The Dark Side Of Dubia

This is an epic article, well worth the read…

http://www.independent.co.uk/opinion/commentators/johann-hari/the-dark-side-of-dubai-1664368.html

Has Russia got it’s groove back?

Rising oil prices, soaring shares - and socialites out in force. Adrian Blomfield in Moscow studies the signs of recovery

http://www.telegraph.co.uk/news/5024779/Has-Russia-got-its-groove-back.html

Analysis by Spiralman

Russia still has a lot further to fall, but it may end up somewhat better off than its European neighbors who have loads of net debt.  (Russian companies have lots of debt, but the Russian government surplus is even bigger and slightly more than cancels it out; so the Russian government will probably take back the companies that were privatized during the Yeltsin era.

However……
1)  if world economic activity slows as much as I anticipate – somewhere between –25% and –50% compared to peak activity – then oil and gas consumption will fall significantly as well.
2)  since almost every G20 country is aggressively pursuing anti-hydrocarbon policies, it seems very likely that oil/gas consumption per unit of GDP will fall by at last 30% (as it did during the late 70’s-early 80’s oil spike/crash), meaning that any recovery will use disproportionately less oil per % of growth.
3) since solar best practice technology is already as cheap as King CONG, and will be on average as as cheap KONG by 2012, and
4) since batteries for large scale energy storage will be online by then
5) since high voltage direct current (HVDC) electric grids are being rolled out
6) since hybrid vehicles are dramatically improving and reducing their prices
7) since even non-hybrid cars, like Tata’s $2,000 Nano, are radically more energy efficient

Any global economic recovery will be starting from a much reduced global oil consumption base similar to the 1970’s (ie ~50% lower than the peak of oil consumption in Summer 2008) and primarily be based on a new energy infrastructure…….

Countries dependent upon their energy exports for their economies are likely to be in a world of pain.

Basically, all these “energy independence” moves (cloaked in Green terms regarding the environment to get leftie buy-in) amounts to an Economic World War waged by energy importing countries against energy exporting countries.

It does not take a super genius to recognize that this Hydrocarbon Import Boycott, ahem Energy Independence, Fighting Climate Change, is likely to result in very real wars in response.

When oil was very cheap in the 1990’s, the US saw Al Qaeda’s major upsurge in terrorism

• 1993 WTC Part 1; 1998 Bombings of US embassies in East African; 2000 USS Cole; 2001 WTC Part 2 

When oil became expensive, the terror attacks subsided.

Not really a surprise.  When folks have enough money to go around, people are less pissed off.

Reality seems to contradict of the fantasies of both the neocons and liberals like Thomas Friedman who think that strangling MidEast oil production through ‘energy independence’ will result in less conflict and modernization/reform.

If anything the high oil prices since 911 enabled the meteroic rise of Dubai and major expansion of secondary and college education of women in Saudi Arabia and the rest of the GCC.  In fact, Saudi Arabia’s budget swelled dramatically as a result of their educational reforms, and now they will face challenges will lower oil prices.

Moscow’s rhetoric has become much more bellicose since US-client Georgia provoked them, Bush II announced the missile shield on their border, and then oil prices started to fall.

The Middle Eastern countries are very well positioned, possibly the best positioned in the world with their enormous cloudless deserts and proximity to Europe, Africa and Asia, to transition to being the Saudi Arabia of a Eurasian Solar Economy.

Russia is not.

Decades of humiliation and suffering after the collapse of the USSR and the failure of Bush I, Clinton I, Bush II, and Obama to facilitate renovation investment of the Russian economy, the continuing attempts at geopolitical encirclement through expanding NATO to the Russian borders, the missile shield, and now the Energy Boycott, could easily drive them to launch desperate, rapid surprise attacks to regain their regional sphere of influence, and reactivate support throughout the Global South.

Declining importance of metals since WW2 

For those of you who have been following the - “Why Global Warming(climate change) doesn’t matter anymore thread, I wanted to take the time to create a seperate post specifically addressing the rarity of Copper point that Rob brought up in the comments section where our exchange has been taking place

There are . so far in that discussion.

