December 29th, 2008
I was recently particularly irked by an article in last week’s International Herald Tribune entitled, “China and U.S. bound themselves with linked addictions.” The article is actually well-written. In fact, Mark Landler’s article was so concisely written it effectively focused my ire about a debate that’s been going on for the past five years:
“The problem, he [Ben Bernanke, currently Chairman of the Fed] said, was not that Americans spend too much, but that foreigners save too much. The Chinese have piled up so much excess savings that they lend money to the United States at low rates, underwriting American consumption.”
Bernanke had said this back in 2005, when Walmart and Mattel were at their height pressuring Chinese suppliers for cheaper toys and, oh yes, skip the quality checks (why complicate things?). The argument that the United States is in this credit and debt mess because the Chinese produced exactly what the Americans wanted at price points the Americans could guzzle is specious, and removes the accountability US regulators should have for channeling Chinese investment in the US for better, more socially constructive purposes.
“In the past decade, China has invested upward of $1 trillion, mostly earnings from manufacturing exports, into American government bonds and government-backed mortgage debt. That has lowered interest rates and helped fuel a historic consumption binge and housing bubble in the United States.”
But it’s this next statement in the article that really torqued me:
“China, some economists say, lulled American consumers, and their leaders, into complacency about their spendthrift ways.”
The implication, of course, is that China had some grand scheme to destabilize the American economy and therefore usurp supremacy in the economic order. Of course, all China wanted to do was meet burgeoning demand for its products and provide its citizens economic opportunities that would not destabilize its dynamic society and sclerotic government.
Herein, though, lies the nub of the irresponsibility with which America – its citizens and its government – squandered a grand opportunity to ensure its preeminence in the next century:
“By itself, money from China is not a bad thing. As American officials like to note, it speaks to the attractiveness of the United States as a destination for foreign investment. In the 19th century, the United States built its railroads with capital borrowed from the British.
“But Americans did not use the lower-cost money afforded by Chinese investment to build a 21st-century equivalent of the railroads. Instead, the government engaged in a costly war in Iraq, and consumers used loose credit to buy sport utility vehicles and larger homes. Banks and investors, eagerly seeking higher interest rates in this easy-money environment, created risky new securities like collateralized debt obligations.”
It’s an old story, really: the West digs products from China, bankrupts itself, and then blames China. In the 19th century Britain spent ALL its silver on the purchase of Chinese goods, forcing it to become a Pusher on a scale never before seen in human history.
“By the early part of this decade, the United States was importing huge amounts of Chinese-made goods — toys, shoes, flat-screen televisions and auto parts — while selling much less to China in return… Shorn of the social safety net of the old Communist state, they squirrel away money to pay for hospital visits, housing or retirement. This accounts for the savings glut identified by Bernanke.”
And now, the West says, if only the Chinese would be just as gluttonous and short-sighted as the Americans, then the global economy in future will be ok. Of course, by the time the Chinese on a per capita basis have caught up with the Americans as consumers par excellence – theoretically balancing trade figures by that time - there may be few natural resources left with which to produce much more than war over the bit that’s remaining.
Clever.
Posted in China Society, Globalization | 7 Comments »
