A New US Strategy in the Global Economy?
America's banker isn't happy. At the WTO, China's representatives call on the US to halt the decline of the dollar that has contributed to the rising price of food and oil (and racked up staggering losses in the value to China's $1.5 trillion in dollar reserves). China's leaders blame Washington's "warped conception" of market deregulation for the financial crisis that is rattling the world economy. Liu Mingkang, the chairman of the China Banking Regulatory Commission, scorned distorted US policies: "Does moneymaking or doing business justify the regulators in ignoring their duty for prudential supervision and their job of preventing misbehavior?" Perfect. The Bush administration is so lame, it is getting lectures from the communist governors of China on how best to regulate the market.
And when China talks, the US better start listening. Our trade deficit with China last year jumped to an all-time high of $256.2 billion, the largest deficit ever recorded with a single country, and the equivalent of nearly one third of America's total trade deficit. The Chinese have over $1.5 trillion in US dollar reserves, and are now creating sovereign investment funds to purchase US companies and properties at bargain level prices. China's willingness to lend us the money we use to buy the goods they make with the jobs our companies have taken there enables us to spend far beyond our means. When your banker calls, you answer the phone.
This week, Treasury Secretary Paulson meets with his Chinese counterparts in Annapolis for what is called the Strategic Economic Dialogue. Generally the US comes with a list of complaints about Chinese mercantilist economic policies -- the manipulation of their currency, the violation of copyright and patents, the protection of their markets. The Chinese deny or ignore the accusations, offer a few criticisms of the US and go on with business as usual.
As Annapolis will once more demonstrate, US policy towards China is simply befuddled. The problem is that while the Chinese have a clear economic strategy, the US global strategy is the byproduct of corporate lobbies and Wall Street political muscle. The Chinese routinely flout the rules of the global marketplace, but under the Clinton administration, the US -- driven by companies eager to set up shop in China and bankers eager to cut the deals -- gave China permanent most favored nation trading status and then let them into the World Trade Organization without insisting on reforms or setting up decent enforcement mechanisms for standards everyone knew the Chinese did not and would not follow. About the only thing the US pushed for in the negotiations was to try to open up Chinese financial markets to US banks, a clear reflection of a trade policy that, in Barack Obama's words, has been made for "Wall Street, not Main Street."
It isn't clear how long the old game can last. The dollar has lost about half its value to the Euro, and US exports are beginning to rise. But the Chinese (and the Japanese) have pegged their currencies to the dollar and not allowed a similar adjustment (The Chinese have allowed the renminbi to rise only about 20% to the dollar since 2005). The result is that the US trade deficits with China keep rising; the Chinese keep pocketing more and more dollars. The Chinese are importing inflation that is ever more difficult to control. And the US is exporting manufacturing jobs, and now service jobs, generating a backlash against trade generally that could grow much uglier.
What America needs is a clear strategy to sustain its middle class in a global economy that has just integrated over 2 billion workers in China, India and the former Soviet Union. Neither the Bush administration nor John McCain shows any sign of having ever thought seriously about this fundamental challenge to US security. McCain seems satisfied to prate about the benefits of free trade, and accuse Obama of believing America can't compete.
This week in Flint, Michigan, Barack Obama called for the US to develop its own national economic strategy, and began by putting forth elements of a "competitiveness agenda" for the US. He vowed to raise taxes on the wealthy, capture some of the money now being squandered in Iraq, and invest in a concerted drive for energy independence, seeking leadership in the green industries of the future; in education and training, from pre-school to affordable college; in a world-class modern infrastructure from broadband to fast trains; in research and development to keep the US the world leader in science and invention. While conservatives were grousing about "tax and spend," sensible observers might be more worried about whether his commitments were commensurate with the size of the challenge ($10 billion a year in an investment bank for infrastructure won't build many bridges, much less seed modern transit).
On trade itself, Obama called for "strong and smart trade policies," promising enforceable protections of labor rights and the environment, insisting on enforcement of current accords, saying "we need tougher negotiators on our side of the table -- to strike bargains that are good not just for Wall Street, but also for Main Street"
Obama argued that "Allowing subsidized and unfairly traded products to flood our markets is not free trade... We cannot stand by while countries manipulate currencies to promote exports, creating huge imbalances in the global economy. We cannot let foreign regulatory policies exclude American products....China was not mentioned by name.
With the depreciated dollar, US trade would move towards relative balance with two major exceptions -- the rising cost of imported oil and trade with China. The former requires a concerted drive for energy independence, which both Obama and McCain, less credibly, have called for. The latter requires a serious strategy towards a country which is now our leading creditor.
