'The Biggest Political Blunder in Modern History'
Today's NY Times op-ed page features a warning against the advent of an all out US-China trade war. How did we get to this point where China holds so many cards? The same way that Max Baucus came up with his outrageous health 'reform' bill, by putting the interests of huge corporate contributors over the well being of the people. Some history:
The West, as defined by G-7 or the OECD, back in 1989 struck a Faustian deal that they would 'engage' China like they never would have the Soviet Union.
COCOM, which had very successfully kept western technologies out of Soviet hands, denying them a source of economic growth, was allowed to die in the early '90s.
G-7, at that time, controlled over 75% of the world's economy and could have used that primacy to engender real change in the remaining non-democratic countries. That was supposed to have been the real 'peace dividend'.
Instead, western leaders kowtowed to their respective corporate constituents and set of a race to the bottom in pursuit of China's cheap, compliant labor force.
The rationale given to the gullible public was the 'engagement' theory in which we would 'change China from within' because 'economic reforms would lead to political reforms.'
Now, in 2009, China blocks almost all UN Security Council initiatives aimed at stemming corruption, oppression of minorities and women, sanctions on despotic regimes, etc. The Central Commitee is stronger(and richer) than ever.
China is a champion of 'no strings' investment in myriad bad regimes in Africa and we can't complain because the West did the very same thing with China!
The decision of our leaders to trade with China in hopes of changing it instead of the other way around will eventually be recognized as their biggest political blunder in modern history. Even bigger than abandonning Afghanistan after we expelled the Soviets. Talk about 'blowback'!
I support the policy of engagement with China. It has been a fantastic success. Engagement has raised the standards of living of hundreds of millions of people, and has also prevented the rise of an expensive and dangerous US-Chinese geostrategic rivalry.
The US and the Chinese are now heavily interdependent economically. That is a good thing for us, for the Chinese and for the rest of the world. Hen Hao.
September 19, 2009 3:00 PM | Reply | Permalink
"...has raised the standards of living of hundreds of millions of people..."
Jury's still out on that one, the majority of the population in the interior hasn't really benefitted. Workers are routinely abused and the fallout from environmental degradation has yet to fully manifest itself. If you count clean air, water and food as part of 'standards of living' then maybe it's too early to make that claim.
"and has also prevented the rise of an expensive and dangerous US-Chinese geostrategic rivalry"
How do you know that? That's very speculative. Without China's opening it's labor force to FDI how would China have afforded such a rivalry? The USSR couldn't keep up, partly because of CoCom which we dropped in the early '90s.
The self-stated goal of the 'engagement policy' when it was being sold to Congress and the US public was to 'foment political reforms and the advancement of human rights through economic means.' Raising 'standards of livings' was only part of it. What happened to political plurality, what happened to local elections, press and speech freedoms, religous freedoms, tolerance of political dissent.
It's not always just about the $$.
September 19, 2009 3:41 PM | Reply | Permalink
Besides, we still might get that 'geostrategic rivalry' you refer to now that the West has enriched China.
September 19, 2009 3:43 PM | Reply | Permalink
Having lived, studied, and worked for a little while in China, I am inclined to agree with you. At least from a political history perspective. Dan K is absolutely correct about raising the standards of living for over a billion (including those in the countryside). However as you correctly point out the regime is a disaster for the advance of democracy, human rights, and individual liberty. They are growing stronger and will continue to undermine those efforts throughout the world.
I simply don't get our selective use of engagement. Seems to me we had it backward- we should have engaged Cuba which likely would have overwhelmed them and blockaded China like we successfully did with the Soviets.
I don't really get Dan's point about how good our interdependence is. Seems to me it's a play on the freidmanesque "counties with mcdonalds don't go to war with each other" meme. 19th century Europe all the way through ww2 is full of examples where that didn't quite work out. With our world running out of resources who knows what the future holds.
How is losing our manufacturing base to a country with no social or environmental rules good? How is their lending us trillions of free money to feed our stupid bubbles good? Oh but we get plenty of cheap crap we don't really need. It has been very good for those at the top and China. As for the environment, our working class, and the advance of human rights not so much.
September 19, 2009 6:13 PM | Reply | Permalink
Consider your comment rec'd, as well as the post.
September 19, 2009 6:21 PM | Reply | Permalink
Many thanks.
September 20, 2009 4:54 AM | Reply | Permalink
I was waiting for you to weigh in here, Sal. I don't know quite what to think. Living standards are way way up. So put that argument aside.
But are you seriously arguing that what brought the Soviets down was trade sanctions? First time I've heard that theory. Also can't get my head around the very concept of 'blockading' roughly half the planet.
More to the point, I find you and the OP rather over-optimistic about the US' ability to affect internal political change in a country as big and complex as China. With a regime so 'sensitive' they happily let tens of millions die for the sake of a great leap forward.
Given a binary choice between engagement and sanctions, the former seems more constructive, and at least holds out hope for the development of a significant middle-class capable of pushing through change and improvement in governance.
Which leads me to my last question - on which I'm pretty ignorant. Is governance now better or worse than it was 25 years ago? Sure the 'Party' is still in control, but it is composed of a much more heterogenous group, with business leaders moving up the ranks, than the previous ideologues, isn't it?
September 19, 2009 6:36 PM | Reply | Permalink
Obey,
To tell the truth I don't really know what I think either (i did qualify my statement "inclined to agree". First off, I can't dispute the moral argument that a billion people are now living a decent quality of life. That alone is a powerful argument for engagement and despite our agreement to set it aside it does play a role in my opinion. (Perhaps the dominant role).
I also make no illusions that we are now powerful enough to blockade China. What is done is done. Our relative strength has been slipping for quite some time and we have crossed the rubicon. Nor am I arguing that Trade sanctions brought down the soviets. I am of the school that believes it was a combination of factors that led to the downfall of the soviets (internal ethnic tensions, collapse of oil prices, Mikael Gorbchev's conscious, etc. long list).
Now as to blockading half the planet. We did exactly that for 50 years. It was called containment. Some might argue it worked, the war against communism was won. There is not really a place on earth save the hermit kingdom and a few rebels in Nepal that is Marxist in nature. However, I think our battle was misguided, we should have fought against Totalitarianism- not Communism. That battle was not won, it will be eternal.
