Reading the news of riots in Paris and political paralysis in Italy makes China look pretty good, in terms of pragmatism. Democracy is great, but my view, from a watchtower on the China coast, would be that a significant proportion of voters in France and Italy and possibly other European countries have failed to spot the key trends in global economics. They will suffer the inevitable consequences. The bottom line is that the balance of growth has shifted to Asia, and Europe has to give up its deficit spending ways.

The voices of protectionism in the US are getting shriller. Particularly the US. But what they are missing is that the US is now symbiotically linked to China, and vice versa.

The US needs Chinese cash to fund its deficit, and Chinese investment funds to help buoy stock prices, and cheap Chinese products to keep inflation down.

Many of the serious captains of US industry are said to get it, but the power of the Republican Party is such that they are not willing to speak out about it. Meanwhile, in China debates on policy in general are becoming more and more open. A complete flip in roles in taking place here, which reflects the dynamism of China and the failure of the Bush administration to recognise reality in any of a hundred ways.

The future is not mutual protectionism, but the realization of mutual dependency. China is ahead in the awareness race. The US needs to catch up.

UPDATE

I now see that at least one US CEO has come out and said what needs to be said. This from today’s FT:

The head of Caterpillar on Wednesday warned that deteriorating trade relations between the US and China could plunge the global economy into recession and called on Congress to back away from protectionist measures.

Good for him.

The President of the European
Commission said yesterday that economic nationalism is "absurd". Jose Manuel
Barroso’s comments came just ahead of the EU Summit, to begin in Brussels
tomorrow, and they virtually assure that protectionism will be on the agenda.
Britain, Italy and the Netherlands, meanwhile, are drafting a denunciation of
protectionism to be signed at the summit. Which is odd, considering that Italy
is leading the charge to place import duties on leather shoes from China. As
usual, it seems that free trade has many meanings to many men.

The primary focus of this
renewed attack against protectionism, it seems, is against those who would
block deals within the EU itself. See, it’s okay for Spanish firms to take over
English ones, or for Italian companies to buy French companies. But cheap
Chinese shoes? That’s a violation of the WTO.

The same syndrome applies in
the US, where it’s okay for British firms to manage US ports, but if an Arab
ally wants to take over — well, that’s outsourcing the national security!

The recent NPC session focused on rural problems and the new mantra is the "New Socialist Countryside". The sense is that there are deep problems out there in the paddy fields, and the threat of unrest is in the air.

There is obviously SOMETHING going on, but what puzzles me is that I spend a fair amount of time in the Chinese countryside – in Anhui, one of the poorest provinces – and I sense prosperity. growth and progress. People I speak to say "Anhui is poor, we are poor", but ask them how things are compared to a few years ago, and they light up. "Oh, MUCH better!"

I see mobile phones, and lots of construction of new houses. I see wedding processions with several cars and vans packed with people looking hopeful, I see fields of rice and tea, and trucks loaded high with produce heading for market. It is totally subjective and possibly inaccurate, but I do not sense trouble brewing.

So I don’t doubt the need for changes to rural policy. But I am puzzled that I am not seeing it on my travels.

More developments on China’s road to a new information flow
chart: the New York Times researcher in Beijing who has been in jail for 18
months appears likely to be released ahead of Hu Jintao’s visit to the United
States, and a guy in Shandong who posted an essay on the Internet saying people
have the right to use violent means to overthrow tyranny was sentenced to 10 years
in jail.

It’s tough for them, finding the right balance on these
issues. But as they are pushed inexorably down the information road, they are
still doing remarkably well at maintaining the dominance of the approved
view amongst ordinary people.

This weekend, I was in Shanghai reading a copy of the Hong
Kong Apple Daily from December of last year – the day after the massive street
rally calling for a timetable for "one man one vote" direct
democracy, to help non-government appointed legislatures withstand pressure to
sign up to the Beijing-approved "when the time is ripe" model. Good
graphics and photos and massive headlines in the traditional Apple Daily “hit
them between the eyes” style. A mainland guy aged around 30 looked at the paper
and at first was convinced it was a hoax, that such a thing could not possibly
take place in China-Hong Kong.

This guy is on the Internet all day and all night long. He is
plugged in and intelligent and he had no knowledge of this march and similar events
in Hong Kong. This is a true measure of Beijing’s success in
addressing the challenge of the Internet.