I wrote this in April 2011 as feedback to this article in PC World.
After decades of buying from China, it’s time we paid the bill.
Step back from rhetoric & ideology. What, exactly, do we expect the Chinese to buy with all the dollars that they’ve amassed? What happens if we try to dictate their options? –Making available just a few items at the bazaar?
Most Americans want balanced trade. Trade is balanced by encouraging foreigners to return dollars to America. That means purchasing goods & services or investing (purchasing equity or debt). But purchasing debt isn’t real balance. It postpones and magnifies a trade imbalance.
The Chinese have built vast quantities of products that we consumed for more than 30 years. For whatever reasons, they have built them cheaper and responded quickly to consumer demand, and with sufficient quality and style that we loved acquiring them.
Now China has pockets stuffed with dollars. There are so few places that want those dollars, the logical recourse it to spend before it depreciates. That’s logical. Getting them to use those dollars is what we want.
The US exports movies, airplanes, weapons & software, and we charge foreigners to attend our Universities. On the international stage, that about sums our brag sheet. But when we consume trillions from foreigners, do the promissory notes that we issue (“dollars”) limit them to these few commodities? What else can the Chinese purchase that isn’t manufactured closer to home, better, and in larger quantities? They export the really big ticket items themselves–like skyscraper contracting, oil drilling, nuclear technology!
When a foreign corporation or government wants to purchase something significant from the US, suddenly we stop yelling “Buy American” and we start yelling “Security Threat!”. Poppycock! If we create such enormous red tape that international telecom players cannot acquire or invest in one another, we reduce liquidity and further weaken our dollar. Face it: Our start up companies are commodities as certainly as a retail copy of Windows, a Boeing jet or a patent portfolio. When we turn up our nose at healthy interest in intellectual trade or infrastructure acquisition, we are not protecting our interests. We are simply informing trading partners that they were fools to trust us, and that the dollars they stockpiled can be redeemed only in Hollywood films.
It’s natural to be skeptical. China is controlled by an authoritarian dictatorship. Citizens lack social & political freedom. But don’t be misguided about their economy – both within and abroad. It is lubricated by capitalism and is more adaptive and free-wheeling than our own. Whatever their shortcomings, we accepted these when they were selling. We must also allow them to buy. Our technology plays are the only thing on our menu.
- A) If we refuse to allow the Chinese to repatriate dollars or offer them only the local goods of our choosing – typical of a Banana Republic – then they will dump our dollars and also stop buying our debt. It would crush our economy in a heartbeat.
- B) If we allow those with large stockpiles of our dollars to use them as they see fit, the dollars will return to build factories, create jobs, and produce good, old fashioned innovation. But this won’t happen with newly printed dollars. It doesn’t work that way, because that weakens both parties and makes our factories unattractive. It must be the dollars that we willingly handed over for TVs, computers, shoes, toys and even building materials. We must accept that we owe China—big time! For decades, we passed off pictures of George & Ben in exchange for tangible goods. We knew the Chinese crafted high tech goods for less and that the political system was repressive. But we looked the other way. We really wanted those things! Whether you like their government or not, we promised to expend future time and resources supplying their children with commensurate goods.
This video was commissioned in an effort to defeat Obama’s 2010 universal health care bill. It has terrific shock value. It depicts what China believes to be our economic weakness. I won’t comment here about health care or stimulus economics. It’s unrelated to my point. But the video also depicts what Chinese believe to be their imminent destiny, perhaps at America’s expense.
They deserve all of the positive things they have earned. Although it’s natural to whine and complain about an uneven playing field, and our past glory (Automobile assembly, television, the moon landing and the Internet), China is winning in the global economy and any trade in which we engage is, by definition, fair. In fact, the only uneveness in the playing field of international trade is just the opposite of popular perception: It has been tipped in our favor for the entire 20th century!
We must get it through our heads that capitalism is not a contest! This simple truth is often overlooked. The emergence of China as an economic superpower is a good thing. Not just for the Chinese, but for every American. If we keep our own ship in order, the result will be an abundance of goods and services from both sides because we will have affluent trading partners, broader access to labor and markets, and eventually, democratic trading partners.
– Ellery Davies|
Ellery clarifies law and public policy. He is a frequent columnist and TV commentator.