Regardless the question is could we have blockaded china. I don't fully know the answer to that. They had reached out to Europe as well as the rest of the world, but in 1989 we were the dominant power bar none. Further, we were the technological leader and our consumer market is what has driven China's growth. Depriving them of our FDI and particularly our market would have severely retarded their development. Look at our trade ratio with them since 1989 and take that away and think about where that leaves them. Furthermore the ruling communists are completely dependent on that growth in order to maintain power and keep their huge internal problems at bay. Without economic growth fueled by our imports the economy would have limped along and people would be angry. I would argue that the state industries that still employ hundreds of millions would have collapsed by now, and frankly that is where a political revolution would have occurred.
Now, I don't know. I have never really bought that the argument that a middle class automatically leads to democracy or human rights. Seems to me that only happens when the middle class is at risk of losing thier hard fought position that the revolt. I think in China the middle class is allied with the Communists against the workers and the peasants (Also the entire country is fiercely nationalistic- the news and education is frightening). I think they look to India where the democracy sometimes works for the peasants at the expense of the upper classes with fear. Regardless that is a digression I don't have time for today.
Regarding your point about governance. It was a corrupt yesterday as it is today, now their is money. Sure they have occasional show trials for a few fools who fell out of favor but they did then too (gang of four). But I do think overall that economic prosperity has lead to better conditions and therefore better governance in general. However, Fairness or equality under law has not developed. Nor has informed political debate, which coupled with their nationalism is potentially worrisome.
Damn I have tons more to say, but I have to run. I want to leave with this thought.
The question though is what have we gotten for our engagement? And there I don't think we have had quid pro quo. We get cheap shit while hollowing out our economy and their coal plants are destroying the world (we are not innocent here, but their industrialization has been like slamming the accelerator pedal for global warming).
Make no mistake- For decades they have kept their currency cheap to take our jobs and stockpile our bonds so that they effectively own us. We have become dependent. Our relationship is similar to a drug addict and pusher. An irony that is no doubt a source of satisfaction to them given their history.
And that I would argue has not been good for our middle and working class, or the world's environment. But it has been good for the rich, and ironically China's poor.
Faustian bargain indeed.
September 19, 2009 7:38 PM | Reply | Permalink
p.s. sorry for babbling.
September 19, 2009 8:20 PM | Reply | Permalink
Why?
I thought it was a thought provoking post that asks many good questions and has just as many good observations. More posts like it are needed...
September 19, 2009 8:38 PM | Reply | Permalink
Because I was typing too quickly and many of my thoughts are stream of conscious and poorly worded. The pug deserves better. I should have edited.
September 20, 2009 3:31 AM | Reply | Permalink
But thanks.
September 20, 2009 3:33 AM | Reply | Permalink
Seems to me your babbling is a lot like your spinning avatar.
Meaning....that for me, your circles teach me something.
Your spinning thoughts do likewise.
http://www.youtube.com/watch?v=mKvCEUJfQA4
September 20, 2009 3:56 AM | Reply | Permalink
Thanks for the Link Liz!
September 20, 2009 6:21 PM | Reply | Permalink
You're very welcome. It's one of my faves.
September 20, 2009 6:30 PM | Reply | Permalink
Thanks Sal! A lot there.
My own view is biased/informed by a couple of things: my chinese roots on my mother's side - with family and friends in various parts of the country, and several years spent in East Asia. So I find the idea of a Chinese 'threat' which motivates a lot of these worries somewhat exagerated for two reasons: Chinese nationalism is certainly strong - up there with Americans and French and Russians. But unlike these latter, there is much less of an Imperial impulse. Taiwan and Tibet are two pretty unsavory counter-examples to my claim, that to me show more the limits of their ambitions - 'Unified China' - than some further threat beyond their immediate historical sphere. Also, when you talk to people in the region, they are much more wary of Japan than they are of China. The Japanese themselves are pretty unworried about the expanding Chinese influence. Understandable from a historical point of view. But utterly strange and flabbergasting from our American pov given our post-war relationship with Japan. These factors weigh heavily in my take on China. And has me more and more concerned about rising anguish in the States on all political sides about this 'threat'.
Some second thoughts about the 'engagement vs sanctions' issue. Sure, there is no certainty to either option. But, firstly, I think it is too early to call the former a 'failure'. Secondly, maybe a way of framing the choice in the absence of certainty: it's a low-stakes choice vs a high-stakes choice. Sanctions and belligerence could either lead to collapse and reform, or collapse and anarchy, ... or much stronger belligerence by an entrenched Military regime whipping up nationalist frenzy in the interests of externalizing blame for domestic discontent. We just don't know which of these would have happened, and to my eyes, optimism about the first of these coming true looks like quasi-neocon fantasy. Regimes fall apart when they cease to take care of the internal economy (see Indonesia and Suharto). If the economic troubles are patently the fault of outsiders - as would be the case if they were triggered by sanctions - the people will RIGHTLY blame the outsiders. This regime change mantra just doesn't float my boat. I prefer the low-stakes, 'safer' option of engagement without interference.
A last point on the issue of blaming China for our present economic ills. I just don't buy it. Not even the 'shared blame' position. We got cheap capital and cheap goods in exchange for export-oriented development for China. Was it necessarily unsustainable? No. We just blew all the cheap money on McMansions no one needed and wars no one needed. We directed the money towards blowing up insane asset-bubbles instead of something more productive. WE BLEW OUR SIDE OF THE DEAL. Imagine we had some carbon emissions regulations in place in 2000. Alternative energy and energy-savings measures in transport, urbanization, etc. would have been a huge attraction for investment. (one could also add that the inevitable concommitant carbon tariffs would have done Chinese industry and environment a hell of a lot of good). But no, instead we piss on the Chinese for all our own horrible decisions.
And a minor anecdotal piece of evidence on governance. I dealt with both US and Chinese trade reps at the WTO a few years back. And the latter struck me as much less frighteningly Corporatist as well as being incredibly bright and, for lack of a better expression, genuine human beings. That is my only personal familiarity with the Chinese elite, but it does color my impression of the overall performance and culture of their government, while all the same recognizing the rampant corruption.