Spiralman writes:

By the way, I don’t think Rob read carefully through the article he cited for copper and metals through to their conclusions, including especially their caveats.
[highlights mine]

http://www.arch.mcgill.ca/prof/sijpkes/arch374/winter2002/materials/chapter1.html

Conclusions

The fraction of the stock of recoverable resources in the litho-sphere already placed in use or in wastes from which it will probably never be recovered is currently ~26% for copper and 19% for zinc. We lack data, but suggest that similar proportions apply for the other industrially important, geochemically scarce metals. Because the remaining stocks of ore are large compared with current needs, prices of these metals do not yet reflect scarcity value. Additionally, improved extraction techniques have kept the average real prices of these metals nearly steady for over 50 years (1). There is no immediate concern about the capacity of mineral resources to supply requirements for the geochemically scarce metals. Limitations would arise only from restrictions on international trade or legislative restrictions related to the environmental consequences of mining, milling, and smelting lower-grade ores (1–5). Nonetheless, over time the widespread adoption of certain new technologies can be expected to encounter natural limitations in cases for which a particular material provides a unique service. We identify platinum as the most likely metal to face this limitation because of its unique catalytic properties and its desirability for such applications as alloys for high-temperature service.

Data on the stock of copper used in the U.S. over the past century cast doubt on the idea that demand for metals eventually decreases as incomes rise. Although the nation’s GDP has increased much faster than the copper stock-in-use, the rate of increase of the per-capita copper stock remains undiminished. We find that the per-capita copper committed to some services has decreased in the 20th century but that this decrease is overbalanced by the provision of new services. The demand for new services is deeply embedded in a western popular and political culture that sees growth and development as absolutes, quickly converting services originating as luxuries or entertainments for the wealthy into necessities for everyone. Scenarios depicting future use of copper resources anticipate worldwide spread of the metal services enjoyed by the postindustrial nations. These scenarios need to explicitly address the cultural factors that continue to increase the per-capita use of copper in wealthy societies and the use of alternative materials to provide copper services.

Concern about the extent of mineral resources arises when the stock of metal needed to provide the services enjoyed by the highly developed nations is compared with that needed to provide comparable services with existing technology to a large part of the world’s population. Our stock data demonstrate that current technologies would require the entire copper and zinc ore resource in the lithosphere and perhaps that of platinum as well. Even a lower level of services could not be sustained worldwide because a continuing supply of new metal is needed to make up for inevitable losses in the recycling of the metal stock-in-use. [This is no doubt where Rob derives his main conclusions, but let’s read further…….] Substitution has the potential to ameliorate this situation, but one should not automatically assume that technology will produce a satisfactory substitute for every service at an affordable price and precisely when needed.

The topic of resource constraints inevitably recalls the classic bet between Julian Simon and Paul Ehrlich in 1980, in which Ehrlich bet that the prices of five metals would increase by 1990 (36). Instead, the grouped prices fell, and Ehrlich paid Simon $576.07 to settle the wager. Unlike Ehrlich, we do not imply that metal price is a satisfactory measure of the remaining amount of a resource. Rather, we merely point out the present state of affairs: that anthropogenic and lithospheric stocks of at least some metals are becoming equivalent in magnitude, that world-wide demand continues to increase, and that the virgin stocks of several metals appear inadequate to sustain the modern ‘‘developed world’’ quality of life for all Earth’s peoples under contemporary technology. These facts compel us to ask two key questions: Do we really envision a developed world quality of life for all of the people of the planet? and If so, are we willing to encourage the transformational technologies that will be required to make that vision a reality?

