Beijing.

These generous souls also allow us to continue our extravagant lifestyle, by giving us money whenever we need it. Currently America owes China about a trillion dollars for government securities alone. Whenever Uncle Sam needs a buck, Uncle Hu Jintao delivers.

Then last month we saw vividly where it was leading. China decided it did not want to be restricted by a Copenhagen treaty. So it told Obama, Brown, Sarkozy, Merkel, Rudd and the rest of our leaders to shut up and sign what it dictated. The world was going to play by China’s rules or not at all. After some vain protests, our leaders meekly signed the filleted accord.

China learned the lessons of world diplomacy from the best teachers. The British Empire fought the Opium Wars between 1839 and 1860 so they could feed the Chinese people constant supplies of opium. We knew an addicted people was in our power.

Well now the West are the addicts. Dependent on China for their tellies, iPods, clothing and - soon - cars. We’re also addicted to money. Where do you think all these billions spent on financial bail-out schemes will come from, ultimately? More loans from Uncle Hu?

Those of us in marketing are just the front-end of the process. We sell the products, wherever they were made. We build the straw and bamboo store fronts, and stand there handing out the toys and gadgets made afar. We don’t create the goods, our tools are smoke and mirrors.

The world has very little time to get real. We’ll never cure the addiction so at least let’s make more of the dope ourselves. Like adding value to the minerals we’re feeding into the furnaces of Asia’s industry.

Trouble is, our politicians have seen what happens to those who try to expose the cargo cult or preach reality. They are ripped apart by a raging mob. (Here we call this an election.)

Whatever persuasion you are, it’s time to stop berating our politicians and start encouraging them to be brave. It’s going to take some tough decisions if we’re to break the addiction of cargo cult economics. Happy New Year.


No comments: