Just how to apply pop culture to Freakonomics: use China’s transition as an example
‘Chinese aren’t fans of irony, but nothing’s more hilarious than comparing how China is unwinding Marxism and interpreting capitalism at its own end-of-history pace,’ says Peter Guy
I was challenged recently to apply the pop culture economics of “Freakonomics”– the rogue side of economics popularised by Steven D. Levitt and Stephen J. Dubner.
It’s not easy to joke about economic models based on rational utility maximisation, but I tried by linking similar woes that confront both Hong Kong and the US.
Chinese people aren’t fans of irony, but nothing is more hilarious than comparing how China is unwinding Marxism and interpreting capitalism at its own end-of-history pace, while Hong Kong- supposedly the model free market SAR, is fast becoming a victim of Marx’s last-days-of-capitalism narrative.
Marx was first to describe the tendency of the wealthy to destroy the system by extracting so much out of it that demand collapses. He accurately characterised how unregulated free markets like Hong Kong’s, have allowed the creation of modern day serfdom at the hands of the tycoon/bourgeoisie class and an apathetic government.
“Marxian capitalist has infinite shrewdness and cunning on everything except matters pertaining to his own ultimate survival. On these, he is not subject to education. He continues wilfully and reliably down the path to his own destruction,” he said.
Even during his life and times, Marx profoundly understood that powerful economic forces and unwise self-interest would drive the rich to seek more money even if it was against their long-term interest. Only the wilfully ignorant or the blind cannot see that the development of 150 square foot flats is the beginning of the end of civil society in Hong Kong.
Marx would say it is happening already and no one will admit it. When demand is acknowledged as the problem, major wealth redistribution becomes essential – and that’s blasphemy in Hong Kong.
Your average Hong Kong consumer can barely afford much more than clinging onto their mortgage payments. Slowing retail growth aside from mainland spenders is strong evidence that what the Hong Kong consumer demand, is permanently depleted.
But, rather than losing anything, the wealthy intend to undermine the system until there is some major collapse and they will be forced to change their ways. Marx characterises the rich as sociopaths who always prefer lose/lose scenarios even if they come off worse.
They can’t stand the thought of anyone getting the better of them. So there is no hesitation to truck in more mainland shoppers to substitute local ones no matter how that affects our quality of life.
Marx would have used Hong Kong as his laboratory to point out his end game of capitalism.
Larry Summers and the IMF now recognise that today’s economic woes are similarly plagued by weak demand that can’t be cured by monetary policies.
According to Summers: “The economy now faces secular stagnation or a chronic lack of demand.” Eight years of near zero rates have been disastrous and unproductive.
Donald Trumps mantra of “Making America Great Again” is a romantic thought.
But, longing for a past when America actually ruled the world, accounting for about half the world’s economy, where Washington is the world’s political capital and US college kids are full of optimism for the future, is a revisionist dream.
Presidents Bush and Obama tried their versions of resetting geopolitics and their plans have not worked out well for America. Trump faces a different kind of reality show today. This demand dilemma could end badly for Hong Kong and the US.
Peter Guy is a financial writer and former international banker