Dealing with China

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“DSC_0844” by Studio5Graphics is licensed under CC BY-NC-ND 2.0

Relations with China are important.  By some measures the Chinese economy is already the biggest in the world and still growing rapidly.  The Chinese military is the most comprehensive challenge to US hegemony since the heydays of the USSR.  Chinese technology has evolved rapidly to near parity with ours.   The Chinese political system could not be more diametrically opposed to ours.

With such a significant adversary, it goes without saying that we need to manage the relationship carefully.  At the moment, though, all we’ve got is war-mongering.  The Trump people have always been big on scapegoats, and the Chinese are just as convenient as the immigrants.  A difference is that immigrants have some defenders—Trump can’t get away with just calling them all animals.  But by playing patriot, Trump has gotten away with pretty well anything about the evil Chinese.

A couple of comments:

– Since the Chinese were major allies in recovering from the 2008 crash—and the Republican Party was not—there’s a strong case that Republicans (deliberately) caused more pain to the US economy than the Chinese did.

– The Chinese intellectual property theft we keep hearing about had been diminishing until Trump ignited his trade war, and Chinese hardliners felt empowered to fight back.

Competition with China is a fact of life.  No amount of trade war is going to make them go away.   So “getting tough with the Chinese” is publicity not policy.  What matters is how to get results, as we’ll discuss.  Further, it should be recognized that we actually have quite a lot of influence on the form our relationship will take.

We’ll start with some background.

  1. Political and economic systems.

China is very unfree.  There is extreme control of information available internally, and consequences for speaking outside the party line can be very severe.  Recently deployed surveillance systems add another dimension of party control.

Before we get too far up on our high horse, though, we should recognize that support for the regime in the population is now very strong, perhaps stronger than ever.  The regime has delivered unimaginable economic success for a very wide swath of the population.  Just to be clear this wasn’t stolen from us—US trade is a small part of the overall Chinese economy—it is a legitimate success.  And it created a sense of pride in China that had been lost for centuries.

There were two primary factors for that success, one intentional and the other not.  The intentional part was government investment in the population (e.g. education) and national infrastructure.  That prepared the country for technological achievements that would have been impossible otherwise.  In that, China was very much like the US in the fifties—when the government sent the GI’s to college and built the interstate highway system.  Public investments we’ve forgotten how to do.

The other success factor—strangely enough—was an accidental surge of free enterprise.  As a minor weakening of collective economic control, Chinese municipalities were freed to carry out their own businesses once obligations to the state had been met.  That minor bit of freedom took over the economy.  Municipal businesses became dominant to the point that they dwarfed the (corrupt) state-run enterprises.  Municipalities ended up devoting all attention to their own businesses, to the point that they were meeting their obligations to the state with products purchased by free-market profits!

So China’s success was as a mixed market economy.  Where Xi’s new stress on state enterprises will take them remains to be seen, but it certainly raises questions.  In many ways Xi’s push to consolidate power in the state is just as radical as Trump’s push to turn everything in the US over to the private sector.  Both are abandoning past recipes for success to cults of personality and personal ideological visions.

  1. History, nationalism, and negotiation

Western imperialism in China was terrible and recent.  The Opium Wars were fought for the profits from addicting the population, and it took Mao’s hell to drag the country out of the consequences.  While the Europeans were primary players, we had a role in it too.  We have conveniently forgotten all of that, but the Chinese most emphatically have not.  Not just their leaders but the population as a whole has reason to see their current place in the sun as hard-won against forces that have done their best to keep them down.

That’s a dangerous situation.  It sounds like Germany in the 1930’s (eerily, that’s also the only other example that comes to mind of such a dramatic economic recovery).  From that example we know what doesn’t work: neither draconian efforts to keep them down nor appeasement after the fact is going to be successful.

In that context our unilateral trade wars have several bad effects:

– They complicate negotiations by mixing fair trade with measures to retain dominance.  In that the trade wars are counterproductive even domestically, by encouraging the false belief that we can “defeat” Chinese competition.

– They make negotiation a matter of pride not just interest.  Worse, they produce broader nationalist reactions in both countries.

– They lead to more destructive isolation of countries from each other, always a bad idea.