Beyond that, I'll cede to your much better knowledge coming from on the ground experience in the country. Which I just don't have to any serious extent. If you've got more, and I know you do, I'd really appreciate it...
;0)
September 20, 2009 8:11 AM | Reply | Permalink
Was it necessarily unsustainable?
You imply that it isn't, but I think the record truly shows that it is.
I absolutely agree that we blew our side of the deal as you state. The US consumer economy has been profligate in its abuses of over-spending and wasteful spending. (NOTE FOR ANOTHER BLOG: I can argue that a lot of this has been a result of workers being given credit to cover ever-increasing expenditures in place of real wealth in exchange for their labors, thus ensuring that real wealth accrues to the ruling [i.e. "corporation"] class.)
We simply aggravated what is a troubling aspect of a consumer economy, which is the fact that it requires more and more consumption to keep the economy growing. Your argument that increased environmental regulations or wiser choices in goods purchased would have made things MORE sustainable is correct. We can postpone the day of reckoning, perhaps, but we cannot continue on the path of "a chicken in every pot and a car in every garage" without slamming into a brick wall at some juncture in the not-too-distant future.
Labor inputs into the goods that are manufactured represent a "value-added" component that drive the growth in economies. But the limitations of non-renewable resources drive this growth as well. It takes a great deal of energy to build and operate factories. It takes consumption of great amounts of other non-renewable resources as well. And this unsustainable consumption of non-renewable resources becomes a critical component that promotes the "health" of our consumer economy. It is in fact inherently encouraged. Investors, after all, count on the stresses and ultimate depletion of these resources to drive their own gambling profits, which is the principle behind most of the commodities trading, is it not?
The amazing rate of coal-burning power plants being brought online in China is not an anomaly. Its consequences are staggering to the environment, and are only a miniscule bellwhether of what we can expect in a continued effort to "grow' this consumer economy on a worldwide scale.
Again, I am intellectually unable to arrive at a solution to the impending crisis represented by a continued reliance upon consumerism to "raise our standard of living." The answer surely must include a redefinition of just what constitutes a good "standard of living." But defining that with a consensus agreement among all peoples won't be easy. And how we then move from here to there is a challenge unlike anything the world has confronted in its history.
September 20, 2009 12:26 PM | Reply | Permalink
Not sure we disagree Sleepin. It was clearly unsustainable in the form it took - i.e. given what we did with the cheap money. So no argument there. As for whether China's growth pattern is sustainable, I might disagree. They're gonna have to adapt to the limits on non-renewable resources just like everyone else. But I don't think there's a viable development pattern that skips straight from a rural economy to hyper-efficient low-energy consuming industry.
I think what was unsustainable in the US economy, was the reliance on consumption growth outstripping real income growth. Where by 'real' I mean that part dependent on productivity growth excluding asset-inflation. Or something. I confess I get lost in the intricacies here...
As for what happens when economies have to adapt to natural resource shortages, I'm pretty sanguine. There is so much waste in agriculture (think excessive meat production), Industrial and consumer overuse of fresh water, underexploited opportunities for recycling, more and more efficient alternative energy technologies, that we can all have a pretty decent living standard if the world population stabilizes. The one thing that worries me is the unhealthy American obsession with economic GDP growth. There are so many untapped opportunities for increasing well-being independently of GDP growth that are being simply laid aside. For instance, you can see the tendency in Europe to think more in terms of increasing productivity in order to decrease working hours. That kind of thing.
Is there 'an impending crisis' in the consumer-driven economic growth model? Well, only if you stick to this model. The solution is to move away from it, meseems...
September 20, 2009 12:58 PM | Reply | Permalink
Obey, I will adopt your more optimistic outlook if for no other reason than waiting for the collapse is itself unsustainable! ;O)
Actually, you point exactly to the one thing that I think about when considering redefining "standard of living." In the US, we have adopted a really cruel and corrupting dynamic wherein all benefits of increased productivity accrue to the "owners" rather than the workers. Thus, any increase in productivity is simply absorbed into the profit stream, and the workers actually suffer because their labor is devalued.
It would be more sustainable to instead reward a worker with one less hour worked for every hour gained in productivity - while maintaining the same level of total compensation for the worker. Thus, the economic objective becomes skewed toward the increase of leisure time for workers and away from an increase in the GDP. Who knows? With enough increases in productivity, we might find ourselves able to return to the days of one-income households and gain a more generous vacation schedule of the kind that exists in France and other European countries.
You're definitely on the right track here. A long way from sustainability as you seemingly point out in your last paragraph. But it is the type of discussion we should be having, as opposed to the present obsession with the growth in GDP as our sole objective.
September 20, 2009 1:25 PM | Reply | Permalink
Interesting thoughts SJ. I look forward to you expanding those.
September 20, 2009 6:33 PM | Reply | Permalink
Shoot, you really do a damn fine job of articulating my ambivalence. Its a very complicated question.
Lets start with what we agree on. "the china threat" I am also inclined to argue it is oversold. China cares first and foremost about its historical sphere of influence (Tibet, Tawain, and this year add the Xinjiang uprisings). They will go to war over those issues (and deal ruthlessly with their own minorities). However outside of their sphere they tread lightly, with the exception being strategical resources that they feel they can take (see The Spratley Islands). The nationalism is disconcerting but I agree it is not likely to manifest itself in War mongering anytime soon. Besides I would argue they are demographically too old to really go on the War Path. But I would not dismiss the possibility of them inciting wars on their periphery if they felt it would be in their interest. Particularly over resources. Zhong Guo (China) means literally "Center Country", their nationalism intends to reinstate that.
Where I view them as most dangerous is in their undermining of human rights throughout the world. For example, their tacit support of the Regime in Burma, or most devastatingly their support of Sudan (and that comes with $$$- they are the largest investors in Sudan they need the oil- who cares about Dafur??).
Just as your opinions are shaped by your personal experiences as our mine....
ahhh seriously have to run, be back in 3 hours.
