- FEBRUARY 9, 2010
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TIGHTROPE
Obama’s China-Taiwan Challenge
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DECODER
Parsing the State of the Union
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SUPREME COURT
Decision Widens U.S. Credibility Gap
Welcome to the Bizarro world...
Posted By David Rothkopf
Thursday, March 26, 2009 - 4:11 PM
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When I was a boy, in between family readings of von Clausewitz, Sun Tzu, and the secret diaries of Scipio Africanus, sometimes I would sneak up to my room and read a comic book. Needless to say, DC Comics were heavily preferred over Marvel or other inferior brands because I liked my super heroes dry and undiluted by irony or wit. (Much as I like my blogs.) Particular favorites were the Legion of Super- Heroes and Justice League of America and when my brother and I would act out the events of the comics, he always wanted to be Superboy (which I considered a trite choice) or Aqualad, which I found hard to comprehend although it did lead to his spending a lot of time in the bath and being a very clean child. My favorite was Mon-El who was a mid-level African American talk show host during the day and then at night would become... Wait, I'm confused. That's someone else. This was a long time ago. No, Mon-El was cool because he appeared to have all of Superboy's powers but didn't have that annoying allergy to Kryptonite. I am telling you this because...well, because I thought he was definitely the best one and he never got anywhere nearly as much press attention as he should have.
But the real reason for bringing this all up was that also in these DC Comics stories of Superman periodically he would travel to the Bizarro world. This was a cube shaped planet where the Bizarro Code dictated "Us do opposite of all Earthly things!" Strangely all the people on the planet were rendered to appear the opposite of normal residents of earth -- like Superman -- by having them appear to be chiseled out of something relatively hard, probably soap or a good English white cheddar.
What does this have to do with foreign policy today? Well, currently...
We have a president of France who is pro-U.S., has taken steps to have France re-join the NATO military alliance, and who has played a very active and constructive role in shaping the international response to the global economic crisis.
This same president of France has, with the chancellor of Germany, a woman, led an effort to promote a fiscally responsible response to the crisis, often admonishing the United States about its free-wheeling spending and over-aggressive market intervention.
We have the government of Sweden -- who we had been led to believe were practically so communist they were the last surviving member of the Warsaw Pact -- unhesitatingly refusing to bail out national auto icon Saab, while the ultra-capitalist U.S. sentimentally coddled the dying carcass of GM in its fiscal arms.
We have the Chinese, lectured by the entire world for gaming their currency not more than a year ago, proposing a new alternative currency and while no one is clamoring to sign up now, they are taking this idea and Chinese critiques of the U.S. economy very seriously. Because China is now the country with the cash and the U.S. is the country on the global dole.
We even have the U.S. secretary of state going to Mexico to discuss drug violence and actually acknowledging that demand in the United States is a principal driver of the problem that is currently such a corrosive force in that nation.
In the midst of this crisis, we also will soon see a G20 Summit convene in London and while it is not sure they will agree on much, the one thing they seem unified about is giving more money to the IMF...an organization that has at best a mixed record, is despised throughout the developing world and which was widely considered to be so irrelevant as recently as a year ago that there were some who thought the best answer might be to just turn out the lights and convert the whole headquarters building into condos.
The U.S. has finally broken through a wall of prejudice and elected the first African American president, Jaguar and Land Rover are Indian car companies, Japan just beat Korea in a World Baseball Classic Championship Game from which the U.S. was shut out, and the very best basketball player in the world is Jewish.
Ok, of all these things, only the last one isn't true. We have gone through the looking glass. And as it turns out, reading those Legion of Super-Heroes comics may have been better preparation for today's world than even our lively family discussions of the Memoirs of Clive of India. Except of course, there are no super heroes anywhere to be seen and we could really use a few.
GABRIEL BOUYS/AFP/Getty Images
What have we gotten in this trade?
"Because China is now the country with the cash and the U.S. is the country on the global dole."
What interests me is how we got here. Wasn't Milton Friedman smart enough to understand that the elimination of trade barriers -- between states with radically different wage levels, labor laws and environmental standards -- would move production out of his own country and turn us into a debtor nation?
