We know that by a very large 44 percent to 27 percent margin, Americans now name China as the world's leading economic power rather than the United States. (As recently as February 2008, the numbers were virtually reversed, as 41 percent of Americans still saw the U.S. as the top economic power, compared with 30 percent who named China.) And we know that when it comes to which nation will have the dominant role in world affairs going forward, the American public gives a solid 43 percent to 38 percent edge to China.
And the reason we 'know' all of this is because the information comes from the highly reputable joint Pew Research/Council on Foreign Relations poll.
We also know -- because Germany and Japan help us know -- that last year China overtook Germany as the world's largest goods exporter and that sometime this year China will overtake Japan to become the second largest world economy.
But when it comes to the much needed specifics of China's trade figures, its GDP and its foreign reserves and direct overseas investments, it's shocking how little we know.
Case in point: While many non-government economists are predicting that China's overall exports will rebound this year back to their pre-Recession level, we will have insight into its trade with the major developed countries of the world (the U.S., Canada, the E.U., Australia and Japan), which are all pretty good in reporting their imports and exports, but we will know next to nothing about the details of China's trade accounts and, especially, about its very large -- and largely masked -- 'multinational trade' throughout Asia and its trade with Africa and South America.
Similar imprecision and uncertainty surrounds our knowledge about the nature and magnitude of China's GDP (which China says grew 10.7 percent in the 2009 fourth quarter) and about its foreign reserves and direct foreign investments (which it says total $2.5 trillion dollars and a few hundred billion dollars, respectively).
In order to manage and protect our economy -- not to mention maintain our national security -- we need detailed trade and foreign reserves information related to each of our major trading partners, but especially related to China, with which we run a consistent negative trade balance on the order of $250 to $300 billion a year.
And the unfortunate point of this piece is that even though the data and analysis we get right now from our various U.S. government agencies is neither particularly refined nor particularly coordinated, it's not likely to improve without a major overhaul -- and in one important area they are about to disappear altogether.
The Labor and Treasury Departments continue to shirk their responsibilities to gather meaningful data about productivity and about foreign reserves and overseas investments, respectively. And bafflingly, the Obama FY2011 budget completely zeroes out the office in the Bureau of Labor Statistics that, with an already meager staff of just sixteen economists, is charged with collecting "jobs, wages, outsourcing and trade data resulting from globalization throughout the entire globe."
Specifically regarding the latter, President Obama's budget would eliminate the International Labor Comparisons Office and transfer its sixteen employees to the group now tracking domestic inflation and occupational trends. (In other words, the measly 0.08 of an economist which we now have dedicated on average to each of the 195 countries in the world is about to go to zero economists per country!) The White House says that this cut is "one of many difficult decisions the president was forced to make to control spending" -- however, since the projected savings is a measly $2 million a year and since "data from globalization" is pretty darn critical right now, I must say that this is "one of the stupidest decisions I've ever seen."
The ILC Office dates to the '60s, when "globalization" was still just a concept and the dominant issue of the times was comparative unemployment rates in Western Europe. Now, globalization is a storm-whipped tsunami and its unfair trade, subsidy and environmental practices are being used every day to threaten our workers and our national security. And we are inexplicably shutting down the one entity in government charged with keeping us informed about its practices and results and harmonizing data so that it is comparable among countries.
Let's look at just a few (of the many) examples that show the hazard of not having correct data and informed analysis and of not being able to figure out the "big picture."
Many of us believe that something on the order of 90% of China's domination in manufactured goods vis-à-vis the U.S. is due to subsidies to its domestic and foreign-owned manufacturers and to its extremely low environmental standards. But our "belief" regarding this 90 percent figure, while not casual, does not come from any U.S. government agency as it should -- rather, it comes from non-government entities, industry and company anecdotes, and our analysis of the discrepancy between the cost of the natural resources flowing into China and the finished-costs of the manufactured goods being exported by China.
Even the full extent of China's eight-year-long chronic undervaluation of its currency is still uncertain, although any honest observer knows that this is by far the most damaging of China's many unfair trade practices and is responsible for up to 25 percent of our relative cost differential with China in manufactured goods. Non-government economists estimate that this undervaluation ranges from 20 percent to 40 percent, yet no U.S. government agency or anyone in the administration is informed enough right now to narrow this range. So, as Congress clamors for the administration to formally identify China as one of those nations that currently "manipulate the rates of exchange between their currency and the United States dollar" -- which the Treasury Department is required to determine twice each year -- the administration, which is responsible for removing this imprecision, is using its existence as the excuse not to act. Talk about ironic!
And the dearth of data associated with China's holdings of American Treasury bonds, its outward investments in the U.S. and elsewhere, and its massive current account surplus is equally troubling.
The next example is right here at home, where free traders, using data from the Department of Labor, continually make the case that the failure of workers to retrain themselves after seeing their jobs offshored substantially explains why American workers in 2009 needed 40 percent fewer hours to produce the same unit of output as in 1980. They then turn around and use this determination to justify:
• the wage stagnation that has plagued the average worker for almost this entire period of time;
• the unjustified offshoring of millions of American manufacturing jobs; and
• the Pollyannaish principles coming out of the White House that "a job is a job" and that the decline in our nation's manufactured goods (and, by extension, the labor force that makes them) can be made up by a favorable trade balance in such products as software, legal services, university tuition, and motion pictures.
However, as Alan Tonelson and Kevin L. Kearns recently showed in an opinion piece in the New York Times, the Labor Department in fact grossly overstates productivity, especially in the nation's manufacturing sector, by deeming any reduction in the work that goes into creating a specific unit of output, whatever the cause and wherever incurred, to be a domestic U.S. productivity gain. Specifically, the Department's labor productivity figures consider only worker hours in America, even though American-owned factories have for thirty years or so been steadily transplanted overseas and foreign workers now contribute significantly to the final products that are counted in the productivity measures of purely American workers.
In other words, the American economy is in fact much less productive than the Department of Labor's figures -- and the nation's multinational corporations, some in Congress, and the administration -- would have us believe, and the heavy "price" American workers have been paying because of this mis-determination is therefore without justification.
From the inadequacy of the data we currently gather, and from the foolishness of now proposing that we cut even some of that back, one can only conclude that the administration would right now prefer not to have transparency in these areas -- or about the jobs issues wrapped up in them. How else to explain the behavior of the country which has the largest debt obligation ever owed to another (about a trillion or so dollars of U.S. debt held by China) and the largest negative trade balance ever with a single trading partner ($250 to $300 billion a year, again with China)?
Treasury needs to devote significantly more resources to publishing timely and pertinent data, which would expose the mechanical nature of the relationship between China's trillions of dollars of external surpluses and its precise holdings of U.S. bonds. And an integral part of this revamping must be a complete understanding on our part of the magnitude and intentions of all "sovereign wealth" and "sovereign wealth-related" funds, especially those of China and the petroleum exporting countries. Labor must do a much more thorough and intellectually honest determination of wages and productivity. And the administration must reinstate -- and then significantly increase -- funding for the International Labor Comparisons Office so that we actually do have "data resulting from globalization."
Leo Hindery, Jr. is Chairman of the Economic Growth/Smart Globalization Initiative at the New America Foundation and a member of the Council on Foreign Relations. Currently an investor in media companies, he is the former CEO of Tele-Communications, Inc. (TCI), Liberty Media and their successor AT&T Broadband. He also serves on the Board of the Huffington Post Investigative Fund.