The only path that works is to make them part of the world economic order.  That such approaches work is the primary lesson from the changed world order after the second world war.  The point was discussed recently in a piece by former leaders of ten disparate countries.  The WTO is the means by which rules can be established for free trade as well as conditions of labor and environmental concerns.   As such, it is a much more effective instrument of national policy than the pot shots we’re taking now.

Let’s be very clear that this is not about being nice—it is the path of maximum leverage.  The reason why our current discussions with China are getting nowhere is because we have chosen weakness—replacing leverage by bombast for public consumption.  Under Obama, with far less economic leverage than we have today, both the balance of payments deficit and incidents of intellectual property theft declined markedly.   Both have increased under Trump.

  1. Morality, Chinese minorities, and Hong Kong

There’s a lot we don’t like about the way the current Chinese government does business.  In addition to repression of the population, there is the imprisonment of Uighurs in concentration camps and the heavy-handed suppression of democracy in Hong Kong.

Let’s start with repression of the population.  An important question is why the population is enthusiastically ready to accept that Xi’s model over ours.  Part of it as noted is the economic success and rise in stature of China.  However, another part of it is that—correctly or not—they don’t see the current version of the US as a good argument for our ideals.

The Chinese government may be repressive, but at least they have a proven commitment to improving the economic well-being of the population.  Seen from the outside the US is run for corporations—who can buy elections with impunity—and those corporations have no commitment to anything beyond return for their investors.   Government sees no reason to intervene for the well-being of the population, and the all-pervasive corporate influence leads to a relentless consumerism that dominates daily life.

Where we see in Xi a return to discredited socialist control of the economy, they see in Trump the triumph of corporate power.  It’s up to us to prove them wrong.

Until that happens, our support for the Uighurs is hypocrisy from a country that puts immigrant children in cages and demonizes its own citizens.  Support for political liberalism is strange from a regime than calls the press “enemies of the people”.   And support for democracy in Hong Kong is nothing more than the nth Western effort to keep China down.

That doesn’t mean there’s nothing we can do, but we shouldn’t delude ourselves about the power we really have.  Our actions on Crimea were ultimately little more than symbolic, and we could do nothing at all about Tiananmen Square.  For Hong Kong, the Chinese have already branded the unrest as a Western plot, so overt pressure can be counterproductive.  Just like the US, China is less likely to cave in to coercive power than to international outrage.  For that we need allies and behavior that matches our rhetoric.

 

Where does all that lead?  Here’s one list of conclusions:

– We must bring China into the world economic system with updated rules reflecting today’s reality.  That’s why the WTO exists.  This would have started before now with any other President.  We have a major responsibility to make it happen.

– There are other areas, climate change is an obvious example, where we have a strong need to work together.

– There are also compelling reasons for vigilance, particularly with the military.  But even there we have a large interest in agreements (with Russia too of course) wherever possible.   In particular we all need to avoid arms races and military instability.

– Economic competition with China is inevitable and will be intense.  There is no reason either we or they will be sole winners, as the differences between the societies will lead to different strengths.  That should be good for worldwide prosperity.  The most important thing for us is to recognize and play to our strengths.

– We should (at least for now) view both Xi and Trump as anomalies.  Both are roadblocks to domestic and international progress, and there is no way to know how long they will last.  But they do not define their countries or the possibilities for the future.

– Finally if we’re worried about the decline of our ideals in the world, then we should accept the challenge of living up to them!

Exported and Armed Prohibition

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“Prohibition Repealed: New York Times, 5 December 1933” by cizauskas is licensed under CC BY-NC-ND 2.0

As a nation we seem to be baffled by the problems of drug-based criminality south of the border.  Why can’t those people live like us?  What makes us so superior?

For those questions it’s worth emphasizing that we used to have problems like that too.  Our problems were self-inflicted, but the phenomenon was similar.  Let’s talk about Prohibition.

Prohibition was a reactionary revolt much like what we’ve got with the Christian right today.   The heartland was able to stick it to the godless, immigrant-infested cities.  No more alcohol to corrupt our body fluids.

That repressive crusade was just too overarching to succeed.  It resulted in an immense network of criminality to meet demand.  Criminality pervaded every corner of the country, and the kingpins captured the news daily.  It could and did happen here.

