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Despite Tough Talk from Candidates, American Problems Not Made In China

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Inevitably and regrettably, China has landed in the middle of the American presidential campaign. Both candidates are now laying claim to credentials as the ultimate guardian against the supposed job-killing, prosperity-destroying juggernaut across the Pacific.

This is inevitable because China's rise and its implications for global commerce are never far from any conversation about lost American jobs and diminishing middle-class opportunities. It is regrettable, because -- as both candidates know well -- "getting tough on China," as the tiresome mantra goes, will accomplish little if anything in terms of restoring vigor to a chronically weak American economy.

Rather, by indulging in political theatrics that cast China as the evil empire, the candidates are distracting us from the much more fruitful pursuit of figuring out what we can we do here at home, using our considerable know-how, resources and entrepreneurial savvy, to make American companies both more competitive and more prodigious sources of quality paychecks.

The causes of the American economic crisis are complex. Near-religious ardor for unsupervised markets allowed "financial innovation" -- a euphemism for shenanigans -- to eclipse productive innovation. The decline of union power, the shift of production to lower-wage countries and the rise of automation combined to sow unemployment, particularly in manufacturing, while denying workers their share of the spoils from rising productivity. Tax cuts for the wealthy have exacerbated inequality, which has diluted spending power for millions of households.

But the solution to our troubles is clear enough: We need to generate tens of millions of quality jobs so ordinary people can again earn enough to support their families. The means of going about this lie not in some World Trade Organization hearing room in Geneva, where justice moves at a glacial pace, or across a table with a porcelain vase in Beijing, where visiting American diplomats negotiate mostly worthless communiqués.

The solution does not reside in Washington, where blustering congressmen make hollow threats about trade wars while raking in campaign contributions from the primary beneficiaries of cheap Chinese labor and an undervalued Chinese currency -- the major American brands that have come to depend upon China as their factory floor.

The answer lies here at home, in our laboratories at major research universities, where our finest brains pursue ideas that can germinate thriving new industries; at our community colleges, where laid-off manufacturing workers can be trained for jobs in these new pursuits; and inside our private sector companies, where entrepreneurs can adapt to the global economy by producing intrinsically useful goods and services.

The key to the deal is getting these components to work together, rather than engaging in the politics of division and pinning the blame for our problems on some distant, hard-to-influence force. The 'Blame China' conversation is a time-wasting, attention-diverting sideshow, not unlike the discussion of illegal immigration as a supposed threat to American prosperity. Both present handy props for opportunistic politicians eager to use externalities to explain away their own failure to reckon with our problems.

Let's be clear: China's trade and labor practices do frequently collide with international norms and undercut commitments that Beijing has made through the World Trade Organization. China does indeed subsidize favored companies, not least by funneling cheap capital and natural resources to state-owned enterprises that dominate strategic industries such as steel, automobiles and electronics. China systematically exploits its working people by banning trade unions and by sheltering employers from enforcement when they routinely violate minimum wage laws.

If China is genuinely breaking international trade commitments in its production of auto parts, as the Obama administration alleged last week in fresh WTO cases, filing such complaints is a legitimate means of seeking redress. Ditto, the cases filed in other industries, not least in the manufacturing of gear for renewable energy production, a key emerging pursuit.

But anyone who suggests that these sorts of actions are going to fix what ails America is either naïve or disingenuous. If we were to magically remove China from the global economy, laid-off textile workers in the Carolinas would not suddenly get new jobs again making cotton T-shirts (though we might significantly hurt sales of American cotton, a highly subsidized commodity, which now gets purchased in great quantities by yarn factories in China). We would not suddenly resume building personal computers in California. (Though we might severely disrupt a global supply chain that has made a lot of people very wealthy in Silicon Valley, which in turn has fueled a consumer boom that's also enriched vintners, contractors, landscape architects, art dealers, lawyers, insurance salesman and, for that matter, taco stands, dry cleaners and every other part of the economy.)

These traditional pursuits would simply get dispersed, shifting from China to Vietnam, or Mexico or Turkey -- a shift that is already happening as Chinese wages climb.

We have serious economic challenges in America. The hollowing-out of manufacturing communities should be high on the list of challenges that need attention. We need training programs for laid-off workers and targeted investment with government support in promising new areas. But pretending that something meaningful can be done by pointing at China in order to return significant jobs to the Rust Belt is of little help.

Far too little attention gets devoted to a bigger challenge than China: automation. Despite the tendency to write obituaries for the American factory, the United States by most measures still ranks as the world's second-largest manufacturing power, behind only China, having produced $1.86 trillion dollars worth of goods in 2010. The problem is that this production doesn't employ nearly as many people as it once did. But this is not just an American problem, it's a global reality. Indeed, China itself has lost millions of textile jobs in recent decades amid consolidation and modernization.

When the election is over, the global economy will still be here with its opportunities and its pitfalls, requiring more sophisticated action than simply looking across the Pacific and promising to get tough with those cheaters who supposedly stole our prosperity.

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Obama Romney
332 206
Obama leading
Obama won
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Popular Vote
33 out of 100 seats are up for election. 51 are needed for a majority.
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Holdover
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Democrats* Republicans
Current Senate 53 47
Seats gained or lost +2 -2
New Total 55 45
* Includes two independent senators expected to caucus with the Democrats: Angus King (Maine) and Sen. Bernie Sanders (Vt.).
All 435 seats are up for election. 218 are needed for a majority.
Democrat leading
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