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This long article from the New York Times details the history of corruption behind the emergence of a hazardous chemicals warehouse in Tianjin run by Rui Hai International Logistics which became known as the go-to company for getting things done efficiently. On August 11 disaster struck with an explosion that ultimately led to the death of 150 people, the injury of 700 people, and anxiety about toxic fallout afflicting a district of one million residents. The details do not matter. The point of the article is that Tianjn and Rui Hai are emerging as potent symbols for why China's days as the world's lowest cost jurisdiction are numbered. Efforts at a coverup seem to have been unsuccessful. Among the violations is the storage of 700 tonnes of sodium cyanide intended for gold mines when a license existed for only 10 tonnes. But maybe Tiajin's Rui Hai facility was just a rogue that got unlucky? The article closes with the observation that in 2010 the Ministry of Environmental Protection "found that half of China's oil processing, coking, chemical and pharmaceutical plants were located within less than a mile of sites like schools and residential areas, in violation of regulations". The problem is widespread, part of China's Faustian bargain to concentrate productive capacity on its soil at the expense of "freedom busting" jurisdictions that not only have regulations but actually enforce them. Of course, if you asked the Freedom Festers you would probably get the explanation that China's problem is the existence of regulations and the way they lull citizens into a complacency unbefitting of a mouse whose entire short existence should be focused on avoiding a catastrophic demise. Get rid of the regulations and those people would avoid living near hazardous chemicals warehouses, except that there would not be any information about the nature of the stuff in those drums moving in and out of the Rui Hai warehouses. But perhaps there would emerge a market for muckraking journalists who expose the truth, individualists not compromised by working for an organization whose decisions control that employee's self-sustainability, who post on a blog that nobody pays for and thus nobody believes because the absence of a business model calls into question all online pontifications (wait for it, there is an argument why a reader of this blog would be wise to become a paying member of KRO). The reason there need to be regulations and trustworthy enforcement of them is that individuals simply do not have enough time to protect themselves against all the ways that countless other individuals are competing to engage in a one-sided economic transaction rather than a fully-disclosed fair transaction that is the basis for a flourishing market economy. Tianjin and Rui Hai is a problem for Beijing because its ugliness cannot be swept under the carpet. This problem is relevant to resource sector speculators because it signals that the next wave of growth will not be fueled by a global rush by capital to dump costs into a toilet called China (or perhaps a new one called India whose Ganges River is a renowned competitor with the Yangtze River for top toilet status), but rather by a surge to build productive capacity on the basis of "clean" rules in jurisdictions that have until recently languished because the cost of compliance with all those regulations could not compete with that great sucking sound of costs swirling down the toilet bowl into the stomachs and lungs of the Chinese people. The cost advantage of doing business in China is disappearing, and the shocking new story is that the driver of the global economy's next growth spurt will come from advanced economies such as the United States which the Freedom Festers have long dismissed as a hopeless self-crippler.