Let’s compare with the situation in Latin American.  North of the border there is vast money to be made with illegal drugs, and the resources available to stop it are ludicrous by comparison.  Big surprise they’ve got a problem.  We have drug problems too, but we also have resources of the US.

What kind of help do they get?  They can’t even get us to slow down the sale of military-grade weapons underpinning the drug wars.

It’s like the wall.  Let’s just keep problems out.  We’ve exported and armed Prohibition.

A Nightmare World of Our Making

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“presidential Twitter” by osipovva is licensed under CC BY 2.0

The first Democratic debate began with a question to Warren about the economy: “Since most Americans think the economy is doing fine, why do you need all those plans for change?”  She responded by pointing out that the “great” economy was primarily benefiting only a lucky few.

Even that, however, understates the issue.  It’s not just that unemployment rates don’t tell the whole story about what it means to be working for a living.  It’s that there is so much run amok with the direction of the country that the unemployment rate doesn’t begin to stand-in for the strength of the economy or the well-being of the country overall.

For that we need to pull together many strands and formulate a picture what it would mean to have four more years of Trump—the kind of world we are making.  This note attempts to make a start.  We can be explicit about many things.  Our path of decline was clear from early on, but now we have more specifics.  We should leave no doubt about the risks we run.

In doing this, one goal is to avoid what I felt was a problem with the Clinton campaign.  Trump kept talking about change, but we didn’t get across the danger in those changes: what they would mean for ordinary daily life, for the environment, for the courts, for democracy in America.  Who’s to say if that would have made a difference, but many people were certainly surprised by what they got.  If nothing else, it would have called out the risk of non-voting.

What follows is an outline with a few supporting points and references.  As noted this is a start.

More unprecedented floods, hurricanes, temperatures, etc.

By leaving the Paris agreement we broke the international unanimity that was the best chance for progress.

               Each lost year is time we won’t get back

Disdain for science and technology in government

Non-support of research and education

Ignoring climate change technologies

Choosing big, established companies over innovators (Net Neutrality)

Xenophobia and racism encourage entrepreneurs to go elsewhere

=> Lower standard of living

=> Real threat to our military security

  • Nuclear proliferation and risk of nuclear terrorism

Encouraging nuclear proliferation by statements and actions (N. Korea vs Iran)

More players means more chance of theft or sale

Belligerence normalizes nuclear weapons

Bulletin of the Atomic Scientist sees highest risk of catastrophe ever

  • Back to the 19th century on woman’s rights

Roes vs Wade hangs by the thread of Roberts’ desire for Court legitimacy.

One more Supreme Court vacancy, and we all live in Alabama.

  • Erosion of opportunities for middle class life

Education—weakening of public education and more generations in debt

Attacks on unions

Healthcare at issue—ACA hobbled with no other proposal in view

Continued declines in good jobs for people without degrees

No recognition of the problems created by technology change

Cutting the safety net—If you don’t succeed you’re a loser

Conflicts stoked between races, ethnic groups, cultures

No interest in racial justice—to the detriment of all

Cruel and intentionally divisive Immigration policy

Major hit to both security and prosperity

Trade wars instead of alliances and international norms

New arms race already announced

Policy rooted in weakness—from fighting on all fronts

Conflict as the first choice— “Trade wars are easy.”

Other wars too?

  • Weakened environmental and other standards

Air and water

Workplace safety

Food safety

  • Bubble economy based on debt

Good times prolonged by deficit-funded stimulus

Proven recipe for cycles of boom and bust (back to the 19th century here too)

No Republican history of help during downturns

  • Undermining of democracy in the US

Increasing government by fiat (“executive order”)

Restriction of voting rights

Politicization of the Justice Department

=> Democracy is not a luxury—it made us what we are.

 

Weakness and Strength

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“King of Hearts” by Duong Vu licensed under CC BY-NC 4.0

We’ve talked here before about effects of bullying.  This time we want to be even more basic—weakness and strength.

If you want to get something done, it’s important to get others behind you.   In almost any task or context, few people are able simply to impose their will.  Building alliances is the means to power—for individuals and for countries.

There was a time after the second world war when the US, as last unscathed power, could do whatever it wanted.  That’s of course the era Trump recalls with MAGA.  But we’re no longer in that world, and we do ourselves no favor by pretending it’s still true.

