Notes on Inflation, America’s Wage Politics, Marriage Rules, and the New Rich List

Inflation now looks hard to avoid

At the start of work on February 24, there was already informal notice from suppliers that price increases might be coming. By March, online debate had filled up with economists arguing over whether inflation would appear at all. Many specialists maintained that there would be no global inflation this year. I disagree. In my view, the chances of clear worldwide inflation—something on the order of roughly 5% year over year—are high.

The reasoning is fairly straightforward.

1. In 2020, governments around the world responded to the pandemic with loose monetary policy, fiscal stimulus, or both. Those measures naturally push in the direction of inflation.

2. The recovery this year is unlikely to be spectacular. If the global economy merely gets back to 2019 levels, that would already be a good outcome. But compared with 2019, the money supply has expanded significantly.

3. Global finance is now deeply integrated. Most currencies are effectively anchored, directly or indirectly, to the U.S. dollar and the euro. If the dollar and euro inflate, other currencies will tend to follow.

4. Suppose the dollar and euro do inflate. Then countries that kept their exchange rates tightly aligned with them, while either avoiding major stimulus in 2020 or using less stimulus relative to GDP than the U.S. and eurozone, would face a problem. Their nominal exchange rates would weaken along with the dollar and euro, but in real terms their currencies would become relatively stronger. That raises real interest rates and hurts exports, making recovery harder. In the end, those countries would be pushed toward policies that produce real depreciation anyway.

For these reasons, I do not see obvious global inflation as something hypothetical anymore. It looks increasingly unavoidable.

Some experts insist that the United States itself will not see meaningful inflation this year, and they support that view with a pile of technical financial terminology. The writing can be polished while the logic is still wrong. The basic conclusion of those arguments seems to be that because the dollar is a global currency, the scale of dollar issuance is not actually “that much” relative to global demand and U.S. GDP.

But if the dollar influences the world’s currencies, then it should bear the responsibilities of a world currency. It should preserve stability in its value so that the wealth of countries using dollars, pricing in dollars, or storing wealth in dollar terms remains stable. It should not continually harvest seigniorage from everyone else. Why should the rest of the world be forced to pay for American over-issuance? Poor countries outnumber rich ones. Transferring wealth from the poor to the rich is not something a global leader should do, nor something economists should beautify.

Even setting economics aside, there is a matter of basic conscience. If one cannot regard people across the world as brothers and sisters, one should at least regard them as fellow human beings of equal standing—not spend all one’s time flattering American power and inventing justifications for policies that extract from others.

A $15 minimum wage in the U.S. is very likely

After the Biden administration took office, one of its first major gifts to low-income Americans quickly moved toward reality. Democrats in the U.S. House proposed raising the federal minimum wage from $7.25 an hour to $15 an hour—more than double.

Using a simple calculation of 8 hours a day and 22 working days a month, that would put the monthly minimum wage at about $2,640.

For perspective, consider wage levels in several other countries:

• In 2018, the average annual wage for employees in above-scale enterprises in China was 68,380 yuan, or about 5,700 yuan per month.
• In 2018, average monthly wages in India were about 1,300 yuan.
• In 2018, average monthly wages in Vietnam were about 1,500 yuan.
• In 2018, average monthly wages in Brazil were about 3,900 yuan.
• In 2018, average monthly wages in Mexico were about 3,100 yuan.
• In 2018, average monthly wages in Russia were about 4,700 yuan.

And among those countries, places like India and Vietnam still had large unemployed populations, with many people earning under 600 yuan a month. There are poorer countries still, but there is no need to list them all.

If Washington really doubles the minimum wage, the obvious question is how this policy is supposed to be sustained. Where will the higher wages come from?

There is no shortage of commentary online claiming that a higher minimum wage would cost more than 3 million low-income Americans their jobs, because many small businesses would not be able to bear the burden. But that clearly is not how the Biden administration sees it. Biden wants higher minimum wages, lower unemployment, more welfare spending, and a broader assumption of global responsibilities. So where does the money come from?

In practical terms, the channels are limited: tax the rich more heavily, or draw wealth from other countries. Which of those is more likely to be pursued can be left to time. When the United States suppresses other countries’ advanced manufacturing and finance sectors, that too is a way of fighting for a larger share of the pie—though it is usually presented as defending a pie that others supposedly stole from America.

For low-income Americans, a minimum wage increase is certainly a benefit. For the world as a whole, it is not. Countries that have long borne the cost of American extraction have even less reason to celebrate. When the landlord lives more lavishly, the tenants usually live harder lives. People love to gossip about the extravagance of the rich as if it were harmless entertainment, yet rarely stop to ask whether someone else’s wealth and their own poverty are connected.

Requiring couples to be “certified” before marriage could backfire

On March 2, Chen Aizhu, a deputy to the National People’s Congress, said in an interview that during the 2021 legislative sessions she would propose a counseling period before marriage—a kind of “first lesson” before entering married life. Drawing on local work in Pingyang County, Wenzhou, on marriage counseling and family stability, the idea was to use such measures to reduce divorce and encourage more harmonious marriages, effectively having young people become “licensed” before they start married life.

The earlier divorce cooling-off period already made divorce harder by requiring advance scheduling of around two months, and in some places it even created scalpers who profit from the process. As for whether such a cooling-off period can really reduce divorce rates, I am highly skeptical.

Now there is another idea: a marriage counseling period before the wedding, as if couples should be certified before taking up the role. I suspect this would work even worse. If people are worrying about divorce at the very point of marriage, then is that marriage really necessary in the first place? And if they have already thought the decision through carefully, they are not likely to break up during a counseling period anyway. In that sense, whether the counseling period exists or not may make little difference.

This reminds me of a 2010 proposal from Hubei political adviser Zhang Xiaomei suggesting that husbands should pay wages to their wives. But marital property is shared property. If a husband “pays” his wife out of common assets, isn’t that an artificial way of drawing a line between the two sides of a marriage? If a couple is already close and united, why insist on dividing what was once held together into separate containers? Does that really improve the quality of the relationship?

The stated goal of a marriage counseling period is to lower the divorce rate. The more likely effect may be to lower the marriage rate.

A quick look at the 2021 Hurun Rich List

The 2021 Hurun Rich List was released on March 3. A brief look at the rankings suggests several broad conclusions:

1. Bubbles in internet-related wealth and electric vehicles look serious.
2. The global economy appears to be softening, while companies that make physical products are becoming increasingly marginalized.
3. Wealth is concentrating in the hands of the rich across the world; in plain terms, the gap between rich and poor is getting wider.
4. The pandemic, followed by economic stimulus programs, accelerated that concentration of wealth.
5. Men still hold and control most of the world’s wealth.
6. China is producing new fortunes faster than any other country.
7. Beijing is neither China’s economic center nor its financial center, but it has become the main center of concentration for Chinese billionaires.