Notwithstanding the answers to the key questions posed above, it is clear that, as the proportion of the stock of ore remaining in the lithosphere diminishes relative to the stock-in-use and the stock dissipated, scarcity value will indeed eventually raise the real prices of the geochemically scarce metals and will stimulate intensive recycling well above today’s levels (37). We anticipate that price increases are unlikely to trigger a lower rate of increase in metal services or sudden economic disruption. More likely, we will see a new engineering emphasis on using these metals more efficiently and increased use of abundant alternative materials, principally iron and its alloys, aluminum, and magnesium. We anticipate a gradual transition to reliance on these alternative materials, with the use of the scarce metals increasingly restricted to those services most difficult to obtain by material substitution.

[so, let’s make that point more sharply than the article.

Even if every person on the planet expected to be alive in 2050, lived like an American we would not be anywhere near any natural limits for industrial services provided by Earth’s raw materials because any that are rare will be substituted by more abundant materials.  

The article should have more fully addressed the major new technological developments that are likely to lead to widespread replacement of copper, so people could have a feel for how substitution takes place:

First, let’s recapitulate their nice list of copper’s main usages:

the following four principal categories of copper use can be defined:

1. Building and construction comprises the copper contained in structures and is subdivided into three subcategories: interior wiring; plumbing, heating, and architectural uses; and air conditioning and commercial refrigeration.

2. Infrastructure, which is not subdivided and comprises copper in power-generating utilities, telecommunications, lighting, and business electronics.

3. Domestic and industrial equipment comprises in-plant equipment, industrial valves and fittings, nonelectrical instruments, appliances, consumer electronics, military and commercial ordnance, coinage, and off-highway vehicles. It is subdivided into domestic and industrial categories.

4. Transport includes two subcategories, motor vehicles (auto-mobile, trucks and buses), and other transportation (railroad, marine, aircraft, and aerospace equipment).

Table 1. Components of copper stock-in-use in the U.S. in 1999

In-use stock,
Sector or subsector             kg per capita
——————————————————————-
Infrastructure                    95
Building and construction         76
Plumbing                           32
Wiring                             28
Air conditioning and refrigeration 16
Industrial and Domestic Equipment 39
Industrial                         26
Domestic                           13
Transportation                    28
Motor vehicles                     16
Railway, ships, aircraft           12
Total                             238

As (many of you) are aware from my periodic sendings of articles, there is a major revolution underway in high temperature superconductivity (HTSC).  It already has led to early adopter, experimental rollouts of HTSC power cabling in NY for power substation connectivity.  Such cables carry over 150X the amount of current per pound and volume than standard copper cables.  
This HTSC tech is still a copper-based technology (albeit using 150X less copper material) and which only raise operating temps to liquid nitrogen.
Developments in the last few years are pushing that up to the much warmer temperature of dry ice, ie CO2.  

Advances in 2008 and 2009 have found completely new classes of superconducting materials:

Silicon-hydrogen
http://www.nextenergynews.com/news1/next-energy-news3.19a.html

Iron and arsenic Feb. 24, 2009
http://www.sciencedaily.com/releases/2009/02/090216092835.htm

Almost every single usage mentioned above, from the article that Rob cited, aside from plumbing and valves, are ultimately related to the usage of copper for conducting of electricity.  Even the motor usages (which covers air conditioning, refrigeration, and vehicles) are principally for the usage of copper as windings around motors and transformers.

The less directly related usages of lighting and telecommunications are already being rapidly superceded by LED lighting and fiber optics.

Why Global Warming Doesn’t Matter Anymore

Exaggerations and Needless Despair:

Why The Global Warming Hysteria No

Longer Makes Sense…

A sharp decline in China’s trade surplus in February likely signals a shift in the nation’s financial balance with the rest of the world, and may reduce the speed with which it piles up foreign-currency assets such as U.S. Treasury bonds.

