In response to Czuch's question:

> Whats the solution then???

I think the answer to this question is ideologicaly charged. How we as human beings are going to solve the problems and ineffficiencies in the Capitalist system is complex because it is colored by how we see socialism and the role of the state in regulating the economy and the business environment. Politicians do know that this problem exists and I have seen some opinions about it. I can start perhaps with what I will call the "pessimistic and radical view".

Among the more hawkish neoconservatives in Washington there is this belief that the current economic relations between China and the US will eventually lead to military conflict. There is a perception that the US is in an economically unmanageable situation because its foreign debt has become too great to manage properly without causing hardship for millions of working Americans. If at some point China decides that it is time to collect on the debt, the only response viable will be a war because the US will not be able to pay such a huge debt. To me this is a destructive and pessimistic view because it implies that China is a hostile, unreasonable power with nothing but evil intentions towards the US. Thus the more hawkish right-wingers see war as the only outcome.

More moderate views say that if China is given enough time, its population will move from a "producing" population to a "consuming" population. As the economy in China grows the rate of consumption will increase and that will open avenues for products to be sold to China and bring the trade deficit into balance. Evidence of this is seen in both the expansion of local businesses in China and the increase in demand of certain luxury consumer goods (e.g. cellular telephones, televisions, computers, etc.)

There is another view, and this is the one I subscribe to, which sees the current economic relations between China and the US as part of a much greater, and much older economic process. This process is called "economic integration". It is a concept that was born first from a Marxist view of economic systems and then it developed further in the Soviet Union in the 1950s after WW II. The theory is that as time is passing the entire world economy is in a process of "globalization". Originally economic systems arose locally and in isolation, then as time passed different economies came into contact and as they engaged in trade and exchange a process of adjustment had to take place. If enough time is allowed to pass, these economies merge into one larger economy.

The evidence of this is very strong and we all have heard of globalization and the formation of large economic blocks such as the European Union. The process of economic integration requires for nationalistic or local interest to concede ground to the much greater interests of the whole economic block.

The shifting of labour force from the US, Japan and Western Europe into China and India is driven by the self-interest of large corporations, but its ultimate effect is a process of economic integration in which all the economies involved become so interdependent that it becomes impossible to separate one from the other.

We saw this in the latest crisis in the economic system. As the American economy slid into recession, the demand for Chinese goods dropped suddenly and China also experienced a shrinkage in its economy.

As China and the US exchange more and more capital, eventually it will become impossible to separate one economy from the other and the US and China will end with a fully unified and integrated economy.

Many capitalist economists don't like this idea at all because it implies that western capitalism and communism end in an economically inseparable state, and that means a politically inseparable state.

If the current crisis in the world economy is not resolved, we will see a situation in which the state will have to intervene fully to keep the world economy afloat and that will mean moving from local central banks (like the Federal Reserve or the Bank of England) to a larger central bank regulating the world economy. We will have a "World Reserve" that will regulate banking and interest rates on a worldwide scale. We already saw this with many large cenatral banks lowering interest rates at exactly the same time and central bankers meeting to discuss common strategies to fight the crisis.

Parallel to this there will be regulatory bodies that will have to enforce labour laws on a worldwide scale to ensure that wealth is distributed more evenly and to minimize wage disparities that are further fuelling the current crisis and causing hardship for millions of people around the world. Many people are already complaining that there were massive bailouts for banks, car companies, real estate and mortgage companies, etc. However, the poor of the world get no bailout and they go on being poor. So the only way forward is to ensure that there is more wage equity in other places around the world.

Such an aggresive and global form of the state scares many people and is seen as a form of "socialism" and an "engineered economy". There is great political opposition to any "socialist" measures to fix the world economy.