September 20, 2009 1:33 PM | Reply | Permalink
No disagreements on any of that, Sal. But if we're comparing the records of the US and China as 'global citizens' over just the last eight years, say, it really takes some chutzpah to assume the moral high ground here. Isn't it? I guess that's where my resistance to the China bashing comes from to some extent, the realization that we could do a lot of good by starting to clean up our own act. Anyway, thanks for the useful caveats to what I said...
September 20, 2009 5:52 PM | Reply | Permalink
Chutzpah indeed.
The election of 2000 will go down as the most important of the post Coldwar world. I cried.
This interchange reminds me of a story that happened to me when I visited Mongolia in 1998. I was drinking with a Russian businessman and we were discussing politics and he was very cynical (goes with the territory). We got on to who would win the next election of our respective countries and he was certain that the mayor of Russia Yury Luzhkov was going to be elected. All of the oligarchs had coalesced around him and that was that. I made a guess that Bush's son would probably be elected for the same reason. This was before I knew anything really about W, save his father did okay and he was gov of Texas and seemed to have Oil backing.
I wish to god I had been wrong and he had been right.
September 20, 2009 6:19 PM | Reply | Permalink
Wow Obey, that's alot of ground to cover.
"...I find the idea of a Chinese 'threat' which motivates a lot of these worries somewhat exagerated..."
I don't have an informed opinion about China as an existential military threat per se though I do note their efforts to acquire/build a 'blue water' navy, shoot down one of their own satellites, and engage in some pretty serious cyber hijinks.
"...there is much less of an Imperial impulse..."
Certainly true in that the Chinese aren't, IMO, seeking a 19th century expanding red line on a map called 'the Chinese Empire' or a 20th century type of pax Americana. Yet they are, as we write, creating spheres of influence in the developing world through 'no questions asked' development and raw material exploitation investment. They actually use 'no questions asked' as a selling point. Have a read of Rotberg's 'China Into Africa' ( http://www.amazon.com/China-into-Africa-Trade-Influence/dp/081577561X/ref=sr_1_1?ie=UTF8&s=books&qid=1253466875&sr=1-1 )
Also, they realize by so strongly backing 'no questions asked' it makes it harder for other nations, like the US to 'ask questions of them. We have pretty much given up on that score already.
"The Japanese themselves are pretty unworried about the expanding Chinese influence."
Not sure, under Aso and the LDP, Japan was toying with the idea of vastly increasing military spending (as a econ. stimulus tactic and a 'rising China' offset). Let's wait and see what happens under Hatoyama, Kan, and the DPJ.
"Some second thoughts about the 'engagement vs sanctions' issue....We just don't know which of these would have happened, and to my eyes, optimism about the first of these coming true looks like quasi-neocon fantasy."
Sadly, we will never know. Just to be clear, I do NOT advocate we suddenly embark on some hare-brained attempt at this juncture to isolate China. A whole herd of horses is outta the barn. Thus the title of my original post. I am certainly not a neocon, read my comment on the passing of Irving Kristol ( http://tpmcafe.talkingpointsmemo.com/2009/09/18/irving_kristol_dies_how_will_the_neocon_church_now/#comments ). I merely aimed to point out that in the heady days after the Berlin Wall came down the G-7's economic primacy measured by how much of the global economy was of their respective GDPs (>75%) far out stripped even their impressive military might. It's not as if 'the West' spent much time agonizing how to 'deal with China'. Corporations pushed for 'engagement', CoCom was allowed to die, was replaced by the voluntary, useless Wassenaar Agreement and the global corporate gold rush began. That was/is our 'peace dividend'.
As to the success or failure of 'engagement', a policy that has been in play for almost 30 years now, maybe it is too early to tell. But if one dispassionately looks at the goals set by advocates of 'engagement' at it's outset i.e. "change China from within", "economic reforms will inevitably lead to political reforms', "a burgeoning middle class will insist on certain freedoms" it's not hard to be sceptical.
I truly wish that I could point at some non-economic progress and say, "hah, that is a byproduct of engagement."
"A last point on the issue of blaming China for our present economic ills. I just don't buy it."
Totally agree with that whole paragraph, I like the pun-like "I just don't buy it", was that intentional? Awesome.
You're right, like on so many other fronts, Bush was a terrible steward of foreign/trade policy because he was even more hands off than his predecessors.
I do think you give China or Chinese policymakers too much credit for making China what it is today. Without the >$2trillion in FDI since Deng, which we begged them to accept, China would be a much different place right now.
How clever does one have to be to say "yes" to money being thrown at one?
As always, thanks for the 'engagement'.
September 20, 2009 1:56 PM | Reply | Permalink
All your points are well taken, trblmkr. you have some great links, too!
Just on the belligerency you see in some China's moves. To me they are to some extent a pretty reasonable reaction to US antagonism. Eg. in the case of the satellite downing. It came in the wake of US statements of policy claiming or aiming at dominion over space in military matters. Which is pretty much a direct attack on the national security of other powers. Somewhat uncalled for. Beyond that their military expansion is not outrageous for a country and a regional power that size. The fact that they won't willingly submit to US supremacy in the fashion of Europe and Japan is quite understandable, imo, even if we aren't quite used to that kind of independence. As for the cyber-stuff, I don't know. And there is much that WE don't know. Has the US, for instance, been conducting/testing cyber attacks on China's defence systems? I wouldn't be at all surprised. And given how in conventional warfare standoffs like this there is no little amount of play with provocative posturing on all sides, it is pretty much to be expected, no?
Dunno, maybe I'm too sanguine. And I'm not really intending to play the China apologist here. More reacting to positions I find a bit strongly put.
But again, great blog. great discussion.
September 20, 2009 6:04 PM | Reply | Permalink
Agreed, really good blog Troublemaker!
Ironically I find myself sometimes playing the china apologist for the similar reasons Obey (tends to depend on the crowd). Part of me really gets a kick when china tells us off. We usually deserve it.
Its complicated.
