Crocker Coulson
As we enter the second year of this, our Lesser Depression, Americans have no little cause for anxiety. Each day's newspaper is splashed with fresh stories of layoffs, write-offs, foreclosures, and ruinations. What was supposed to be a gentle little postmodern recession has grown sharp teeth.I often tell my employees that if they would only absorb two lessons from the Chinese, they would never have an economic care in their lifetimes. First, work 12 hours a day with no complaint, and, second, save 25 percent of your compensation each and every year. (Actually, the average Chinese savings rate has been more than 50 percent for the last few years, but that is excessive and has led to its own problems.)
People who work 12 hours a day or more are likely to be among the last ones fired. And even if their employer's business craters and they are ultimately laid off, they will have built skill sets and a track record of achievement that make them desirable hires. Finally, even if this morphs into a Greater Depression and there are no jobs available for several years, they can simply spend more time with their families, go back to school, or take a period of extended vacation or volunteer work. People who save 25 percent of their salaries never have to worry about putting food on the table or a roof over their heads—they can coast for years as long as they have been working and saving for a decade or more.
Despite the headlines in US newspapers about widespread layoffs among exporters in Southern China, there is absolutely none of the feeling of despair or limited possibilities when you travel around Chinese cities. In the past two months, I visited 20 cities in China and visited with the CEOs of 30 small- to large-size enterprises. In every city I visited, the malls were busy, the restaurants were full, and the mood was cheerful and bustling. With a few exceptions - in industries such as electronics, apparel, steel, commodity chemicals, and coking coal - the outlook of the CEOs was resolutely upbeat. These business leaders were not planning to make meaningful layoffs, scrimp on capital expenditures, or cut R&D. In fact, their biggest concern was when the international equity markets would reopen so they could fund their future expansion plans.
What's behind the optimism? Most Chinese believe that growth in domestic consumption, urbanization, and industrial productivity in their country now has an unstoppable momentum. While the global recession may throw a speed bump in front of 2009 growth, it cannot divert China from its path of development and growing prosperity. Second, Chinese people believe that their government has the commitment, expertise, and balance sheet to do as much as possible to shield China from the global meltdown. And the third factor is that amazing savings rate—even laid-off migrant factory workers have been accumulating an enormous nest egg over the past decade.
Our political system, too, could stand to learn from the Chinese example. China's government has accomplished an economic miracle that is unprecedented in world history by lifting hundreds of millions of its people from poverty to a comfortable existence within the space of 15 years. Many of those have now ascended to China's middle class, which is expected to number 700 million people by the year 2020—making it far larger than America's middle class.
China's government has had to manage huge demographic and ethnic pressures, including the largest internal migration from rural areas to cities in the history of the world. McKinsey estimates that China's urban population will rise from 572 million in 2005 to 926 million in 2025 and hit the 1 billion mark by 2030. To manage this type of change without social chaos requires enormous political will and economic-planning capacity—which in America has been flagrantly missing for the better part of a decade.