Krugman had a recent NYTimes piece talking about the limits to our power in the trade wars.  However to my mind he didn’t go far enough with his argument.  It’s true that our power is limited, but we also refuse to think seriously about how to get things done.

China is of course the case in point.  Despite Trump’s initial declaration that “trade wars are easy”, this one has been up and down for many months with constant chest-beating and accusations of evil.  There is still no clear idea of the timetable or eventual conclusion.  One thing that is certainly true is that there is already a legacy of hostility and suspicion on both sides—with consequences that will survive any deal.

That situation is not a fact of life, it’s a fact of weakness.  We represent 18% of China exports, and by going it alone that’s all the leverage we’ve got.  The EU represents another 18% with essentially the same grievances.  Normal behavior is to ally our interests and get to the conclusion with overwhelming power.  The Business Roundtable of Corporate CEO’s recognized that from the beginning.   However, Trump wanted a special deal with his name on it, so he chose weakness instead of strength—leaving us all to live with it.

We can even go a step farther.  As a way of exercising power, international institutions are actually useful for this kind of problem.  That’s why, despite the “threats to our sovereignty” rhetoric, those institutions exist.

China is still classified as a developing country for the WTO. Everyone expected that to change, with new rules to be negotiated. That is where the US + EU leverage would normally be brought to bear.

And negotiation in that context has two more advantages:

1. First the negotiation becomes a matter of standards for international behavior, not a question of national honor. That keeps the focus on technical issues rather than face-saving.

2. It requires us to separate what are real matters for rules of commerce (open markets, intellectual property, conditions for labor) from whatever barriers we might want to place in the way of Chinese technological development.

That may sound like a limitation, but it is actually an advantage.  It makes us think about competition for what it is, rather than as something we can cure with a big stick.  There is plenty that we’re not doing to strengthen our own act.

The bottom line here is simple.  We have chosen to fight a trade war with China out of weakness.  That weakness has already had consequences in terms of relations between countries and will also be expressed in the terms of any final agreement.

We can be explicit about what that means.  We have chosen a path that will lead to less access to the Chinese market (already the biggest economy in the world) and more hostility between countries.  On that second point we have already announced a new arms race—which will cost both countries (and the rest of the world economy) dearly.

None of this has to be.   It’s weakness instead of strength.

For Sanity on China

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What are our stated objectives with China?

  • We want to bring them into the world economic system on appropriate terms of fair play.
  • We want access to their markets according to those rules of fair play.
  • We want protection for our businesses and workers, also according to those rules of fair play.

Those are perfectly normal and achievable objectives.  We can be specific about how to get there, and the probability of success is high.

What are our actual objectives in the trade war?

Trump has been clear about this in both words and deeds.  Our trade war is to assure that China will never be able to challenge our technological, economic, and military dominance.

Those are not the same as the stated objectives (although the press seems confused about the difference).  They are objectives for a real war.  And if you’re going to fight a real war—with bullets or with tariffs—you had better be sure you’re going to win, or the results won’t be pretty.

Problem #1:  We don’t run the world.  We are 18% or Chinese exports, same as the EU.  We’ve gone out of the way not to have an alliance with the EU on this issue.  (It’s worth noting that the EU already has a far lower balance of payments deficit with China than we do.)  The Chinese domestic economy is already larger than ours.  We can inflict pain, but we can’t put them out of business.

Problem #2:  China’s technological and military strength is not just because they’re stealing from us.  That genie is already out of the bottle, and it is an imperialist delusion to believe we can keep them poor and dumb.

Problem #3:  We’ve converted an issue of international good behavior into a matter of domination.  Without boots on the ground there’s no way in hell we’re going to enforce an agreement of subjugation.  (The distinction is not a gray area—we’re either thinking about rules we’d be willing to apply to ourselves or not.)

What’s going to happen?

The Chinese will go build their (very large) part of the world without us.   We will have no effective access to their markets or their technology (already today technology is a two-way street).  We’ll be back in a cold war with all that entails in risk, mutual hostility, military spending, and stunted world growth.

What should we do?