September 20, 2009 6:40 PM | Reply | Permalink
Hmmm, I've calmed down a bit. I think Troublemaker below really gives an excellent answer regarding the question of sanctions vs. enguagement in the aftermath of the coldwar. To which I can only add my own befuddlement at why we did not strategically invest in Russia rather then China (sure there is the geography issue- Russia is largely landlocked). Building up a strong free Russia seemed a smart play but instead it was allowed to become a kleptocrazy (maybe that was what the Russians wanted but i think a greater effort to engage would have helped, and more NGO's like Soros's Open Society).
Your point as to who the chinese would blame if sanctions had been enacted and their development would have been impaired I don't think is apt. I think your general point is true, but the chinese did not have much trade before the 90s, only a few coastal Special economic zones had been set up in the 80s. If we (G7) did not go in and invest full bore the majority of the country would not have ever known what they were missing. Sure they would have blamed us, but they have been blaming us since the Opium wars. My point was that their growth would have been retarded and this might have lead to internal turmoil.
You are correct that Japan, despite its passivity in our eyes, is still a force to reckon with. Thier Military matches and in many cases still surpasses China's. And all of Asia has some serious historical wounds that have not been healed.
What is it that gets you worried about the American rise of the "china threat'? We have had fears of the "great yellow horde" for at least 150 years. I don't see what is different now. Sure the military is a little worried (particularly the navy as their subs are now as good as ours), but that is what the military is supposed to do.
On the economy- Did we blow it? Absolutely. But the point I raised is that China has used a strategy to deliberately get our jobs. Now sure I fully agree with your point that we squandered the surplus savings the arrangement gave us on mcmansions and walmart junk. And yes if Gore had been in power and we had enacted some sensible environmental policies and pricing then we could have used that surplus to invest in sustainable technologies. The fact that we didn't is not really my point.
This blog is looking at the issue from a the perspective of geopolitical strategy. And despite the possible benefits to our side that could have accrued from our trade relationship the fact is that China has deliberately undertaken it. They have never had any interest in allowing their currency to float. They wanted the jobs. Period. On that account they are winning and we are still bleeding jobs and industries that we could compete on if the accounting rules were different. There success has come at the expense of our middle class. Maybe that was historically inevitable, regardless our multinationals have gotten vastly richer and more powerful in the interim.
At one point the world will get tired of our arrogant proligificy and the dollar will be replaced as the dominant currency. That will happen probably in my lifetime. China will have a more advanced infrastructure and industrial capability and they will displace us as the dominant power. That doesn't mean we need to fear them, there is no reason to presume that will intrinsically be bad. It just sucks, because I like freedom of speech.
That is an issue that is dear to me. The CCCP creates is own reality in the same way that Fox does. With the uprising in XinJiang this year I listened to an interview with a Han woman on NPR and she genuinely had no idea why they were upset, she had never learned anything about the region she was colonizing (despite the romanticism of the Silk road, that area was not historically Han, nor was Tibet, they are now but government fiat and moving the Han's in.). See that bothers me. That is how their education and news work, repeating propaganda and it is effective. It largely keeps the peace- but I don't like it one bit.
Finally as to the governance. I fully agree with you that their are multiple moral matrix involved. We are hardly a paradigm of virtue (actually Iraq pretty much renders all our protests mute). I would like to point out that at the beginning of my first reply to you I stated that the moral argument of lifting 1 billion out of poverty is a persuasive one. There is much merit to that argument. Is some corruption okay if the trains run on time and we have food on the table. Is it okay that some people disappear occasionally or are arbitrarily locked up? Is freedom of speech necessary for happiness? I don't know the answers to those questions. For me I am inclined to say yes and therefore despite their breadwinner virtue- I don't like the rise of Chinese influence.
Now here is where things might get interesting in the next two decades. What if we get some great sustainable technologies that can really help heal our world (more in my series coming). What if it is their autocratic rule that allows them to really enact them on a wide scale and we continue to dither because some teabaggers can whine aobut taxes. Then what will I say?
September 20, 2009 6:08 PM | Reply | Permalink
Great points all, Sal. Don't think I agree though on the coming Chinese dominance. These phenomenal recent growth rates are going to flatten out, their demographics stand in their disfavor, higher levels of development are harder without some sort of rule of law, etc. But we're going to have to live with the fact that we no longer can dictate matters across the globe.
I'm also a bit skeptical (not objecting, but just confused) about our level of responsibility for China's development. Sure, there are the significant FDI figures. One issue is setting up the counterfactuals - what would have happened, would Europe have jumped on board, would FDI just have become indirect investment funnelled through other countries in East Asia, the Chinese diaspora, etc? Secondly, the FDI went there because the market reforms made the country extremely attractive. In contrast Russia post 90 was a basket-case, and still to some extent is. Thirdly, throwing money at people is far far from a sure-fire way of juicing an economy. It's so much harder than that. External investment is a good thing, but neither necessary nor sufficient. Fourthly, i'm getting confused now between two claims:
i. we could have prevented their development by sanctions, and
2. we are (to x degree) responsible for their phenomenal development.
And I suppose different arguments apply to these different propositions.
I might also have something to say about the 'they stole our jobs' theme. I don't think they intended to STEAL our jobs. And even if so, it wasn't just them, but all developing countries were trying to create some industrial manufacturing base as a core element of development. Not sure how it's otherwise to be done. Manufacturing export-driven growth is a pretty standard model. They threw in the additional element of currency-manipulation. So maybe that is the objectionable element. But it's not really stealing if you give something in return - cheap money. My point is just that the latter was horribly misused. It could have been used to create profitable investment, with all the jobs that come with that. But we didn't. It comes with the territory of being highly developed that the number of low-skilled jobs in agriculture and heavy industry shrink. THe solution isn't to blame those countries who take them over, it's to create new jobs, adapt. But maybe that's a discussion for another day.
(you say you calmed down - hope it wasn't due to me and my maybe awkward tone that got you heated up. If so, most unintended, as I hope you already know...)
;0)
September 20, 2009 6:46 PM | Reply | Permalink
Obey,
fair points.
I agree with you on the demographics- I just believe that China will grow to be a larger then us in my lifetime, but perhaps dominance was the wrong term. The world is becoming a multipolar one.
