In an almost astonishing departure from no-holds-barred capitalism, China has discovered that if they are to continue their 30 year, double digit economic growth they must have to have consumers other then foreign customers for their exports: consumers  like their own people.

 With that realization, the people who run the show there have mandated a 20% increase - for the 2nd time in 6 months -  in the minimum wage throughout the entire country, thus stimulating  a nation of more than a billion people to afford the goods and services that the "world's factory" now produces.  At the same time, they have hiked interest rates, for the 2nd time in three months, and told banks to keep higher reserves, as a hedge against inflation. 

All this has occurred amid a widening gap in China between those with money and those without it and the government's fear of a rising tide of discontent among tens of millions of poorly paid workers.

If there is any doubt that "The Chinese Century" has arrived, the Chinese government's new direction should put it to rest, for clearly they understand the importance of  a strong and vibrant middle class.

This contrasts starkly with the predominant American preference,  since the Reagan presidency, to let "the market" determine wages and prices. As the middle class has withered away due to decreasing real wages, the export of high wage jobs in manufacturing  and the consequent softening of consumer demand with the collapse of easy credit, the American economy continues with its so-called jobless recovery. While Wall St. percolates, some 15% of the American workforce is simply out of work.

These events beg two important questions: 

First, are capitalism and democracy incompatible? While the American body politick dithers and argues as to whether we should stop spending on ourselves to stimulate the economy or gets itself untracked while trying to decide who should and who shouldn't be able to marry,  our competitors, by a simple mandate of a relatively small cadre of politburo oligarchs, can change the  economic course, by several degrees, of the world's 2nd largest economy.

Second, should an unrestricted free market be the deciding voice in who wins and who loses? Clearly the Chinese have decided that the answer is no: the hand of the government is integral to the orderly expansion of a national  economy. They have observed, and as Americans in large part seem to refuse to observe, that without consumers an economy cannot expand. 

China's incredible taking of the economic center stage among the nations of the planet are also now translating into diplomatic, military,  and political power. In other news, the Chinese have announced the deployment of a missile which can destroy the jewel in the crown of American naval power, the aircraft carrier.  This has been described as a game changer in the balance of power in the Pacific basin.  It is quite arguable that the day of the Pacific Ocean being an American mare nostrum, along with the military power it implies, may be closing.

We live in interesting times indeed.