  1. The first step is to cool the chest-beating jingoism. (China is in fact a mixed bag for the US economy.) That way we can at least recognize the difference between the two types of objectives.  It’s the only way to behave rationally.
  2. If what we want is a correct and viable world order, then that means we need an alliance supporting our view. Ultimately this should end up in the WTO, but a first step is to codify what we want and assemble wide support.  That will add both carrot and stick to achieve our objectives.  The Business Roundtable of corporate CEO’s was explicit about this from the beginning.
  3. History shows that the best way to avoid war is mutual commerce. That means establishing rules we can all abide by.
  4. If we’re worried that the Chinese are going to take over anyway, then the best thing to do is to recognize and play to our strengths. Overall the odds are well in our favor.   The fact is that we’ve been here before.  Not so many years ago the perceived technology threat was Japan.  In China, Xi’s thirst for control makes him an enemy of what made for China’s success.

History is full of disastrous, inconclusive wars that no one wins.  Trade wars too.  We’re not so weak that we have to blunder our way into this one.

Losing by Bullying in China and Elsewhere

Most of us choose not to run our lives as bullies.  That’s not because we’re all so nice; it’s because being a bully is usually a bad option.  For one thing it’s precarious—the bully loses everything as soon as he’s not top dog.  And what’s worse is that it precludes other ways of getting things done.  The bully has nothing to offer but bluster.

The US has been the predominant world power since World War II, but we’ve generally chosen not to play the bully.  Instead we’ve used international institutions to enshrine our views as a kind of international rule of law.  That has been a very successful enterprise—no one wants to be odd man out.  And after 50 years we remain both the military and the economic powerhouse.  (How that filters down to the well-being of the population is another story.)

Recently however we’ve made the all-too-common mistake of believing our own propaganda.  We’re just too nice, and in our beneficence everyone is stealing from us.  For example NATO—which exists to make sure a Russian WW III is fought in Europe and not here—is now a case of wasting money to defend ungrateful allies.  The time has come to step out from behind the curtain and take all that we can get.

How have we been doing as a bully?  Let’s look at a few examples:

Iran

In Iran we’ve decided to take off the kid gloves and go for everything short of war.  The result thus far has been to strengthen the hard-liners in the government and to unite the population behind hatred of the US.  Initial steps have begun to resume nuclear weapons development—an effort that has strong support in the population as a whole.

Regime change remains unlikely, and even if it happens, it won’t be pro-US.  As for nuclear weapons, we’ve made North Korea a proof-positive of their value.

Venezuela

Trump administration high-handedness has intensified the ever-present fear of US domination—even among Maduro’s opponents.  That played a big part in the failure of the Guaidó uprising.

Arbitrary exercise of power makes us weaker.

China

This is currently the most consequential case.  We have legitimate grievances with China, but the situation is not so black and white, and it matters how we play it.

Our bullying approach began with tariffs before negotiation.  Then we chose to violate the our own trade agreements to go for an exclusive deal to benefit only us.  And we are unabashedly using the process to prevent China from challenging our dominance.  Finally we’re consumed with a feverish China bashing that has nothing with the reality of China’s effect on the US economywhich has many positives, and the negative effects don’t begin to compete with what we’ve done to ourselves.

There are two points worth emphasizing:

  1. The US represents 18% of Chinese exports, as does the EU. By making this an exclusive deal we lost half our leverage. That was a “get out of jail free” card for the Chinese. They didn’t have to worry about dividing the West, because we did it for them. (Not the only example of giving China exactly what they want.)
  2. We have dispensed with the idea that this is about international rules for fair trade. Instead this is strictly about what our national leverage can get us.  That’s not a great basis for compliance (particularly given history), and there are many ways that trade deals can fail to deliver.   Further, by setting arbitrary tariffs we’re striking a blow for protectionism, not open markets.  That’s the last thing we should be doing when a primary goal is access to a Chinese economy that is already larger than ours and growing faster.

The is another way to do this, and it was waiting to happen.  Within the WTO China is still classified as a developing country.  All parties recognize that needs to be renegotiated, which would have happened regardless of who was President.  The hand we were dealt was better leverage, better compliance, and no trade war.

There’s another way to look at this.  The following chart shows the kinds of items China exports to the US.

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It’s not just cheap widgets.  It’s the computer equipment that runs the software that is the basis for our economic strength.  The worst thing China could do to us is stop its exports.  So what do we really want?  In some order, we want access to the Chinese market, we want a say in how China competes in the rest of the world, and we want to address intellectual property theft.

