Mainly about China

5 thoughts on “Mainly about China”

1. Helena, I think it’s true your article was untimely whacked. But as for the Williams article–that, I would say, is really insipid silliness.
   First, the EU and the nations of NE Asia have industrial policies contrived to ensure trade surpluses. Such policies usually don’t work so well when you have two mercantile nations (like the UK and Germany pre-1914); in that case, wistful British historians look back at the period with exasperation at the way technical innovation in the UK usually benefitted non-British industry (FULL DISCLOSURE: as a compulsive anglophile who normally has an immense esteem for the British and Dominion countries like Canada, I too feel a deep regret that the UK’s capital markets allowed local talent to wither or migrate. I can’t help it. My website is dedicated to a British economist who agitated for reversing this process by abolishing imperialism.)
   The trade deficits are driven in large measure by our financial sector, which controls our central bank and normally insists on a dollar of excessive strength. Weighted for trade, the USD is excessively high and this has been devastating for American workers. In the case of China, whose renminbi is pegged to the dollar at a low & declining real exchange rate (E-R).* So much for them.
   Now, when we glance at our trade relations with other rich countries, we see the USD is undervalued relative to its real purchasing power. An obvious example is the euro. In some countries the PPP of the euro is only about $0.60 (OECD statistics). That means the euro has a real exchange rate of about two. Elsewhere, the E-R of the euro is as low as 1.25, IIRC. The yen’s E-R is, on average, much higher.
   Why would such discrepancies exist? And why on earth would nations accumulate reserves of the dollar?
   Easy: the USA is a unique example of a country with a huge economy that allows balance of payment trade deficits. The euro cannot be a reserve currency because the EU has a big trade surlus and exports a smaller amount of capital–so it runs a surplus in its balance of payments. China is more intent on doing so than the EU, and this has been the central object of EU member states since the Renaissance–so we’re talking serious committment
   What we could do to please Ian Williams is have a revolution of unparallelled ferocity, one utterly surpassing the social transformation of the French revolution; the most extreme, drastic reordering of economic relations since the the Khmer Rouge captured Phnom Penh, and thereafter ran our enterprises to run gigantic trade surpluses.
   (They would have to be gigantic: at least a hundred billion per year to result in a current account surplus, because factor payments to foreign proprietors would be at least that much and possibly far more.)
   In the event such a revolution occurred, people in the rest of the world would be plunged into depression. If our trading partners agreed they were tired of hording dollars or selling thm to each other, they could buy American products. If they really thought American stuff was such crap as Europeans always say it is, then the dollar could drift south until our real exchange rate was really huge.
   Ian Williams looks at this imbalance and simply goes at it with the familiar ideological blinkers. Americans are contemptible imbeciles, both stupid and evil, short-sighted morons; once you’ve traced any problem in the universe to their doorstep, your work is done. In reality, he conflates cause and effect. The vast majority of Americans have no control over any aspects of our industrial policy–no one does. (That is not so for the EU, where industrial policies of the member states are an expression of popular will). While only a vanishingly small percentage of Americans have any influence at all–say, a tiny number of actors in our financial sector–foreign financial sectors have the prevailing influence over our industrial policy, and hence, over our foreign policy. American foreign policy neither serves, nor is determined by, a preponderantly American group of humans. No such thing can be said about China, which at least has strict national control over its industrial policy, its financial sector, and its foreign policy.
   Now, it is rather more reasonable to say Americans are a bunch of contemptible yobs for allowing this; that we are somehow morally bound to alter that. But that’s still not very reasonable at all. Consider the consequences to the vast majority of us if such a virtuous revolution were to occur.
   Oh, well, I do wonder why I bother. [clutches temples in despair]
   —————————–
   (E-R) Should be “e-sub-R” but comments don’t support subscripts. The real exchange rate is the ratio of a nation’s currency to its real purchasing power. Thuus, for example, the Indian rupee buys about 2.1 US cents on forex markets. However, in India, the rupee buys as much as $0.11 would in the USA. In other words, the US dollar’s price in forex is five times purchasing power parity with the Indian rupee, or the E-R of the Indian rupee is about 0.20. All figures are approximate.
   If this explanation isn’t clear, my sincere apologies. I could try again.

2. In the all-too likely event people jump to the conclusion I’m rejecting valid criticism of US foreign policy–let me hasten to repeat that I spent a vast portion of time trying to explain what’s wrong with it.
   However, I must say from my own experience that the fundamentalist anti-Americanism of commentators tends to punish dissent. Americans who dissent from the policies of their own state are in a profoundly different position from, say, Europeans who dissent from American policies. Europeans enjoy the satisfaction of intact nationalist chauvinism (and how!); the dissenting American sacrifices this out of moral conviction. In the majority of cases, such Americans labor under the burden of being hostile to their compatriots’ immediate interests, or at least, of being perceived as such. In extreme cases, we stand accused of blood libel by those who do reject our narrative.
   In my experience, people of any society who accuse their own state of killing without adequate justification face intense acrimony–we are liable to the accusation of blood libel/slander.
   Many from other nations will seek to take advantage of the dissenter. Sometimes (as in the case of Ahmed Chalabi), the dissenter collaborates and benefits materially from his dissent. AC obviously benefitted from dissent. Equally obviously, Americans who dissent do not get a payout. Ask yourself what Daniel Ellsberg gave up to leak the Pentagon Papers.
   Speaking for myself, I would rather you arrived at the protest and wallopped me in the face with a baseball bat, than convinced people I was guilty of not loving my country. For the one who loves, and is animated by that love, no insult is harder to bear.
   In a sense, the natural and inevitable reflex of Europeans–with their frustrated nationalist ambitions and their nationalist chauvinism–is to use the American dissenter as mmunition for anti-American nationalism. Nationalism and nationalist chauvinism are invariably directed against a rival nation; patriotism never is, because patriotism is love of country, not loathing of rivals. As I say, it’s quite predictible that Europeans like to make common cause in their scorn for Americans with Americans who dissent. It’s human nature, and it’s vain to complain of it.
   It is also vain, IMO, to complain against those who think whacking off my head and broadcasting the video of the deed are avenging the atrocities of US state actions in Iraq. I don’t think it would be fair, but I sure wouldn’t be surprised if it happened. Indeed, the whole point of revenge is that it exceeds fairness. Even haunting the perpetrators (if I could) seems like a waste of time.
   Now, you can snort at what I say, or dismiss it, but MY own view of genocide or other forms of big atrocities is that they are made partly enabled by the fear of the outside. The most common excuse I’ve heard for the Abu Ghraib atrocities, etc., around here has been “They hate us anyway.”
   I mean, if you REALLY ARE interested in educating Americans you would probably dissociate yourself from anti-American fundamentalists who indulge in the sort of intellectual laziness illustated by Mr. Williams’ essay. I strongly suspect most essays of this type are written by people who have found a really convenient excuse for Euro-jingoism.

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