"Our cooperation is an irreversible and unstoppable current," China's new Vice Premier Wang Oishan said. "China needs the United States and the United States needs China." That is surely true -- but the current current is unsustainable.
How can America benefit from the expanded trade and opportunity of a global economy, while avoiding a race to the bottom that erodes the American middle class that is the pride and the foundation of our democracy? How do we balance our relationship with China, even while engaging that country to join in the effort to address global warming? These are far more fundamental challenges to our security than the threat posed by the scattered extremists of al Qaeda.
While McCain is simply out of touch, Obama has put forth essential elements of a different course. He's called for the US to get serious about developing a national strategy for the new global economy. But that can't be done without a much more candid debate about the big gorilla in the room -- China whose communist governors are happily lending us the rope to hang ourselves with.
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Silly. We already found the solution to the problems plaguing the middle class. Once they fall into poverty, they simply no longer exist, either in the eyes of government or their fellow citizens. We know this because American poverty is never the subject of public discussion. If we did have poverty in this post-welfare reform era, our progressive community/media would surely take the lead in discussing how the sudden creation of a massive bottom-wage/no choice workfare workforce impacted all workers' wages, crumbled unions and stripped away workers' rights and protections. If we had people suffering in poverty, we would be DEMANDING that the government reverse those policies that took public funds out of welfare, to cover the continuing costs of "tax relief" for our richest. But we don't. As far as I've been able to determine, once you fall below a middle class income, POOF, you no longer exist. Problem solved.
Liu Mingkang, the chairman of the China Banking Regulatory Commission, scorned distorted US policies: "Does moneymaking or doing business justify the regulators in ignoring their duty for prudential supervision and their job of preventing misbehavior?"
I feel like kissing a Chinese guy named Liu Mingkang.
"Does moneymaking or doing business justify the regulators in ignoring their duty for prudential supervision and their job of preventing misbehavior?"
Hah. The neocons and neoliberals have even got China fooled.
It should be self-evident by now that Clintonian "free trade" was never about fair and equitable trade that would benefit the majority of America's citizens. The goal was always to enrich the corporations along with their owners and/or shareholders and their executives while destroying organized labor in the United States of America.
I wonder if the Chinese also believe that "trickle down" economics was really supposed to help the majority of Americans and make the United States stronger?
Wow...is it possible that they also believe that Bush, Cheney, & PNAC, LLP invaded Iraq to find WMDs or al-Qaeda or to "spread democracy" or whatever the lie du jour is?
(I'm being sarcastic. Unlike the kind of people that still support Bush or watch Fox News and believe what they say, the Chinese are neither gullible nor stupid.)
As America is finding out, when a country has the amount of debt that America has, it affects that countries freedoms to make independent choices. The banker (China) has too much influence in America's policies. This probably is why America also cowtows to Mexico also.
IMO = We must stop the devaluation of America's dollar - it may benefit trade but at the peoples peril. . . .
America must start producing something more than just greedy people . . . .
You know how the GOP hates economists who read books and know facts and figures.
Man, all this shit gives me a headache.
I'm off to listen to Morrissey.
Here is where I totally agree. Having spent two years living in the UK, with my dollar worth half the pound, living was seriously constrained. However, my friends from the UK were delightfully booking trips to Florida and NYC because they were so cheap!!(to them!) Where is the public outcry, or indeed, the congressional outcry about the recent Chinese invasion of the computers belonging to Rep. Wolf of Virginia! "They got everything," he was quoted as saying, referring to human rights issue files. A Chinese citizen living in the U.S., known for her action on human rights issues, has already discovered suspicious cars driving by her house. She got their license number and determined they were from the Chinese embassy. Commerce Secretary Gutierrez recently asserted that his computer may have been scanned by the Chinese when he visited there on a recent diplomatic mission.Wo
Has anyone noticed the 'cheap sneakers" (ala $25.00) at WalMart only last a few months and have in the last 2 years doubled in price? And if you buy a "name " brand, it is most likely manufactured in the same factory with slightly better materials, but sells for 3-4 times as much and lasts 6-9 months. So, what happens when the Chinese decide to double, triple, quadruple the price of consumer goods? Where do we go, who we gonna call? The EU? Japan? Perhaps Bangladesh
I do know one thing, it sure as hell won't come from the United States. An associate and I were musing a few days ago that we get excited these days when we see "Hecho en Mexico" because it signifies quality!