Why not blame them? Aren't we playing armchair geopolitical strategy here? On the ground I have many friends and family members, educated hard workers that can't find jobs. Its nice to be in the clouds- but blood is thicker then water. Hell how many on this site lost their jobs in the last year? I am very ambivalent.
Yes, Russia is a basket case. I don't know if it needed to be though.
It wasn't just the market reforms that made China attractive- It was the cheap cheap labor, and the mystic of 1.3 billion new customers. At the time I was living in China (admittedly dated 2001 I left), most foreign companies still had not made money on the domestic market. However, manufacturing for export to us was very very profitable. Still is. I am merely pointing out that this is because of the currency. Sure perhaps stealing jobs is not the right term, but they have strategically manipulated their currency that lead to this result. They have agency here too.
September 20, 2009 7:32 PM | Reply | Permalink
Conceded - 'profitable' was the wrong term. For all the reasons you give.
Now you have me imagining what would have happened without currency-manipulation. The Bush deficits would have sent interest rates through the roof, throttling consumer debt and stifling corporate investment. We'd still be fucked, but without the stock-market/real-estate roller-coaster.
Another minor point - I think the idea behind the natural shrinking of farming and manufacturing jobs has more to do with vastly increased productivity leading to fewer jobs for the greater output. Hence the trend towards jobs in services such as HC and education, where productivity is harder to increase much. Losing jobs to China, if that's what we're going to call it, is a small part of a much broader trend. What did our trade-deficit with China look like at its peak? 1.5% of GDP?
Apart from that, are medium-skilled jobs getting replaced by low-skilled jobs? Didn't realize that, though it makes sense. Do you know of some research on this? I just don't like the knee-jerk 'raise tariffs' reaction...
September 20, 2009 8:11 PM | Reply | Permalink
Now you have me imagining what would have happened without currency-manipulation. The Bush deficits would have sent interest rates through the roof, throttling consumer debt and stifling corporate investment. We'd still be fucked, but without the stock-market/real-estate roller-coaster.
Too which you can add that a lot of CO2 generated by those bubbles and China's growth wouldn't have happened. Oh and I might never have heard about the bulsshit "proseperty gospel".
Consumer debt was unsustainable in 2000. Its way worse now. We have created a huge underclass that will likely never be debt free, or never be credit worthy again. Both are losses. We should not have created such a debt trap. We should have confronted the hard questions and forced reforms.
Yes it is a part of broad trend, but China is the number 1, by a long shot. A trade gap 1 to 1.5% over 2 decades is culminatively quite substantial, and those were real deals, not paper wealth generated by the cheap money bubble- still supported by the FED's printing and the suspension of Mark to market accounting. You could argue that some of the jobs that were generated never would have happened in the US and for a lot of stupid products I agree. But those products never should have come into being to start with.
As to research behind my claim of mid skilled jobs being replaced by low skilled. I am afraid I don't have anything of the top of my head. Anecdotal accounts like Barbara Ehniriechs books are probably not what you are looking for. Here is an article I just goggled.
http://www.cemfi.es/~dorn/Autor-Dorn-InequalitySpecialization-LowSkillServices.pdf
I am pro trade, but I am against dumb trade. And am not against throwing some elbows. I don't like how the free trade mafia has taken over intellectual discussion. My reading of economic history differs, I tend to agree with Ha JoonChang I don't think that there is anything wrong with the occasional tariff, many have done a lot of good. They are all just tools, means to an end. The question is what is the end?
September 20, 2009 8:58 PM | Reply | Permalink
Thanks for all that. I'm not disagreeing much. My problem with the free-trade fans is the obsessional nature of it - a lot of other factors matter much more, imo. And also the fact that Dean Baker loves to highlight: the selective nature of where this mafia wants full competition.
September 20, 2009 10:17 PM | Reply | Permalink
Obey,
I Just read this article, it is fairly well balanced and gives some interesting anecdotes on the current politics of our relationship. Its worth a read just for the Geithner student story.
http://www.tnr.com/article/economy/peking-over-our-shoulder?page=0,0
September 20, 2009 10:27 PM | Reply | Permalink
Really interesting. bkmk'd. Great Geithner story!
September 21, 2009 11:21 AM | Reply | Permalink
Just another point on my handwringing about fears of a 'China threat'. These fears aren't new? It's new to me, anyhow. At least in its increasing intensity, mainly on the right, and now due to supposed economic wrongs (which you seem to endorse) also on the left. I think the fears are overblown. That may be me overestimating the force they have. Or underestimating the threat, as you and trblmkr suggest. But if the threat is to be taken as an argument for a more antagonistic stance (where I'm not sure of your position), then that seems pretty wrong as a pragmatic issue. If this turns into a trade war now, and by extension a military escalation, everyone loses. Or would you disagree?
September 20, 2009 7:00 PM | Reply | Permalink
Maybe it is because I grew up in Portland, now a liberal haven but a town that ran all the Chinese out twice. But it doesn't seem new to me at all, I mean the 1882 Chinese exclusion act Could be a west coast thing.
We largely agree. I don't think they intend to be a military threat- but they want to be equal, and economically well it's way too late to get those jobs back.
Truth is that what really gets me is that I resent their influence in undermining human rights throughout the world. Its what they do (se Sudan). They claim some quasi-Confucian Chinese way about things and that's fine. Kinda quaint. But I value human life, and I value honest discussion. I value truth. They are actively engaged in rewriting their own history (tibet, taiwan, Xinjiang) and they are good at it. I hate it, its not the truth. That isn't to say they aren't wrong when the call Tibet a backwards theocracy, just mean its not the whole truth. What bothers me is that you will be arrested if you want to talk about it. Can't support that. Nope.
Or even more fantastical how they twist Marx, Lennin, Mao, and Deng thought into whatever current CCP fasion is. It's perverse- mindblowing historical nonsense that contradicts itself at every turn. They teach it like gospel. They make a mockery of their own history. I don't respect that and it is hard for me to take the CCP seriously because of it.
That being said, I still read the China Daily ever week or so. They do highlight some things we miss.
