Trouble in Russia, Trouble in China

As ugly as things look for the U.S. economy this year, America’s most credible rivals for Great Power status have it even worse.

China and Russia have much in common — once-totalitarian states that have devolved into authoritarian ones that allow an ersatz form of free enterprise.  (The genuine article isn’t allowed in large part because neither nation has much of a history with property rights or the rule of law.)  The primary difference is that Russia’s prosperity this decade has been built on abundant energy and China’s on manufacturing and exports.

Regardless, both models are falling apart now.

Cracks are even appearing in the nearly monolithic support for the Putin regime in Russia.  On Saturday, “thousands rallied across the vast country to attack the Kremlin’s response to the global economic crisis,” reports London’s Daily Mail.  “The marches, complete with Soviet-style red flags and banners, pose a challenge to a government which has faced little threat from the fragmented opposition and politically apathetic population during the boom years fuelled by oil. Pro-government thugs beat up some of the protesters.”

It’s not just hardened Commies, who never really left the scene, who are protesting. Some of the biggest protest is taking place in Russia’s Far East.  In the port city of Vladivostok, where car imports are a big business, 2500 people took to the streets to protest Moscow’s decision to hike import tarriffs on cars.  Some even demanded Putin’s resignation.

The tarriffs were increased to help another ailing region of Russia in the Volga River valley — the heart of the nation’s auto industry.  There, a factory has laid off all 16,500 of its workers, perhaps indefinitely.  Other plants have cut wages.

Meanwhile in China, 20 million people who left the countryside to work in the cities have gone home as their jobs disappeared.  Reuters notes they could get restive if they find their farmland has been seized for development.  (There’s that property-rights thing.)

Like the United States, China is trying to spend its way out of this mess — even going into deficit last year.  But it’s not working.  “Even security guards and teachers have staged protests as disorder sweeps through the industrial zones that were built on cheap manufacturing for multinational companies. Worker dormitory suburbs already resemble ghost towns,” according to the Times of London, which compiled the following tally of recent unrest.

On January 15 there were pitched battles at a textile factory in the nearby city of Dongguan between striking workers and security guards.

On January 16, about 100 auxiliary security officers, known in Chinese as Bao An, staged a street protest after they were sacked by a state-owned firm in Shenzhen, a boom town adjoining Hong Kong.

About 1,000 teachers confronted police on the streets of Yangjiang on January 5, demanding their wages from the local authorities.

In one sample week in late December, 2,000 workers at a Singapore-owned firm in Shanghai held a wage protest and thousands of farmers staged 12 days of mass demonstrations over economic problems outside the city.

There’s more, but you get the idea.

There now, don’t you feel better about the situation back stateside?

At least until California starts issuing IOUs in lieu of tax refunds, anyway?

The Daily Reckoning