China’s merchandise exports in February plunged 25.7% from a year earlier, the nation’s customs agency said. That’s one of the biggest drops on record, and extends the 17.5% fall in January for a fourth straight monthly decline.
………

http://online.wsj.com/article/SB123674128193891921.html?mod=googlenews_wsj

China Electricity Consumption Down 4.3% Year Over Year
http://news.alibaba.com/article/detail/energy/100064573-1-update-1-china-february-power-output.html

Wondering if Crude Could Fall Even More
http://www.nytimes.com/2009/03/10/business/10oil.html?ref=business

…….
In China, for example, oil consumption, which had been growing at more than 10 percent a year, fell by 4 percent in December, according to the International Energy Agency. This year, the agency expects “paltry” growth of 0.7 percent in Chinese oil demand.

In the United States last year, demand plummeted 6 percent, the steepest decline in nearly three decades. With Americans traveling less because of the bad economy, the demand for jet fuel fell 11 percent in January, compared with a year earlier.
…….

[Contrast this reality of collapsing global GDP, collapsing exports, collapsing energy consumption with the increasingly hysterical parade of studies the last two weeks concerning Climate Change and its impacts.  From proclaiming that carbon reductions aren’t likely to making linear extrapolations about melting Arctic glaciers to noting that certain sea microorganisms have had their shells grow thinner from carbon-acidified waters, they have assumed that all of the same dynamics that were going on during Peak Credit will continue to go on forever.

Climate Change furor is the equivalent of the notion that “real estate can only go up.”
While these meteorological geniuses and correlative ecology simulation circle jerkers continue to manufacture terrifying scenarios based on a hockey stick which clearly broke sometime this Summer, it is apparent to anyone who can calmly read the business news, that CO2 production will be in sharp retreat completely independently of environmental policies.]

Carbon cuts ‘only give 50/50 chance of saving planet’
http://www.independent.co.uk/environment/climate-change/carbon-cuts-only-give-5050-chance-of-saving-planet-1640154.html

[Since Profits and Wages really do matter, and that therefore Asset prices are ridiculously high even with the existing declines of the stock and housing markets, it is reasonable to assume that the wealth will continue to be destroyed, that mass layoffs will continue to accelerate, that consumer and business spending will continue to decline, and that therefore energy consumption via CONG will decline precipitously.

We have the historical precedent of the 1979-1983 oil spike/crash from which to learn.
That one led to a decline of 13% of energy consumption, and post-spike/crash the pace of energy consumption growth was dramatically slower than before, and this dynamic lasted for almost 20 years.
We also have the precedent of the 1930’s Depression when industrial activity fell by 50% in many sectors.

Finally, we also now have reached the threshold of the Solar Age, where solar power is price competitive with retail grid electricity at 10c/kWh.

Combining these observations, it becomes clear that human-caused CO2 emissions are falling dramatically and immediately, probably at least by 13%, and more likely somewhere towards 50%, by the time we reach the bottom of this crisis, and when the recovery begins, it will be based on solar and wind, not CONG.

So returning to the histrionic Climate Change article above, let’s laugh at their already antiquated observations and threats of Armageddon]

……..
At the moment, global emissions are thought to be rising at nearly 3 per cent a year – so turning that into a 3 per cent annual cut would be a gigantic slashing of what the earth’s factories and motor vehicles are pumping into the atmosphere. There is as yet nothing remotely like that on the table for potential agreement in Copenhagen, and if a deal of this ambition were to be done, it would be regarded as a triumph.
……..
So if emissions do not peak and start to decline until 2025, we can expect a 2.6C rise by 2100, and if the decline only begins in 2035, the figure is likely to be 3.1C – even with 3 per cent annual cuts.

[While they fret over whether there will be 3% cuts, even at this early stage of the crisis we’re already looking at drops of at least 6%, and I am positive that by the end of this year as the global layoffs mount, energy consumption will have dropped between 10% - 15%, and it will continue to decline throughout 2010 and 2011 as a result of the end of Peak Credit and the debt deflation deleveraging as well as the relentless march of renewable energy and energy efficient devices.  I predict that CO2 emissions will drop by at least 25% and possibly 50% over the next 4 or 5 years, rendering both of the above Climate Neurosis articles Silly and Arrogant Beyond Imagination.]