We have good means of addressing all of these, but bullying China isn’t one of them.  A trade war is counterproductive for the first two, which is why we created the WTO.  For the third, we now have a common interest, and it’s worth noting that Chinese hacking has gone way up, since Trump declared economic war.

Bullying behavior may give a rush of power, but it’s no better for countries than for people.  It makes the world worsemost of all for US!

More To Say About China

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This piece is a little broader in scope that our past posts about China.  That seems useful, since war-mongering in press coverage of China has put us all in blinders.  We’re not claiming here that the Chinese are angels, but there is a lot more to the story that needs to be discussed.

We start with a couple of basic points, of interest regardless of whether we consider China friend or foe:

  1. China is now the world’s biggest economy and is continuing to grow rapidly. Further its population is more than four times the US.  That has many consequences worth thinking about.
  2. China has built itself up from nothing to a world class challenger in many areas. This is not just—or even primarily—a case of “stealing from us”. It is imperative that we understand their example and what we can learn from it.

On the first point, it should be noted to begin with that while the Chinese economy is the biggest in the world, the country is so big that its per capita income is well-below Mexico.  A rising standard of living in China could drive growth in the rest of the world for quite some time.

That is a dramatic turnaround in what China means to the rest of the world.  It is also the reason why virtually everyone expects China’s trade relations to be renegotiated.  Opening China has moved from a largely theoretical matter (because there just wasn’t that much to be sold) to become the primary issue.

This is the time for negotiation, but it’s also a window of opportunity we can easily miss.  In this, as we’ve noted before, a unilateral trade war is actually counter-productive. We’re defending protectionism, when the primary issue is open access to the Chinese market!  Further by insisting on a bilateral deal, we’re substantially reducing the leverage needed to make the deal a success.  The Business Roundtable of corporate CEO’s said as much prior to the start of current negotiations.  This isn’t about trade deficits; it’s about worldwide rules of fair trade going forward.

Trade negotiation, however, is not the only issue here.  US businesses have long had the luxury of focusing on the domestic market.   Economies of scale will now demand a less parochial view.  An obvious example is loosening of fuel economy standards.  That’s a concession to our automobile industry for the domestic market that will hurt international competitiveness.  Another example is 5G mobile equipment.  US vendors are behind the curve, because the domestic market has been fractured and slow-moving.

We are not doing our economy a favor by granting special favors (including tariffs) to domestic businesses.  That’s just perpetuating the idea that winning here is all it takes.  (Tariffs are also an unreliable and inefficient way of producing jobs.)

As for what we can learn from China, we give a few examples

– Government-sponsored R&D pays big benefits.  That is the single biggest contributor to the Chinese success.   They have created a world-class technological empire out of almost nothing.  Even the much-lamented Chinese technology theft is a non-trivial (if nefarious) accomplishment.  How many companies do a good job managing transitions of responsibility even for their own software?

We used to care about the government role in research too.  It was assumed in the good old days of the 50’s and 60’s. Now we have not only cut back on government R&D (Trump’s latest budget is a recent example), but with the current anti-science nostalgia we’re not even sure we want much to do with scientific progress.

– Education is an imperative.  It’s people who make for national success and we need them to be prepared for the jobs that will defend our national standard of living.  China has been ready to spend the money to make it happen.

– We should want to drive up the value chain.  Despite past history, the Chinese understand perfectly that price-competitive businesses are not the way to go.   Real wealth comes from dominant industries with the power to sell on content instead of price.  That’s what technology can deliver.  It’s simply not in the cards to believe past successes will just revive.

– All businesses need to embrace technology for success.  Even in the cost-sensitive outsourcing business, ease of interworking was an important factor in Chinese success.

– Finally (and paradoxically) a dynamic, decentralized economy is a real plus.  This may seem surprising in a list of lessons from China, but it’s strangely true.  The major impetus that kicked off the Chinese economic miracle was an accidental liberalization.  As a small opening, Chinese municipalities were allowed to run independent businesses once they reached their nationally-set production goals.  As it happened, these independent businesses took off and eventually marginalized the state-run enterprises.  Many morphed into successful private companies.  (Xi is now attempting to put that genie back in the bottle, with reemphasized state enterprises.)

