In this recession time, only a few countries that managed to get a positive GDP growth, which is China, India and Indonesia (as far as I know). The media says this due to their strong domestic market. If this is true, then the politicians will even more strongly argue the importance of protectionism. As a free-market defender, what argument could be used to not justify the politicians arguments, based on the facts?
China and India are both heavy exporters(I don’t know about Indonesia).
Peter Schiff agrues that the fundamentals of China’s economy are strong and the reason that they are in a recession is that they loaned far to much money to the US and are getting nothing in return. So unlike most recessions where individuals are working for unproductive companies that squander scarce resource the Chinese got into trouble by shipping their goods to a customer that doesn’t give them anything in return. To correct their mistake they do not have to go through a massive shift of their work force. Instead they must new trading partners or consumer what they produce themselves.
China took a big hit in manufacturing; something like nearly 14,000 factories closed in 2008. Wages during the boom had doubled. The advantage China has is that the government allowed monetary wages to readjust themselves with a loss in real profit. I’m not sure how the Chinese’s central bank responded, although I know that the Chinese government ratified a large stimulus package. It’s possible that they are going through a re-inflation of the bubble, which is bound to pop in the long-run (maybe when the United States’ government goes bankrupt). But, there’s no doubt that the Chinese response in the labor-market was probably the right one (to an extent; I’m not sure how flexible their wages have turned out to be).