The Chinese beating us at our own game
China's state-owned oil company, PetroChina, held its IPO today on the Shanghai stock market. The debut raised $9 billion in one day; since this offering was only a tiny fraction of PetroChina's total stock, the company ended the trading day with a market capitalization of over $1 trillion.
That's $1,000,000,000,000. This represents $154 for every man, woman, and child alive on Earth today.
The public debut of PetroChina marked a historic watershed in the history of capitalism: Communist China's state-owned oil company now has a market capitalization over twice that of ExxonMobil, which is now the word's second biggest company.
This is merely the latest sign of the decline of American economic hegemony, but our leaders in Washington and our nation's corporations seem to be ignoring the gagging canary in the coal mine. We as a nation have deliberately agreed to trade arrangements which have enabled and encouraged China to eclipse us economically; our politicians sign off happily on the latest "free" trade agreements, gleefully exporting American jobs to cheaper locales. This short-sighted focus on the near-term bottom line will cause our ultimate eclipse over the long term.
China's insatiable demand for oil is driven by their current economic model, which is in turn based on exporting as much cheap plastic landfill crap to the industrialized world as the market will bear. The Chinese will make it as fast as Wal-Mart is willing to buy it, and that takes a lot of oil (among other equally high-demand commodities). It also means that consumer dollars which could have gone to pay American factory workers are now enriching China instead.
We have sold the store to China and the rest of the slave-labor world. Today's PetroChina IPO unfortunately will be repeated a hundred more times before Wall Street and Washington finally get the picture: our economic future cannot and must not depend on a business model predicated on exporting our national wealth as fast as we possibly can.
That isn't sustainable for very long.
While we still have the economic clout to do so, the whole idea of "free" trade must be revisited. We should scrap GATT, pull out of the WTO, and demand a renegotiation of the entire framework of international trade from scratch. This time, we should demand that any signatory to a trade deal must adhere to a set of enforceable standards on workplace safety, environmental stewardship, and labor protections. A signatory country should be required to guarantee a minimum wage sufficient to sustain a family at middle-class or near-middle-class levels. There is no valid argument to support the idea that international trade should be predicated on workers who make $2 per day and work in slave conditions. The current international trade regime is unfair to workers in the developing world, and it is equally unfair to workers in America and other developed countries. We should rethink the entire framework from the ground up, and this time avoid letting Wal-Mart write the fine print.
We've seen the consequences of Wal-Mart's and Wall Street's version of international trade, and it isn't working. It's time to take a fresh look at the entire model.