In his current Asian trip, President Obama visits Japan, then addresses a forum of leaders in Singapore, and eventually ends up in Seoul to discuss nukes and North Korea. But make no mistake, the axis of this week is the time Obama will spend in China, which has catapulted to the forefront of international affairs and is on its way to joining the United States as the alpha and omega of the global economic system.
That China has emerged is secret to no one, but the consequences haven't been fully integrated -- either by the United States or by China. The level of intertwinement between the two economies has reached the point where they have effectively merged, forming what I've called an economic "superfusion." But that fusion hasn't yet altered political and cultural mindsets.
The ministers of the world still beseech the United States to "do something" about a weakening dollar, and U.S representatives on the eve of this trip announced that after the financial morass of the past 15 months, the United States "is back." Yes, the United States remains the world's largest economy -- though technically the combined income of the European Union is greater. But size isn't everything -- just look at Japan, which is still the world's second largest economy but whose influence and impact are substantially less. China may be poor on a per capita basis (perhaps $5000 per person relative to nearly $50,000 in the United States), but it is changing more rapidly and consuming more hungrily that any other society in the world. It is the change factor in the global system.
Chinese leaders, however, have a tendency to downplay their outsized presence and retreat to a combination of false modesty ("Who us? We're just a poor, developing nation") and baton-passing ("The Americans are the ones who messed up the system and they are the ones who have to fix it, and oh by the way, make sure that our $800 billion in Treasury bonds and $500 billion in other investments don't lose value!"). Their doctrine of non-interference in the internal affairs of other countries is a welcome relief for some who have grown tired of the American tendency to do the opposite, but it also is an increasingly ineffective dodge of the responsibilities that come with hundreds of billions of dollars of investment in Africa, Latin American and Central Asia, as well as hundreds of billions of dollars in trade with the United States, Japan, Korea, the EU and the rest of the world.
Americans, however, still don't quite get it. China represents the first time in any American's lifetime that the United States is faced with a country that it cannot coerce. Even the Soviet Union was vulnerable in its way to American military might. China doesn't even pretend to compete with the United States militarily (though it is aggressively spending on "asymmetric" warfare such as disruptive communications technologies and other methods that would impede the ability of the U.S. military to operate smoothly in the Pacific Rim). And there is no real stick for Americans to wield when it doesn't like how China behaves, whether that is in the realm of human rights or intellectual property. For America, China is a 'welcome to the real world' phenomenon, a case where the United States has to do what most other societies have learned to do for centuries: deal with things they don't like in other countries without being able to force them to behave differently.
The issue for America going forward has little to do with China and everything to do with America. Can Americans rediscover the energy and innovation that brought such power and prosperity in the first place? Can the United States respond constructively to a changed global status that sees the rise of wealth and prosperity everywhere from Brazil to India to China? And can the U.S. government remove its collective head from the sand and act with the urgency that everything from climate change to economic competitiveness demand?
The problem of China for America is that it is a large but amorphous issue, unlike Afghanistan (do we send troops NOW?) or health care, with its endless and acrimonious battles in the beltway. There is no vote, or quick resolution or unitary policy that will "solve" China. That allows it to linger as a concern, but not to shape action.
So while Obama's visit is important in form and a start, it cannot be a one-off, full of pomp and devoid of substance. Somehow, the United States must shake of the collective grogginess of Cold War, terrorism, financial crisis and inequalities and grapple with a world that is evolving and changing around us whether we like it or not. There is still time, but that clock is ticking and midnight is approaching.
Follow Zachary Karabell on Twitter: www.twitter.com/zacharykarabell
They'd look pretty silly running around naked! Talk about unnerving!
This is more significant than the author concedes. For all their infighting, the European Union has had the greatest economy in the world since Bush invaded Iraq. Yes, the USA is number two in the rankings of world economies.
The greatest consequence of this is the devaluation of the US dollar which has been weak against the Euro. The dollar declined against the Euro 58% from 2001-2008.
Consider the ramifications of this. For every $100,000 of a U.S. citizen's assets, the international buying power dropped $58,000 since 2001 vs. the Euro. Combine that with the loss in your 401.k and other retirement savings, and you begin to see the real weakness of our dollar and economy.
In addition, the dollar's weakness wipes out the incentive for international investments in it.
I am very pleased that the stock market is making a recovery. I hope it continues. But my concern is that it is just an illusory bubble which will burst again, because the fundamental foundations of our economy are weak.
that's the way capitalism works in this country. Whatever it takes to get that bottomline favorable for "ME" is the path the arrogant CEOs are going to take. To hell with the consequences down the road, I've got mine. Solipsism at its finest.
This practice has been going on for years like a metasticising cancer to our industrial base. Why we can become a "servicing" country, until the services are removed to India or Mexico.
One can't help but wonder what the hell the biggies in the MBA programs - Harvard, Yale, et.al. - are teaching these candidates. Is it how to rape the country's resources - materials and manpower? The evidence seems to point in that direction. Damn near every product on the market for our consumption is manufactured somewhere other than the U. S. And worse, the people we have been electing to run our country jump aboard that train and practically thumb their noses at the parochial electorate. How sweet is that?
Well...the 'Piper" has come to receive its dues. So now we have to pay. Congratulations to us!
Well...