We should never underestimate the value of the dynamism of the US economy.  But we had better be careful to understand what has really worked for us.  There has always been an important government role, and diversity mattered too.  In the Chinese example, success was only possible because government provided the environment, particularly education and infrastructure, for the businesses to grow.  That’s precisely what worked for us establish US dominance in the post-war years.   In general, prosperity requires both the environment and the opportunity to achieve success.

 

All that being said, what can we say about dealing with China?  A few guidelines:

We are misled if we think “enemy” is all we need to know.  China is an important factor for both good and bad in the world economy.  They were an important help in the efforts that prevented a depression in 2008.  They can be a major locomotive in the world economy going forward.  They contribute to the worldwide development of science and technology—which makes us all richer.  They recognize the importance of climate change.  It is our task to make that all work for us.

To get there we need to treat the Chinese like any other adversary—we should deal with them from strength and look for mutual advantages.

It is not productive simply to dictate, with the idea that we can shut them down by denying them access to our market.  We represent 18% of their export market and much less of their total economy.  That’s plenty to cause trouble, but not enough to dictate, and in any case real pain would hurt us as well.  Further, if we want success in their market, there has to be ongoing mutual self-interest—no signed document will do it.   And there’s a historical side of this as well:  China endured some of the worst of western imperialism in the nineteenth and early twentieth centuries.  That memory lingers, and we are not served by recalling it with our behavior.  Mutual advantage is much better than antagonistic isolation.

We need to extend the rules for fairness in international commerce through the WTO.  As noted earlier all parties recognize this has to happen, and we have historically led such initiatives.  We have twice the leverage in cooperating with the EU (also 18% of Chinese exports), and we avoid the hypocrisy of endorsing protectionism in the argument for opening of their markets.

Matters such as intellectual property protection and theft should be solvable problems, in part because the Chinese now have much to defend as well.  It’s not for nothing that Huawei is well ahead of the curve in 5G development.   Chinese universities are now high on the list of international institutions (even though Western ones still have cachet in China!), and the Chinese are acquiring patents like everyone else.  It’s also true, if seldom noted, that Chinese computer hacking decreased significantly by the end of the Obama years and went way up when Trump declared economic war.

The military installations in the South China Sea are a serious problem, but the fact is that the great majority of Chinese imports and exports pass that way—so it’s not surprising they’re worried about it.  We make that worry all the greater by declaring that it is legitimate to use all resources at our disposal to get the Chinese to do what we want.  The only real solution is some kind of freedom of the seas regional agreement that all parties can have confidence in.

Human rights violations are also important, and we have to keep those issues alive.  It’s hard to know how far we’ll be able to get.  The one thing you can say is that we shouldn’t be too quick to use Xi a stand-in for China as a whole.  We’ve already noted Xi is a throw-back (a “princeling” heir to the Maoist past), so perhaps there is hope for better later.  There are many conclusions to be drawn about us if you take Trump as a stand-in for everything American.

In the end the point is to treat China like any other independent nation.  China as “enemy” has real roots, but also large doses of domestic politics (China has been a convenient excuse for our own misdeeds) and “yellow peril” racism.  China needs to work properly in the international system of trade and ideally also in international security agreements.  Any efforts to avoid a new set of arms races will have to involve them.

Vigilance is fine, but there is at least the potential of much to build on.

Post 9/11 Consequences to Remember

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It’s important to recall the legacy of our post-9/11 actions in the Middle East.

  1. After the invasion of Afghanistan, we couldn’t be bothered to pacify the country because we were in such a hurry to invade Iraq.

Consequences:  Years of bloody chaos in Afghanistan ending in retreat.

  1. After the invasion of Iraq we chose sides with the Shiites and couldn’t be bothered with their close associations with Shiite Iran.

Consequences:  Iran was the primary beneficiary of the Iraq war.

  1. After declaring Iran to be public enemy #1, we were so eager to impose sanctions that we couldn’t be bothered about their nuclear weapons program.

Consequences:  All sides in Iran are now united in hatred of the United States.  The nuclear weapons program has always had broad popular support.  The Europeans have forestalled it for a bit, but guess what?

Maybe they’ll get a nuclear club welcoming party like the one we threw for Kim Jong-Un.