this post was submitted on 30 Nov 2025
138 points (98.6% liked)
Chapotraphouse
14187 readers
632 users here now
Banned? DM Wmill to appeal.
No anti-nautilism posts. See: Eco-fascism Primer
Slop posts go in c/slop. Don't post low-hanging fruit here.
founded 4 years ago
MODERATORS
you are viewing a single comment's thread
view the rest of the comments
view the rest of the comments
The question is where is the money going to come from?
To raise wages, either the firms (private sector/capitalists) run into deficit, the foreign sector does, or the central/local governments do so.
Let’s go through them one by one:
Since the capitalists are unlikely to want to make a loss, and they aren’t exactly in the shape to do so right now because profit margin has been squeezed to razor thin due to intensive competition (involution), the wage growth isn’t going to come from there. You can see the government has started intervening with the anti-involution campaign to raise the firm’s profits so they have the money to even pay their workers. Worse, the deflation (lack of domestic consumption) is making their corporate debt even more expensive to service. The only way to offset the loss is by exporting even harder (which is why you see Chinese exporting firms are dumping cheap goods into other countries under Trump’s tariffs).
The local governments are also in a debt bubble right now. Years of over-reliance on land revenue has caused a reckless over-investment in real estate. The property prices are now plunging (land revenue going down), and with slowing consumption/export (value added tax revenue going down), and with an outsized hidden and visible debt that need to be serviced, the local governments have little capacity to spend do so.
Which brings us to the central government, the only governmental body that has the power of money creation. However, since China wants to adhere to the IMF rule of balancing the budget to keep its deficit spending low, it has to either accumulate foreign currencies (through export, or through attracting foreign investments), or borrow through bond issuance (banks collateralizing their assets to the government).
As you can see, the only realistic way to raise wages is for the central government to run deficit, but they will not be able to meet the 3-4% of GDP spending as recommended by IMF, and they will be scolded by the IMF.
Yes, because the developing countries have listened to the IMF to convert their economies into export-oriented ones.
After the collapse of the Bretton Woods, the US empire found the “cheat code” by running permanent trade deficit (super-imperialism) to absorb the surplus goods from the rest of the world. This causes many governments, wanting to earn the US dollars, to become over-invested in export manufacturing capacities. As a result, the oversupply of productive capacity allowed wealthy Western countries with strong currencies to enjoy cheap goods from the Global South.
Since they have over-invested in this trade surplus strategy, the export economy became the primary driver of domestic growth. Whenever they try to raise income, their export goods become uncompetitive. This keeps the developing countries in an artificial “trap” as long as they want to rely on the export industries.
But here’s the problem: how do you transition out of the export economy? For every investment, there is always an opportunity cost. If you spend 10 years to get good at something, and suddenly the skill you’re good at is no longer needed, you find yourself difficult to compete with others because you have not invested in the other skills. This may not be a problem if you’re alone and don’t need much to survive, but what if you have to pay for the medical treatment of your aging parents? Suddenly, the decision is a much harder one to choose.
Every country has to decide how to strategically invest in their economy, and the cost of transition, even if it is overall beneficial to their own economy, will always be a policy choice with some hard decisions to make. If you give up something you’re good at, you might get overtaken by your competitors and suddenly you find yourself losing that market, and you’re screwed if that transition fails.
This is why only countries like China with very strong economy can make the transition easier than most, and they will and should have an outsized responsibility for the rest of the Global South countries.
That still sounds like a non-issue, can the IMF even do anything to China?
The issue I see isn't the IMF, it's the MIC. Without the West relying on China for slop the economic disincentives for war drastically decrease, bullshit like """defending Taiwan""" makes a lot more sense when China stops being the West's toy factory.
That was my question! Is the transition to becoming a high-income country even possible without being welcomed into the imperial core or being one of the core’s favored semi-peripheral compradores? It seems like the middle income "trap" is actually predetermined by the limits of non-imperialist growth, that it might not be possible to reach high-income without superprofits under the current world system. Which would actually imply, to me, that the only way out is to change the world system itself.
So, I guess I agree with you from a different angle. China can't just print money to eliminate deflation because, if it did, its exports would become less competitive and then the imperialist death machine would turn its sights on China to punish them for daring to not churn out the endless slop the West needs to sustain its high standards of living. It's a hostage situation.
They can if they abandon the neoliberal ideology, as I have been saying.
It is a belief system. If everyone in your neighborhood believes that you can only use tap water for no more than 5 liters per day, or else the pipe is going to burst and flood your entire house and damage your property, it’s going to dramatically alter how you live your life, and everyone else in the neighborhood. You will learn how to drink less, wash less, save water whenever necessary, and you will curb certain activities that might make you too thirsty, or need more washing.
And this will create a trading system where people who are good at saving water will sell or lend the surplus water to their neighbors who need more water for the day, in exchange for other treats. It will create an economy of its own even though nobody knows for sure whether the pipes will burst or not.