I am not sure if I am against the occasional trade war. I love Ricardo as much as the next guy but I am not a free trader. Import substitution is what built the USA, and is building china. Post Pax America I look at England today as the likest path for us and that is not particularly appealing. Still could be worse.
But Hell if it happens and then moves to military they simply dump our debt and write down their own losses. They institute martial law and our entire world collapses. I don't think it is going to happen, too much like MAD. But hey, you know what they say- Interesting times.
September 20, 2009 7:54 PM | Reply | Permalink
"They had reached out to Europe as well as the rest of the world, but in 1989 we were the dominant power bar none. Further, we were the technological leader and our consumer market is what has driven China's growth. Depriving them of our FDI and particularly our market would have severely retarded their development."
Absolutely excellent! We will never know what might have happened if G-7 leaders had ignored the corporate Iagos whispering 'engage to change' into their ears! We spent trillions strengthening China and solidifying central control while giving Gorby/Yeltsin the fiscal finger. What was the difference from a corporate point of view? China:stable, Russia:messy nascent democracy, yuck!
September 20, 2009 2:04 PM | Reply | Permalink
Obey. Thanks for the thought provoking words.
"But are you seriously arguing that what brought the Soviets down was trade sanctions? First time I've heard that theory."
Read this carefully http://cns.miis.edu/pubs/npr/vol06/62/lipson62.pdf
What "brought the Soviets down" was a combination of outspending them militarily, Gorby realizing the futility of trying to keep up and CoCom. CoCom was sacrificed at the behest of multinationals.
"Sure the 'Party' is still in control, but it is composed of a much more heterogenous group, with business leaders moving up the ranks, than the previous ideologues, isn't it?"
The two are inexorably intertwined through corruptive guanxi(corruptive connections). There is virtually no incentive to upset the proverbial apple cart.
September 20, 2009 4:53 AM | Reply | Permalink
Thanks, trblmkr, for the link and an all-round great blog and thread.
My own rather simplistic take on the USSR is that Gorby had the possibility of his own Tiananmen, with Western consent (see Thatcher's recently released contemporaneous comments to Gorby), and he opted otherwise. Understandings of the fall are very strange - just before it happened it seemed inconceivable, now it seems inevitable. Neither view strikes me as convincing. Russia and China took two different paths in 1989, and to my sometimes brutally 'realist' eyes, it's difficult to see who took the right one.
As for governance, I really prefer to abstain from overwrought criticism of China until, eg., their incarceration rate approaches that of the States. There are so many moral metrics of evaluation here I have a hard time finding a univocal pov. I somehow think their brutality, oppression and the rest of it does need to be weighed up against the HUGE economic miracle they have managed to bring about. Hence my ambivalence.
I added some further thoughts in response to Saladin. Thanks for this. Looking forward to more in this vein...
September 20, 2009 8:31 AM | Reply | Permalink
Thanks for your kind words.
"I simply don't get our selective use of engagement. Seems to me we had it backward- we should have engaged Cuba which likely would have overwhelmed them and blockaded China like we successfully did with the Soviets."
Corporate America(and the rest of "the West") had been licking their collective chops for cheap, abundant Chinese labor ever since Republicans pilloried Marshall and others for "losing China" in 1949. Compared to Cuba and other smaller examples, it was just a matter of scale and proven historical usefulness under the Brits.
"Seems to me it's a play on the freidmanesque "counties with mcdonalds don't go to war with each other" meme."
Absolutely right. Friedman and those of his ilk love to extrapolate anecotal drivel like that as real "progress". It's the whole post cold war "stability" vs. "democracy" meme.
September 20, 2009 4:43 AM | Reply | Permalink
I agree with the premise that US-China trade, and free trade in general, has lifted the standard of living of hundreds of millions of people...and that is a good thing. Even if it was at the expense of Americans and American workers.
But I think Saladin nailed the problem. The elephant in the middle of the room that no one seems to be willing to acknowledge is quickly dwindling global resources. Use and throw away, use and throw away, use and throw away ad infinitum, will surely lead to an inevitable global conflict more than putting a tariff on tires will. And all the people in power are diong about it is is to try to revive the US consuming juggernaut.
In the not too distant future something considered as basic as fresh water will be the most valued commodity and control of it will lead to wars. Capitalism can do, and has done, good things for humanity...but relying solely on capitalism to solve our problems will inevitably destroy us.
September 19, 2009 6:41 PM | Reply | Permalink
Excellent points all.
Look at how the Chinese have learned the "laissez faire" lesson of FDI very well. They are becoming the investor of choice among countless despotic regimes because they are willing, as the West was with China, to turn a blind eye to atrocities.
September 20, 2009 4:57 AM | Reply | Permalink
You are absolutely right to raise the issue of sustainability, Libertine. It is abundantly apparent that we can simply not sustain the present rate of resource consumption, let alone extrapolate it to an increasing number of consumers throughout the world.
This presents a real fundamental question that begs for an answer: Is Capitalism sustainable?
The answer to that question is left for those who are WAY above my pay grade. It IS fundamental, and I cannot envision how we manage to make a shift to any kind of sustainable alternative in time to avoid the catastrophic consequences to which present rates of consumption of resources are leading.
September 20, 2009 5:00 AM | Reply | Permalink
"Even if it was at the expense of Americans and American workers."
Why exactly are you ok with this? From your own words, people have lost their lives and their jobs...For someone on the other side off the globe they'll never meet or even talk to. And it sold us into economic slavery to those very people, basically.
Why do you think this is a good thing? If you want to hand over everything you have for some poor person in the other hemisphere, be my guest. But don't sign the rest of us up too.
September 19, 2009 9:33 PM | Reply | Permalink
Like so many other ideas pithced by the corporate interests, the engagement idea sounded very good. But, also like most ideas pitched by the corporate interests, they lied about exactly how it would play out and why. The corporate interests don't give a tinker's damn about the interests of the US, the west or anything else. The only thing they care about is themselves and thusly have acted in their interest which was not the same as the public interest of thw west or the US.
September 20, 2009 1:31 AM | Reply | Permalink
That's absolutely right and proves that the old East vs. West paradigm has been replaced by the corporate concern of "stability" vs. "instability" paradigm. They don't give a shit if a given country, targetted for investment is democratic or not. As a matter of fact, given their druthers, they would prefer a strongman in power to keep things oderly.