Last month I read an article that stated China was going to raise their prices - in an attempt to make a better product. So that leaves America where it started. And why would we want to import expensive but faulty goods when we could restart our own production? These trade agreements are just not working out like the government officials hoped it would, so why continue it?
Let's just trade with other countries for the goods enherent to their culture and stop at that. . . .
Until corporate greed and market manipulation is controlled with rules and over-sight, and american workers can afford to 'at least' survive on the wages they are offered by 'the man', the downward spiral will continue. We need to revise the trade agreements, and live with the financial punishments our trade partners incur on us because they are mad about the changes. We are tougher than we think we are. Get ready to prove it!
A nation should NOT base it's policies (economic, foreign relations, defense, science, etc.) on IDEOLOGY! As to economics, China, for the last four thousand years, has based their policies on nationalistic self-interest, right or wrong, (dynastic, nationalist, or communist), it's an historical FACT. Culturally, the US, has more in common with China than almost any other country - ethnically there are at least 14 different dialects of Chinese spoken in their country - now THAT'S DIVERSITY!
Reagan, for eight years, ran this country based on the ideology of "trickle-down" economics and deregulation. He had a half-way competant group of people in charge and THEY couldn't make it work. If I'm not mistaken, his own VP called it "voodoo economics" - our economy has STILL not recovered from that experiment!
NOW, we have a bunch of incompetants, and the AEI, running much the same playbook without a leash! It will take this country at least half a century to recover from this ideologically driven administration!!! I truly fear for my children!
If Americans had any pride or courage they'd be amassed in the streets and stopping business in protest.
We need a hero to lead us into revolution.
American citizens must not be afraid to protest - it shows the government we won't be stepped on. . .
American citizens need to take back the power. . . .
We will never be able to compete against China.
It's not a level playing field. They have an "unfair" advantage.
Their workers have no rights.
That's why the Neoliberals brought American workers down to the same level. Goons like Cheney will be tickled-pink when they see 10 year old under-class children slaving on factory lines.
This is how Washington and their Wallstreet masters plan to "compete"
It's 1984 already. During the nineties many thought that Orwell was way off but it now seems
like he was only 20 years off at worst. Or maybe it's taking awhile for US to recognize what has
happened. We now have 3 major powers at various states of war and alliance while remaining
each others major trading partners. The West, The East and the Equatorial, AKA, the forces of
Capitalism, Communism and Muslim Nationalism. Just as George Orwell predicted!
Yup, it is as plain as day to me. Obama and Bin Laden both play into the role of the 'black' bad guy. The figures who strike up fear in the population and keep us distracted from the obvious power plays in motion.
OMG! So much nonsense! Of the what must be hundreds of posts, only a few have any idea what they are talking about. This is the problem. Ignorance. By the way, it is ridiculously hipocritical to complain about chinese tariffs, and say nothing about our own, such as the latest farm bill. It is off the mark to complain about outsourcing, the dwindling middle class, and all the other "unfair" and "unfortunate" results of a global capitalist system. THIS IS THE SYSTEM! Get used to it. Don't blame China. They are new to the game. We need a new political-economic system. Can we create one? yes, but it ain't gonna happen. Americans and Europeans might be ready to tone down their materialist madness, but the newbees are just getting started. You can't expect them to give it up after working so hard to be like us. Better to accelerate the evolution of the current system so that its demise might come sooner. Remove all barriers to globalization. Force proponents to put their money where there mouth is. Free up all the forces of production, not just capital and technology - labor. For proponents to truly "get what they want" we need to stop holding back and unleash globalization in all its fury, which means elimination of passports and visas so labor can flow freely just like capital and technology. This is the strategy that will bring us a new political economy.
"In politics, nothing happens by accident. If it happens, you can bet it was planned that way."
Franklin D. Roosevelt
Maybe you don't see the big picture but when Bush Sr., Clinton (Bill) and Bushler all talk about NWO (New World Order) what exactly do you think they have in mind? Aside from the U.N. running everything by proxy or "treaty" like they are trying to do in EU? Thank god for the Irish!
It's like America is in a trance --
China is using cheap labor as a weapon. As a result, America's middle class has no jobs and her manufacturing base is destroyed. Consumer spending falls off in America and the dollar declines. The price of real estate falls and China forecloses on its loans. No wonder they are telling us what to do. They and the Saudis own us.
If no one buys the Chinese goods it doesn't matter how much they product !!!!!
With no buyers they go back to the way they were. . . .
At this sorry point in time, just what do you suggest we buy? If it doesn't actually say "Made in China", you can bet that most of the materials used to make the product were made there. The US has exported the ability to produce a product "Made in USA".
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