New Economic Cops

Stormy at Angry Bear has a good Post on the new Chinese Tax law. There seems to be some animosity to the WTO in it, but there are few places where you will not find such animus; one must remember the WTO was created by Corporations for Corporations, input from elsewhere is window-dressing illusionary. U.S. Trade policy is likewise rooted in Corporate gain, it not being an accident that all leadership positions in the current Administration come from the Corporate structure. Stormy might suffer from the mistaken impression that U.S. Trade policy is directed to keeping Consumer Prices low. It’s form and direction is to maintain high Corporate Profits with low Wages, Resource prices are even brought in by Corporate entities; this means it is not unusual to find high Energy Pricing along with extreme Pricing for raw materials. What can be expected from an engineered Corporate government?

The Chinese Tax law, though, will be an eventual break for American Consumers. China has to someday develop a sound domestic Consumer market. The Chinese Government expects to depressurize Inflation with lower economic growth goals due to the higher taxation on foreign firms. Loss of foreign investment will be engendered, but it will be a slow process as long as Chinese Wages are below industrial norms. Domestic firms will evade Chinese Government regulation, and not pass along their Saved taxes in higher Wages to their Help, unless the Chinese Government institutes a program of Minimum Wages increases to match Western production (this does not mean reaching Western rates, just keeping pace with their increase). Failure of the Chinese Government to accomplish this Goal will actually pressure a much higher rate of domestic inflation; one of the sins of development of Communication technology which can reach the rest of the World.

I feel that the Chinese Government will fail in their attempt to control the growth of the Chinese economy, basically because they are not exerting the effort to control Corruption as the Middle Management level of Business firm Executives. I personally would advise the U.S. Government, the WTO, the EU, the Chinese Government, and NAFTA to negotiate a Financial Pursuit Treaty, where Funds obtained by Criminal Conduct or Corruption can be located, and returned to the Governing entity where the transgressions took place. There is real opposition to such a Treaty from financial institutions and Depositors of such illicit funds, but control of such criminal complicity will only come with the ability to recover ill-gotten gains. Recognize here that the Goal is not the return of the Proceeds in themselves; it is the removal of the Profitability of the criminal behavior to forestall adverse consequences to the various economies. lgl