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Howard Steven Friedman

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Fictional Davos Discussion Between Tim Geithner and China's He Yafei

Posted: 02/ 2/2012 1:47 pm

The following conversation did not take place... but wouldn't it have been interesting if it did?

Geithner: Glad I found you. We really need to talk about our trade imbalance. Every month America's importing over $20 billion more in Chinese goods than we export to China. It's unsustainable to have such a huge trade imbalance.

He: So you want Chinese factories to stop producing goods, Americans to stop buying Chinese goods or China to stop lending America money? After all what's a trillion dollars or so in debt between friends?

Geithner: None of the above. I want Chinese factories to manufacture goods at a similar cost to American factories and I want Chinese people to purchase American goods just as much as Americans purchase Chinese goods.

He: Labor intensive manufacturing in America is always going to be at a huge disadvantage versus any developing country. China has 4 times the population and a GDP per capita that is about 1/10th that of the U.S. Chinese factories can pay its workers a tiny fraction of American salaries and Chinese factory workers will work longer hours under harsher working and living conditions.

Geithner: Well America's not going to just give up on manufacturing. That's why we have great leaders like Jeff Immelt chairing our Economic Recovery Advisory Board.

He: Yes, we love Jeff. In fact, China has few better friends than Mr. Immelt. Maybe he can teach other American CEO's how to export jobs to China and avoid paying any taxes to support the American government. I was just joking Tim, don't get so upset.

Geithner: I'm tired of hearing about level playing fields, let's talk about China finally playing on a fair field. China's state capitalism approach is completely unfair to true, unadulterated capitalism. In America the government doesn't prop up companies with public funding and create unfair advantages for domestic companies.

He: Really? Your government never gets involved in propping up American companies? S&L bailouts of the 1989, the airline industry in 2001, the auto industry in 2008, Bank of America, Citigroup, Fannie Mae, Freddie Mac, Bear Stearns, AIG... oh I could go on and on but you seem to be looking a little flush Tim.

Geithner: China's state capitalism system is highly inefficient and unsustainable.

He: You keep lecturing Tim and I'll just keep taking notes. After all, we are happy to study other systems and learn from the successes and failures of others. Of course, you need to remember that economic growth and maximum employment are very important to our national goals. What has your government learned from studying other systems or is America so convinced that everything you do is perfect that you are unwilling to observe others?

Geithner: Currency manipulation! Your country is cheating the rest of the world by propping up your currency and hurting American exports. America is too noble of a country to stoop to doing something as base as that.

He: I get so confused by fancy English terms like quantitative easing. Let me see, that is the process where America increases the money supply without impacting the interest rates. Is that not currency manipulation?

Geithner: Of course not... it is quantitative easing can't you tell the difference?

He: Tim, euphemisms and fantasies are not productive. America needs leaders that live in the real world, not in a dreamland. America leaders have to recognize that the nation can't borrow money forever and ignore the debt burden it places on future generations. Those same leaders need to recognize that this is 2012 and not 1789. America can't cut the government back so much that it ignores the basic needs of its citizens and let's everyone fend for themselves. The global marketplace means that America gets to sell products nearly everywhere in the world but it also means that America has to compete with the rest of the world. China leverages its competitive advantages including its huge supply of cheap labor. You may not agree with our approach but it is helping lift millions of Chinese out of poverty every year. America is a very different country, with a different history, culture and ideology. America needs to leverage its own competitive advantages. America has some of the best universities in the world, a vibrant open culture and a high standard of living. If I were you, I would focus on those advantages to entice the world's top talent to come to your shores, stay and build great businesses that leverage advanced skills. Many of the world's best students and top technical talent, including tons of Chinese best and brightest, want to come to America. Smart immigration has been at the heart of your nation's success since it was a set of small colonies. Open your arms to the world's best and they will create higher end products and cutting edge technology.

Geithner: Sorry, can you repeat that? I got distracted playing Angry Birds after that first part about euphemisms and fantasies.

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