Chanos was excited that afternoon. He had just read a report that China’s electric consumption had dropped 4 percent, despite official government statistics that the Chinese economy was growing at 8 percent. He relished the implications. “I think they’re making up the numbers!” he said. As Wall Street picks up the pieces of the broken financial system, Chanos is already one step ahead. He sees China as the next domino to fall in the global meltdown. In recent months, Chanos has loaded up short positions on the infrastructure companies that have rushed to build China’s new highways, bridges, and tunnels. Now he is waiting for their share prices to tank.
http://nymag.com/news/business/52754/
Will China surpass USA as the leading world financial power? The answer is no, as Taiwan and Japan, which have perfect their skill in copying innovations, not in innovating..... In order to surpass USA, China must start to innovate right now, but that would require it to provide an ideal environment for innovators, a task far more difficult than just to undercut price using cheap labor force.
Will USA enter into a long period of recession? Most likely, yes. What kept the inflation, and interest rate, low is the depressed economy. Once the economy starts to expand, inflation will flare up, globally, especially, for raw materials. The rational way out of this quandary is to have a major innovation, using the innovation, rather than using M, to increase P.... To view entire article, please visit
http://www.postscience.com
US corporations always explain their behavior as a cost saving measure, it's cheaper to manufacture in Asia. Ironically, Asian corporations are finding it cheaper to manufacture in the US so they are building new US factories. Nissan actually manufactures cars in the US for export to Europe.
The future of the US economy does rest with the Asian corporations, if not with the Asian markets.
America needs big changes, or it will go the way of all "empires" (Greece, Rome, Ottoman, Great Britain) Other nations would be happy to see this happen. Scary times.
There's plenty of evidence that providing basic health and welfare services to the population boosts overall economic performance. Even the wealthy benefit because of the economic growth. The only downside is that the wealthy no longer feel so privileged and that's why they oppose any initiative to help the lower classes.
American business needs to bring its manufacturing home. To continue to do business in China is treasonous, in my view, and profoundly dangerous long-term.
I would suggest that in the US there is a one party system as well, both parties are controlled by big institutions [drug ,oil,unions,wall street etc.]rather than the people.
Can anyone say that California is well served by a supposed two party system?
China has decided to try its own stimulus program in which they are trading short-term growth for long-term decline. Whereas when China opened up in December 1978, they grew their economy by developing a private sector. Now they're going in the opposite direction: renationalizing industries, choking off China's engine of growth and creating bad loans. They're going down the wrong path.
http://www.realclearworld.com/articles/2009/07/23/interview_with_gordon_chang_96972.html
Also, Chinese are also acting out a long term economic strategy by buying up and hoarding natural resources like iron and coking coal.
The $4.3 trillion Chinese economy is under-performing despite a $900 billion stimulus program.
China seems to be cooking its books. For instance, it reports that car sales are surging while gasoline consumption is flat. Is that realistic? Or are state run Chinese companies just stock-piling cars?
China may have too much capacity. The central planners built out productive capacity for a booming economy but China is stalling. In nearly every sector of the economy, China is in danger of producing huge quantities of goods with no buyers.
China's economic and political posturing signals that its leaders have no idea what is in store for them. The result may be a surprising economic collapse, akin to what happened when the housing bubble popped in the US.
http://www.businessinsider.com/jim-chanos-china-is-headed-for-a-huge-crash-2009-11
I don't support the one party control of its political system; that is not something we can or will change, change will come from within.
However, I will give the Chinese their due... they think at least 50 years ahead, strategically, while we lurch from year to year reacting tactically to emerging threats and opportunities but doing little to systematically invest in our future as a society. The Chinese are building modern infrastructures, securing global supplies of oil, natural gas and minerals critical to hi-tech industries and are leading us in clean energy technologies and have gone from having virtually no economic reserves in the 1980s to massive ones today... by manipulating their currencies (yes) but with our eager cooperation as we used massive borrowing from Chinea to enable us to eat, drink and be merry on the cheap for the last two decades without personal savings and without paying the taxes we should have to finance two wars and agreed to social programs.
It's time to take a hard look at ourselves, to make some changes in our patterns of savings and taxes, to invest heavily in public infrastructures and plan strategically, in public and in private, for the legacy we will leave 50 years from now. The alternative is that we will rapidly become a second rate nation and a nation of whiners.
the USA is in no position to dictate anything to the chinese ----800 billion notwithstanding
In fact soon the countries with large foreign reserves/stock holdings (China, Abu Dhabi, Norway, Singapore ...) may soon be in a position at least in theory where whenever they feel American exceptionalism and self-aggrandizing gets out of hand, just say "We demand all Americans take off their clothes and walk around on their hands for one hour next thursday at 12PM or we WILL crash your economy".
What scares many in the rest of the world is that the US has the ego of an earth-sized planet, more weapons than the rest of the world combined, an insane religious right and has some serious humiliation coming up.
What good would it be to loan someone money and not be able to call their marker? It's inevitable that China will ultimately develop the means to completely negate the strengths of the U.S. military. The countermeasures to defeat U.S. super-weapons are far cheaper than the super-weapons themselves. China may spend less on weapons but I'm pretty sure its investments are more strategic.
Congress has put the U.S. up as collateral for its loans, thinking that it can simply default in the worst case scenario. Our taxes primarily only pay interest on our debt to China and the Federal Reserve. The wealthy elite has decided to deliver this country into serfdom to pay off their benefactors and retain power. As time goes on, the U.S. people will only have two choices... serfdom or destruction.
BRAVO MY FRIEND YOU SUMMED UP MY THINKING