Wednesday, February 15, 2012

Unfair China

Hating the Chinese has become as American as apple pie. It unites Democrats, Republicans, independents, and even more than one Green Party member I have talked too.

But, we are asked to pretend, we are not prejudiced against Chinese people. It is the Chinese (communist) government's economic policies that are driving us, the best, sweetest, and least prejudiced people on earth, we Americans, to do battle with the Chinese.

All we demand is fairness. We just want some stability. We don't want to work hard for our pay. We are not used to it. So the Yuan (or Renminbi, if you use the more modern term for Chinese money) has to float. And it has to float upward against the American dollar. It has to make American goods cheaper in China, and Chinese goods more expensive in the U.S. Like an iPod, iPad or Mac could possibly be more expensive.

A quick recap the history of relations between the United States of America and China is in order. China was the wealthiest and most civilized nation in the world in when English settlers first started grabbing land in what is now the U.S.A. in 1607. On the other hand, the Chinese ruling class were mostly complacent and uninterested in modernization. Viewing (correctly) Europeans as predator-pirates, the Chinese allowed only limited intercourse during the 17th and 18th centuries. Americans started trading with China while we were still part of the British empire, but the trading was trivial to the Chinese.

In the early 1800's the imperial nations began seeing China as a great prize to be devoured, but its government was still strong enough to repel the predators. U.S. trade with China increased, and U.S. merchants participated in the illegal opium trade. That is where the Delano side of President Franklin Delano Roosevelt got their fortune (the Forbes fortune, too.) The Chinese government clamped down on opium, which was destroying Chinese culture and its economy. Parliament, the device by which a small number of British voters bullied half the world, resulted in the launching of the Opium Wars by Britain, which China lost. Britain got Hong Kong and America and other nations got the right to "free trade" with China.

The Chinese next resisted being gobbled up by America and friends with the Boxer Rebellion. The U.S., Japan, Britain, France, Russia and Germany ganged up on China and essentially got control of the Chinese government. Eventually the Chinese people rebelled, overthrew the monarchy, and formed a Republic. But America and friends preferred a weak China, and so backed a number of warlords, most notably Chiang Kai-shek.

Starting in the 1920's Japan, which had been more successful at resisting U.S., British and Russian bullying, decided that the only way Japan and all Asia would not get gobbled up would be by Japan taking the leadership of Asia. The Chinese warlords sponsored by the Euro-American imperialists did not like that idea. The Japanese, unfortunately, resorted to force to install modern, enlightened (capitalist), pro-Japanese regimes in China. This eventually led to open, declared war between the U.S. and Japan. Chiang Kai-shek's warlords also fought Japan, as did a new Chinese government set up in north-west China by the Communist Party.

America won the war, but not before Japan had encouraged most east Asian nations to declare independence. The Philippines declared independence from the U.S., Vietnam from France, Indonesia from the Netherlands, and Burma and India from Britain.

As the Japanese withdrew from the mainland, a civil war erupted between the Communist Party and the U.S. financed warlord Chiang Kai-shek. The Chinese won the civil war, but by then the Chinese economy was totally wrecked. In a mere 100 years China had gone from still being one of the wealthiest nations in the world to being one of the poorest. Chiang, helped by America, moved China's silver and gold, as well as what was portable of its industries, to the island of Taiwan, where he set up a dictatorship protected by the U.S. navy.

It took the Chinese decades to rebuild their nation. The U.S. refused to trade and pretended Chiang still ruled China. Although Nixon made peace in the 1970's, only in the 1990's did the Chinese start to have sustantial trade with the U.S. The U.S. gave the Chinese no breaks. We treated trade as a form of economic warfare, extracting as much from the Chinese in return for whatever modern technology we were willing to export to them.

So what do the Chinese owe the U.S. What is the standard of fairness that should apply to this situation?

Here's what I think: Americans have not been being screwed by the Chinese. We have been being screwed by Americans, by our own capitalists and their political subsidiaries. They want to direct our anger at the Chinese when it should be directed at ourselves and our economic lords.

So now the exchange rate of the yuan does not float against the dollar, and we buy more from China than they buy from us. First of all, as former Secretary of State Cordell Hull used to pontificate, global free trade can't be balanced on a bilateral (2-nation basis). Goods flow in all directions. China does not have a trade surplus with every nation. Because the U.S. economy is now so consumer oriented, we suck the blood of the entire world. China is just the assembly point, where quick hard-working hands turn raw goods and parts from the global economy into crap that you buy at Walmart because you don't have the good sense to save and invest your money.

If the yuan floated, then China would have a small lower trade surplus with the U.S. They would not take in so many billions of U.S. dollars. They would not buy so many U.S. government bonds to get rid of those dollars. The interest rates on bonds would go up, and the federal government would be stuck paying a lot more interest. So the national deficit would get worse, unless government spending were cut back further. In any case, that won't be good for the U.S. economy.

The way to balance things out with China is for the U.S. to compete on a fair basis, rather than whining and asking for special treatment. We could also increase import duties, which would lower demand for Chinese goods and help the U.S. Treasury. We could teach our children math and engineering and business practices instead of English, Art, and Film Studies.

Oh, things are pretty fair already. We could compete. But our American capital has been concentrated in the hands of a very few people because we no longer have meaningful taxes on inheritances and capital gains. This wealthy elite has become very lazy. They do the easy thing, aided by a bunch of well-paid technocrats, advisors, and lawyers. They invest in China or developing nations when they could invest in the U.S.

I just don't get how we can blame the Chinese for Steve Jobs and crew's failure to invest in the U.S. We don't even have to destroy America the Beautiful to create new factories. There is plenty of empty factory space in Detroit and other American cities.

Let's renovate those empty factories, and stop blaming the Chinese for our problems. I think the success of the Chinese is a great thing for humanity. They are a very civilized people, so far. If they become the number 1 economy in the world again, it will probably make the world a better place.

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