At the World Economic Forum in Davos, Chinese Premier Wen Jiabao and Russian Prime Minister Vladimir Putin have blamed the US for triggering the global economic crisis. They are not the first to do so. Last September, as the crisis unfolded, Germany’s Finance Minister Peer Steinbrück was brutal in his condemnation of Anglo-American capitalism for its greed. Other politicians, in Europe and elsewhere, have done likewise since then.
There is something disingenuous about such attacks. Both Russia and China have built their unparalleled economic growth on embracing the capitalist free market. They did so with enthusiasm and, until now, it has paid great dividends. To like the system in good times but not in bad is inconsistent.
Their sense of grievance is nonetheless understandable, particularly in China’s case. The crisis has hit it hard as foreign markets cut back on imports. Factories have closed and the numbers of unemployed are rising. Growth, down to 6.8 percent in the last quarter of 2008, is projected to fall yet further; it is predicted it could drop to as low as three percent this year. Against this, the Chinese government’s target of eight percent seems wildly optimistic.
But it was China that chose to build its prosperity on capitalism and cheap exports. It can hardly complain when its customers, facing financial difficulty, feel they have to retrench. It might have been wiser to follow India’s lead and put greater emphasis on the home market. The Indian economy, while far from immune to the global crisis, looks set to weather the storm and emerge in better shape than any other economy. That is thanks to domestic demand remaining buoyant. The fact that last week the Indian central bank lowered its growth forecast for 2009 from 8 percent to 7.5 percent, the lowest for six years, becomes irrelevant. It is still ahead of what China is currently doing and a great deal higher than what it may achieve. For the rest of the world, a mere 7.5 percent is cause for envy. It says a great deal about the comparative strength of India’s economy that the main business story in India at the moment is corruption at Satyam, not collapsing banks. It is telling too that there are no Indian leaders blaming the US for the recession. They do not need to.
Given the potential social and political fallout at home from the global downturn, it is understandable that both Putin and Wen Jiabao feel they need someone to blame — and who easier to blame than the traditional target? They have reason to worry that domestic public opinion will turn nasty. They only need to look the US where the economic crisis was a major factor in the Republican’s electoral downfall. In France yesterday, resentment at the crisis and the government’s willingness to hand out billions to the banks but not for social services resulted in the biggest one-day strike for years. Putin’s and Wen Jiabao’s comments are those of political leaders needing an excuse for domestic ears. But Russian regulators were no better than their American or European counterparts in ensuring transparency and probity. Chinese sovereign wealth was happy to buy into US debt. Putin criticizes as “dangerous” American and European multibillion rescue packages, but his and China’s governments are doing the same. Whether this diversionary tactic will work is, therefore, questionable.