The point is that until somebody actually tried running the tap water beyond the maximum limit, it will continue to be a belief that dictates everyone’s life. And nobody dares to test it, because they are afraid that the pipes will burst, their homes will flood, and their neighbors will kill them for irreparably damage the life support system of the community.
Sure, and I'm saying it's a non-issue because beliefs aren't real.
That said, there is some material basis to these beliefs. If somebody ran the tap water beyond the maximum limit the empire's water police would come and kill their whole family. If China abandoned neoliberal ideology the US would start WW3.
Trump literally wanted to decouple from China. It has been China that, through using various of its powerful cards like rare earth export restrictions, that brought the US back into the “marriage”.
China should just take up on Trump’s offer and start importing from the US lol. Let the Americans be the world factory’s workers for once.
Sure, but that demonstrates my point. Trump showed that the US can't decouple from China because it's too reliant on Chinese exports, as long as China is the world's factory it has tremendous leverage that protects it from direct US aggression.
Turning the US into an exporter could turn the contradiction on its head and protect them from US aggression, because then the US would be reliant on Chinese consumers, but I don't see how the US becomes the world's factory without central planning. Currently the US is throwing all of its resources into the AI furnace and it doesn't look like productive economic activity will resume for a while.
My point is that Trump is the one who wants to decouple, not China.
Trump is the one saying “the Great American Nation has run up 100 gallons of tap water for y’all so you get to save your water. Now I’m asking you to open up your tap water and give us back some of the water we gave you”.
I agree that Trump won’t be able to materialize his MAGA plan to re-industrialize America. However, the fact that that’s what Trump wants means that he won’t start a war with China for literally giving him what he demanded, will he?
I'm very aware that Trump is the only one that wants to decouple and not China. Trump thinks paying for stuff is the same as being ripped off, so trade deficits are actually somehow stealing from the US economy. His decoupling strategy wasn't even total, he granted so many exceptions that China continues to be a strong trading partner with the US. Deeply unserious.
That's also why there won't be war, because China is still too important of a trading partner despite exports to the US declining. China also is important for the rest of the imperial core and semi-periphery, even as Trump tries to pressure US-allies and vassals to cut off trade (to very limited success) and this further protects China from US aggression.
So with all that in mind, I can kind of see the logic of maintaining the export-based economy. As long as the imperial core is dependent on China's exports they can't attack without causing their own economies to collapse. It's the only material explanation that makes sense to me, "China is just too ideologically committed to neoliberalism to consider raising wages" isn't a satisfying explanation.
There is no need to wonder, I already posted it before here:
Wang Jian (王建) from China Society of Macroeconomic Research, who proposed the Great External Circulation strategy back in 1987 that was officially adopted by the central government, talked about this in an interview in the early 2000s:
In September 2020, months after China proposed the Dual Circulation Strategy (export balanced by domestic consumption), Wang Jian reasserted the importance of dollar hegemony in an interview:
Once you understand this, you will understand that China cannot and will not give up the dollar system, especially its hegemonic status. The status quo greatly benefited the Chinese economy and there is no reason to give up even when the US itself is threatening to end the arrangement, because China still has plenty of cards to play (e.g. rare earth export). The US will find itself unable to decouple from China.
This is also why when the US confiscation of Russia’s $300 billion foreign reserve at the start of the Russia-Ukraine war, and the Fed rate hike that caused dollar liquidity crisis in many Global South countries and spurred strong interest in many to leave the dollar regime, China has been the one that was and still is the most reluctant to abandon the US dollar. If China doesn’t want to, then nobody else can do anything about it. The Biden administration correctly gambled that China would not threaten the dollar hegemony during the rate hike in 2022.
It's hard to reconcile this with the BRICS trying to set up their own currency alternative to dollars. That doesn't look like China "cannnot and will not give up on the dollar system" it looks like they're trying to build an off-ramp before it inevitably collapses.
And where is the plan of BRICS setting up their own currency?
They have been trying for the last three years, and learned the hard way that a confederated currency cannot possibly work among the different countries. If anything, it will only lead to an internal fracturing and the result is the dollar becoming even more hegemonic. This was the key lesson from Russia’s Kazan proposal on dedollarization at the BRICS summit in 2024.
The only way out is to use a federated currency backed by a strong economy. Euro and yen were two good, internationalized currencies that have the potential to challenge the dollar, but the US already pre-empted the dominance of the euro by destroying the European economy through the Ukraine war. The Japanese economy isn’t growing fast enough and isn’t up to the task anymore.
This brings us to yuan, which is backed by China’s strong economy, but since China refuses to give up its net exporter status, it cannot become a reserve currency that others can use for saving. China seems content with reaping the benefits of the dollar hegemony, so it’s a no go on that front either.