Face it, "engagement" is making us more like China, not the other way around.
September 20, 2009 5:02 AM | Reply | Permalink
Trade policies and engagement can lead to progressive advancements, but that has not happened here. Instead, it seems to me that our present policies with China and with every other country has been exploitative; simply a progression of the colonial practices of the last two centuries.
For now, let's put aside the well-considered sustainability arguments that question if we can afford a worldwide consumer economy and look at this within the context it has been considered.
If we were truly interested in raising the standard of living for the peoples of China and elsewhere, we would encourage multi-national corporations to engage China in effort to expand their markets. General Motors, for example, would build cars for the Chinese. US Steel would build foundries to make the steel for GM-China. Etc.
But the overriding principle here would be that these companies were building the Chinese economy, much as Ford and the others built our economy, from the ground up.
Thus, it would be important to encourage GM to build cars in China, but equally important that we have in place trade restrictions that disallowed those cars from being exported to America or other first-tier markets. In this way we would be ensuring that the Chinese workers were gaining the benefits of their labor while protecting the American workers from losing all benefit of theirs within this economy.
As it is, the multi-nationals are the only true winners who gain both cheap labor and the access to much wealthier markets for the goods they produce. It has resulted in some advance in living standards for the middle and lower classes in the developing economies (until, at least, you factor in environmental impacts related to the absence of regulations), but these advancements are mostly accidental and are in fact accomplished despite efforts by the multi-nationals to keep them as low as possible. One has only to see the competition among developing countries such as VietNam, Philipines, Thailand, Burma, and others to see just how cruelly this race to provide the cheapest labor plays out.
The trickier aspect of using trade policy to promote sensible and sustainable development comes in the need to encourage environmental and labor policies and other regulations that responsibly guide the burgeoning development within these countries. The proliferation of coal-fired power plants in China alone is enough to give anyone pause on the wisdom of our reliance upon a consumer economy. But our own history of development causes us to be ill-placed in raising objections about the degradations that might be experienced elsewhere in "new" economies. We had our own near-catastrophic "growing pains" to get where we are as a developed economic powerhouse, and we therefore cannot credibly argue that other countries should not be allowed to exact the same costs from the environment, etc., required to gain their opportunity to seize the brass ring.
Bottom line? I think trade policies can indeed be used to encourage an improvement in the lives of people within developing countries. I think policies - such as the encouragement of trade unionism within these economies - can also be used to encourage growth of legitimate democracies as well. But these benefits of trade can only be realized if they are set as the objective, as opposed to the present objective of simply gaining the cheapest labor available to feed the profits of our multi-national corporations.
September 20, 2009 4:50 AM | Reply | Permalink
SleepinJeezus, awsome note.
"But our own history of development causes us to be ill-placed in raising objections about the degradations that might be experienced elsewhere in "new" economies. We had our own near-catastrophic "growing pains" to get where we are as a developed economic powerhouse, and we therefore cannot credibly argue that other countries should not be allowed to exact the same costs from the environment, etc., required to gain their opportunity to seize the brass ring."
From 1650 to 1950(ish) it took us 300 years to realize that smoking was deadly. Now that we have that knowledge, do we let our children go ahead and smoke in order have their own "growing pains" or "seize the brass ring"?
Admittedly, not a perfect analogy but if 1.3 billion Chinese eventually consume like we do, all bets are off.
September 20, 2009 5:12 AM | Reply | Permalink
Your last line is the most relevant in this discussion. We simply cannot sustain another 1.3 billion consumers in this economy. Yet, we continue promoting and building a consumer economy that cannot exist in stasis, but is required to maintain steady growth for its survival.
Something's gotta' give! And it ain't going to be pretty or easily accomplished, regardless of what happens in China/US trade relations.
Thanks for providing an extremely important post upon which to consider and discuss these critical issues. I just wish I had answers, but they surely don't come easily.
September 20, 2009 5:22 AM | Reply | Permalink
I believe it has long been recognized that there is a global transition underway where nations such as China and India have been developing their economies.
The outcome in the long term will be an overall global increase in living standards. In the short term though much has been written about the struggle between developed and non-developed economic units.
If I remember correctly the projections for this to come into balance wasn't until sometime in mid-century. We've been observing pretty much exactly what has been previously described in this regard. That is, the U.S. and other developed nations would suffer losses at the cost of growth in less developed economic units. I recall of having read where this is all but unavoidable. The general theme is the less developed economic units will eventually be in roughly the same ballpark as the more advanced economic units. But achieving that parity will take well beyond our lifetimes. I remember also the assurance that the interim will be one of imbalance and compromise for both sides relative to various pieces of the overall puzzle.
Now that this is actually underway as I had read two or three decades ago there are questions of the pace of it and whether China and India can sustain that pace, if it is happening too quickly and what are the environmental and human tradeoffs. These are very complex questions with no fixed or certain answers.
I can see one thing that is an undesriable outcome. The U.S. with our intense capitalism, has let the larger population suffer in a disproportionate way relative to other more developed contemporary economic units. This is very problematic and could be a very disruptive factor as time passes. At some point congress has to bite the bullet and rein in corporations to avoid this disruption becoming more than just an imbalance.
September 20, 2009 5:19 AM | Reply | Permalink
Sometime, as of right now, this site becomes very educational for people like me, people who aren't schooled in world interactions as many contributors obviously are.
I'm reading constructive debate and I'm getting a lot of information about geopolitics that you don't often see online. Now if we can just keep this thread from being hijacked by the usual right wingers who so often visit, the value will continue.
Why, this could become the C-SPAN of Blogs.
September 20, 2009 9:02 AM | Reply | Permalink
Oh good grief!
You mean like the CSPAN Community? I don't THINK so.
=D
September 20, 2009 8:29 PM | Reply | Permalink
Hey everyone. If you're so inclined and want to keep this post on the TPM front page so we can bring more (thoughtful, civil) people into the discussion, please click on 'recommend'.
Best regards,
September 20, 2009 2:12 PM | Reply | Permalink