Increased Number Think Global Warming Is “Exaggerated”
Most believe global warming is happening, but urgency has stalled
http://www.gallup.com/poll/116590/Increased-Number-Think-Global-Warming-Exaggerated.aspx

By SpiralMan

Obamanomics: Is this real change?

B.C. HOUSING HEADS DOWNHILL

Boom times are over for the province following explosive growth in demand, prices

DAVID EBNER AND LORI MCLEOD

October 30, 2008

VANCOUVER and TORONTO — Canada’s most expensive housing market is hitting a significant slump, with home sales numbers falling and prices declining, the British Columbia Real Estate Association said yesterday.

http://www.theglobeandmail.com/servlet/story/LAC.20081030.RBCHOUSING30/TPStory/?query=B.C.+Housing+heads+downhill

Construction Grinds to a Halt in Vancouver Canada

http://globaleconomicanalysis.blogspot.com/2008/10/construction-grinds-to-halt-in.html

I remain amazed at how many people in Canada watched the bubble bust in city after city after city in the US, yet remain steadfast “It’s different in Vancouver.”
…….
US Comparison

In California, the C.A.R. is reporting Median Home Prices Down 47% From Peak and the Case-Shiller 10-City Composite is down 22% from the peak. Given that the bubble in Vancouver is at least as big as the ones in Phoenix, Las Vegas, Miami, or San Diego one should expect a correction at least as big.

Those cities are down a minimum of 32.8% from the peak and still falling. The bottom is likely another 4 years away given we are just now entering the teeth of a consumer led recession with unemployment poised to soar from 6.1% to 8% or higher in 2009 and higher still in 2010.

The US housing bubble burst in the summer of 2005 and we are headed into the 4th year of slump with no end in sight. Fundamentally, there is every reason for Vancouver to follow suit. Condo prices in Vancouver are going to crash just as they did in Florida, Nevada, and California. Home prices will fare better than condos but home prices too will crash.

Bretton Woods 2: R.I.P - More Retailers Liquidating ~ Financial Crisis Rocks China: Factories Go Kaput, Credit Goes Plastic.

Cortesy of SpiralMan

http://www.nakedcapitalism.com/2008/10/bretton-woods-2-rip.html

[Lots of really good stuff in here from Brad Setser and Yves Smith
Interesting to see that in some respects many Americans and Chinese [and other countries that play the BW2 dollar recycling role] are in a similar situation, they each are losing their life savings.  

And if I understand all this correctly,
they both need the value of the Chinese currency rise against the USD,
but that can’t happen unless China quits loaning money to America by buying US Treasuries,
which then means…………….
No more bailouts……….
which could mean either ……
………SPLAT for America…….
or
China [Japan, Korea, Arab, Russians] is/are allowed to buy up American companies and homes in the Great American Firesale.

Otherwise China, etal will swallow their US Treasury bill losses and the impact that will have in crashing the dollar and invest locally or regionally…….
Which brings us back to SPLAT…………..

And it has to be said that even the Great American Firesale to Foreigners will be insufficient to prevent some SPLAT, but it seems the best scenario Americans could hope for.]

……
to put it more succinctly, Bretton Woods 2, as it evolved, hinged both on the willingness of foreign central banks to take the currency risk associated with lending to the US at low rates in dollars despite the United States large current account deficit AND the willingness of private financial intermediaries to take the credit risk associated with lending at low rates to highly-indebted US households.

The second leg of the chain collapsed before the first. And it collapse looks set to deliver a nasty shock to everyone – including the countries that supply the US with vendor financing.

In some sense, the vendor finance analogy never really worked. The “vendor” financers didn’t actually lend directly to the US households that were buying their goods. The big emerging market central banks were willing to take on currency risk associated with lending to the US but not the credit risk associated with lending to US households.

That didn’t matter so long as US financial institutions were willing to take the credit risk.

But now US financial institutions are neither willing nor able to take on the risk of lending even more to US households….