Wasn't Milton Friedman smart enough to understand that the elimination of trade barriers -- between states with radically different wage levels, labor laws and environmental standards -- would move production out of his own country and turn us into a debtor nation?
The theory was that the chinese etc would take their dollars and buy stuff from the USA. That would stimulate our economy, to do whatever it was the foreigners wanted to pay for. We'd do whatever fit our comparative advantage, whatever we could do cheaper and better.
And if we couldn't do anything cheaper and better, even given that the chinese would wind up with full employment doing what they did best and would want us to do the least valuable jobs though they could do those better too -- then the dollar would sink and our stuff would get cheaper for them, if not better. They'd sell us less because we could afford less, and we'd sell them more, and it would balance out.
Why hasn't it balanced out?
1. China has not reached full employment, so they'd rather throw their own workers at jobs than pay us, given the choice.
2. China has lent the money back to us rather than buy more stuff from us, even though with depreciation and falling interest rates they take a loss.
3. Americans can't afford to live on a competitive wage for the low-paying work. Our rents are high enough that we must get relatively well-paying jobs or go on welfare. We lack adequate slums close to the jobs, so both rent and transportation costs are high.
There are probably other important reasons too. So anyway, foreigners did not buy our stuff enough to make up for our imports. And they fudged the mechanisms that were supposed to correct that. They "invested" the money in our stock market and our bond markets etc, distorting those markets. With lots of money looking for investments we supplied them with bogus investments....
And we did nothing about this over the last 20+ years. Now we're stuck and it will be hard for us to fix it -- we don't have the initiative. Our creditors have the initiative.
The system might have worked the way Friedman said it ought to. But governments interfered, and the US government did nothing to stop them but interfered in its own ways instead.
When you say "governments interfered", I assume you mean the Chinese (what about India?) government.
Would it be more objective to say that the Chinese government acted in the best interest, as they perceived it, of China?
On the American side, the US moved to make it possible for China to be a member of the WTO. So, I guess you could say that the American government interfered in the sense that they made this possible.
Regarding Friedman, it is hard to see how the gentleman could have seriously thought that 'full employment' (meaning a level that causes wages, labor law and environmental standards to be compatible with those in the U.S) could be achieved in the lifetime of anyone alive today. The size of the Chinese workforce is vast, and the difference between the wage levels, compared to the U.S. or Europe, are great.
When you say "governments interfered", I assume you mean the Chinese (what about India?) government.
The chinese government plus various others that pegged their currencies to the dollar.
Would it be more objective to say that the Chinese government acted in the best interest, as they perceived it, of China?
I don't know. I guess. Would it be objective to say that most governments act in the best interest of their nations as they perceive it, most of the time?
I don't know what the chinese government officials were thinking. All of them have training in communist economic theory, don't they? Do they tend to believe it, or is it like christian US government officials who wouldn't think of applying christian ideas in their work....
By traditional capitalist theory, china should have let their currency rise against the dollar. The stuff they imported from us would be worth that much more, they could do stuff with it, they'd be better off.
Instead they kept their workers working for artificially low wages, making stuff that they sold to us at artificially low prices, for dollars that weren't worth as much as they pretended. What did it really get them?
Well, they kind of own us now. They could create a giant economic crisis for us whenever they want to. Maybe they wanted that? Did they think that was best for china? I dunno.
"When I was a boy, in between family readings of von Clausewitz, Sun Tzu, and the secret diaries of Scipio Africanus, sometimes I would sneak up to my room and read a comic book"
What nonsense!
My family used to sit around reading out loud von Clausewitz, Sun Tzu, and the secret diaries of Scipio Africanus (of course). We did it every Sunday between Church and afternoon nap.
That is a wholly inexcusable lie, and so is Rothkopf's.
"because I liked my super heroes dry and undiluted by irony or wit. (Much as I like my blogs.)"
Noted - in spades.
David Rothkopf is a visiting scholar at the Carnegie Endowment for International Peace and President and CEO of Garten Rothkopf.
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