Jan 06 2009
What if You Throw a Party, and Everyone Left?
In the 1800s, the largest migration in human history occurred here in the United States as people pushed west of the Mississippi to settle on lands that had been stolen, acquired, and conquered. In the past five years, a new record migration was set as millions of Chinese left the farms and headed for the big city to factories. Some sent the money home to their families, others spent it to keep alive in the expensive cities, and still others kept it for themselves.
Then the factories closed down by the thousands, and now, according to Reuters yesterday, 10% of the people are heading back to their home city. As worldwide demand shrinks for the product China produces, the government is like a party host watching its guests leave. They are facing the nasty fact that “idle hands are the devil’s playground.” What do you do with people who are used to making a living for their family and now they are stopped dead?
No one will forget that lone man that stood in front of the tank on Tiananmen Square. Was it yesterday? No, but the world held its breath that moment, waiting to see if the tank would run over the man. The tank, of course stopped, and suddenly there was hope, even if it didn’t last long. There was hope that the Chinese government would be less repressive, perhaps even begin with a whole new government. When they did encourage capitalism, their country began to blossom. Now the party has slowed.
Restless workers in China are bad, bad, bad, and the government knows it. In the past one hundred years, struggling, out of work people have risen up and overthrew their governments many times. And one of those times was in China itself. The Communist Party officials know this. They know that even in times that are not so bad, they can listen hard and hear the rumblings of people who would rather see a different political system.
Investors, who are always carefully watching the country, will be keeping track of how the workers are treated during this economic downturn. Will the Communist Party be supportive of trying to get these folks back to work? Or will there be a dangerous uprising again? Investors arm themselves with information to determine the next step, and in the case of China, bad news will drastically affect FOREX issues, stocks, mutual funds, and gold. Look for it to get hairy in China the longer the workers are unemployed. Instability over there will make investments interesting in the world.