In retrospect, the fact that (reported) bank profits didn’t fall as the Fed raised rates should have been a clue that risks were building. An inverted yield curve isn’t good for institutions that borrow short and lend long – but it initially didn’t seem to have an impact on financial sector profitability. It is now clear how the financial sector kept profits up: it took on more risk…

Many have highlighted the role that loose US monetary policy played in supporting the housing boom. And there is no doubt much truth in this story: pushing rates down to help “clean” up the bursting of the .com bubble and holding them down for several years certainly helped induce the rise in home prices and the housing boom. At the same time, this story leaves out what to me is a crucial part of the story: the housing boom didn’t end when the Fed reversed course and raised long-term rates. The really risky loans were made in late 2005, 2006 and early 2007 – after policy rates had increased.

I hope that the process of adjustment now underway isn’t as sharp as I fear. The US economy gradually can shift from producing MBS for sale to US investors flush with cash from the sale of safe securities to China and Saudi Arabia to producing goods and services for export – but it cannot shift from churning out complex debt securities to producing goods and services overnight. Indeed, in a slowing US and global economy, improvements in the US deficit will likely come from faster falls in US imports than in US exports – not from ongoing growth in US exports….

US taxpayers are going to be hit with a large tab for the credit risk taken on by undercapitalized financial intermediaries. Chinese taxpayers may get hit with a similar tab for the losses their central bank incurred by overpaying for US and European assets as part of its policy of holding its exchange rate down. The TARP is around 5% of US GDP.  There are plausible estimates that China’s currency losses will prove to be of comparable magnitude. Charles Dumas puts the cost at above 5% of GDP:
Charles Dumas of Lombard Street Research estimates that China makes 1-2 per cent on its (largely) dollar reserves. It then loses up to 10 per cent on the exchange rate and suffers a Chinese inflation rate of 6 per cent for a total real return in renminbi of about minus 15 per cent. That is a loss of $270bn a year, or a stunning 7-8 per cent of gross domestic product.

I have estimated that the annual cost of adding $600b (15% of China’s GDP) of unneeded reserves to China’s stockpile is roughly 5% of China’s GDP — though the exact loss depends on the size of the RMB’s eventual appreciation. Others have calculated large losses to Chinese households on the basis of the very low rates China has maintained on domestic deposits to support the RMB.

Yves here. Note that Chinese households have taken huge losses indirectly as a result of the very low rates on Chinese bank accounts. With inflation at over 7% and bank deposits paying only 0.5%, it was rational to pile into the stock market. Many households put funds which were really savings rather than investment (as in, it included the reserves they needed for bad times) into shares and many have taken sizable losses.

[But the reality is that the Chinese themselves are having a huge battle internally presented as Finance Ministry vs. Central Bank over what to do about America:]

“China’s Central Bank is Short of Capital”
http://www.nakedcapitalism.com/2008/09/chinas-central-bank-is-short-of-capital.html

Final sale: More retailers liquidating
Credit crunch, revenue drop yield bankruptcy filings
http://www.chicagotribune.com/business/chi-wed-retailers-liquidators-oct22,0,1001861.story

Economy rocks China factories
http://www.usatoday.com/money/world/2008-10-21-red-dragon-china-factories-economy_N.htm?loc=interstitialskip

The Great Crash of China
http://www.feer.com/economics/2008/october/The-Great-Crash-of-China

[China’s non-involvement in bailing out the world reflecting a weakening position; and the second article below indicates that they are scrambling to enable rural capital formation through market induced consolidation of agricultural land tenure; but no mention whether there are policies to gear farm output to national vs international export needs.]

…….
At first glance the statistics look promising. Consumer spending is up 22%, inflationary pressures are receding as food prices drop, and strong foreign exchange reserves continue to accrue ($1.8 trillion as of July). Fixed asset investment is rising as well (up 27% in the first eight months of 2008) and China’s sovereign debt rating is improving (S&P has raised long term ratings to A+.)

