Below is a recent article written by Janet Carmosky appearing at the Forbes. I simply liked the way she articulates what’s wrong with the American narrative about China – both in their elections as well as in their media.
Sep. 8 2011
“China Bashing Season Officially Kicks Off”
In the past 24 hours both Mitt Romney and House Democrats have unleashed the threat of labeling China as a Currency Manipulator. There is talk of employing sanctions, of taking steps to launch the mother of all trade wars. Let’s be clear: in the event of a “divorce” of the G2, everyone suffers.
It’s primary season, though. Republican or Democratic, the rhetoric implies we have a moral imperative to punish China for its economic success. Although we bought the goods that gave China a trade surplus, and sold the T-Bills that allow them to hold 8% of our total deficit, the implication is that Beijing has foisted an agenda hostile to the USA upon us, and must be stopped from continuing, even if stopping them destroys US-China relations.
No place in this narrative for the fact that China is by far the USA’s fastest growing export partner; nor that a faster devaluation of the Yuan raises the risks of a financial crash in both nations, hence the world overall. The two nations are in this together. A trade war would be damaging all around. Will the satisfaction of having a clear enemy (that isn’t us) be worth it?
Moral indignation may play well on the podium; recognize however, that to the extent we view economics as moral philosophy, we must also allow that it is subject to different interpretation in different cultural contexts.
Namely, in the Chinese view, a) capitalism is not morally superior to socialism, it just works better and b) democracy isn’t better than single party rule because it liberates individual thought, but there is evidence that allowing election mechanisms (where all candidates are qualified to lead, of course) correlates to regime longevity. China’s partial and inconsistent implementation of western economic and financial disciplines is self-serving, but it isn’t proof that the USA has the moral high ground.
The Wealth of Nations, the original capitalist manifesto, proposes that market mechanisms are conducive to a prosperous society. Thing is, in the Western view, society is more about individuals than governments. Chinese, by contrast, in 5000 years of history, have lived through almost 2000 years of of war – international and civil – and come to the conclusion that the existence of a strong State correlates to freedom from starvation and invasion, to good infrastructure and a healthy population.
Bottom line, China’s success would hurt less if we had a plan. We’ve been running the economy on consumption and now the middle class is broke. We’ve been creating wealth through financial markets, but our markets ended up facilitating wealth destruction for the general population.
China may have been part of getting us to this point but I’m pretty sure it takes two to tango. China’s currency policy, nor its actions as a whole, are not responsible for the USA’s lack of effective industry incentives, infrastructure investment programs, or a long term energy or development strategy. They may be the beneficiaries of a public sector that serves to create national wealth, but they are not responsible for the gridlock in our political system, or for the Tea Party-led civil war against our public sector. That’s all us.
Here’s an idea. Let’s take a page on self-preservation from the ultimate survivors – the Chinese, that nation that is out-performing us economically. If we really want to regain ground relative to China, if we want to stand up to the Chinese in self-preservation, invest more in America. Deficit spend on jobs and infrastructure. Like a trade war, a higher deficit will force a rise in the Yuan, and create all kinds of global financial backlash. But at least we’ll have something to show for it – like jobs and investment promotion programs.