On closer examination, however, a vastly different story emerges. By the end of 2007 almost half of China’s GDP growth was attributed to exports and government consumption, a dramatic reversal from 2003 when growth was dominated by investment and private consumption.

While savings rates have been traditionally high, immense wealth has been invested in the stock market and real estate. The Shanghai index lost two-thirds of its value since its peak in mid-October 2007 and the Hang Seng is down over 50% from its peak a year ago.

While fixed asset investment may be rising, one-third is continuing to pour into the real-estate sector (up 29% year-on-year) despite vacant commercial floor space in China rising by 6.1% at the end of July (the latest month for available statistics). Real estate prices are experiencing their slowest growth in 18 months and new home prices in Guangzhou and Shenzhen have actually declined. Meanwhile growth in new car sales, while still robust, is slowing.

Not surprisingly, consumer confidence, according to official Chinese statistics, is drifting downwards and Western ratings on Chinese commercial banks, the holders of unused commercial real estate, are being lowered. Those on the cusp of entering the middle class are faring poorly as tens of thousands of small and medium sized enterprises go bankrupt.
…….
Laid-off factory employees, along with millions of migrant construction workers likely to be left jobless as construction slows, will return to a countryside largely unchanged from when they left years before. It should come as no surprise then that demonstrations against local officials in smaller cities quickly escalate into “mass incidents.” Fixed investment in education, health, and social programs accounted for a paltry 2.3% of the total through July.

Unless current expansionary monetary and fiscal policies are directed at skills development, an expanded intellectual property rights enforcement bureaucracy and research and development capacity, China may be running headlong into a great economic brick wall. Rising middle class expectations, shrinking manufacturing jobs, and a lack of qualified workers are more of a threat to continued economic growth than the People’s Bank of China’s exposure to U.S. Treasury bonds.
……

China charges into credit cards
http://www.latimes.com/business/la-fi-chinacredit22-2008oct22,0,6799700.story

China’s reforming land rights
http://www.timesonline.co.uk/tol/comment/columnists/rosemary_righter/article4974315.ece

………
Throughout Chinese history, land, hunger and peasant grievances have swayed the fates of dynasties. The mood in China’s downtrodden countryside has again turned ugly, with peasant farmers angrily demanding secure land rights - an issue that has pitted Chinese reformers against ideologues and corrupt local bosses. With the announcement yesterday of the Communist Party’s decision to “transform the entire rural policy”, the reform camp won a victory of enormous significance.

Farmers will not own their land outright - in China, every inch of land belongs to “the people”. But they will have rights, similar to those granted last year to city dwellers, to rent out or sell the plots they lease from local “collectives” under “household responsibility contracts”.

That will free them to link up with other farmers in modern commercial agribusiness co-operatives or to invest the proceeds of land transfers in new businesses. The effect will be to revolutionise Chinese farming and non-farm rural employment, as a market in agricultural land opens up for the first time.
…….

[Despite the article’s strong anti-Mao spin devoid of international historical context of sanctions and breakdown of trade relations with USSR in the late 50’s, nor addressing the Great Leap Forward seems to have prevented China having the famines that wracked the country for centuries, it really looks like China is now ending a pre-capitalist form of tenure and taxation - serfdom.]

…..
The big difference now is the urgency of increasing domestic consumption to counter the loss of foreign customers, as recession deepens. How hard China is being hit by global economic turbulence is hard to assess, because owners are more likely simply to padlock factory gates than to go through bureaucratic bankruptcy proceedings; but evidence points to 67,000 companies closed, some 20 million manufacturing jobs lost, a simultaneous sag in real estate prices and the construction industry - and worse certain to come.

Urban woes have concentrated minds on the need to release pent-up demand in the countryside, where 740 million Chinese subsist on around £1 a day. With larger farms, access to credit and mechanisation, China could rapidly increase farm output and rural incomes, boosting rural demand for urban manufactures. That has become China’s No1 economic and political challenge.
……