CHINA INC

CHINA INC. & THE AMERICAN FUTURE:

Paul Krugman almost gets it.

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CHINA INC. & THE AMERICAN FUTURE:

Paul Krugman almost gets it.

Analysis

Jay B Gaskill

“China has become a major financial and trade power. But it doesn’t act like other big economies. Instead, it follows a mercantilist policy, keeping its trade surplus artificially high. And in today’s depressed world, that policy is, to put it bluntly, predatory.”

Paul Krugman, January I, 2010

Highly credentialed pundits like Dr. Krugman tend to present themselves as shrewd and “worldly”.

No surprise there.

They want us to know that their special knowledge comes with special wisdom. We live in a celebrity obsessed age in which undereducated actors have become international experts. “If those Hollywood idiots can do it”, the highly credentialed pundits think, “then we can do it ten thousand times better”.

A hint to the wise:

Given enough adoring attention, we are all “experts” on matters far removed from our core expertise. As a lawyer with a laptop, I’m no different. But my particular expertise is thuggish behavior.

Here’s the dirty little secret:

Most modern intellectuals are “reality challenged” in that they are seduced by the notion that rational self interest is the governing principle of the world. This is typically presented in the drawing room, gentlemen-and–ladies-making-deals context.

It excludes three essentials from the picture, all of which are painfully evident from a study of Human history:

(a) We Humans are the top predators of this planet. This is a role we cannot ignore or ever fully escape...because the alternative is to become prey. This is why our main institutions are predatory in function in that they always seek to expand the range of the predatory harvest and to kill off or subordinate all competing predators.

(b) Nation states are predators.

(b) Thuggish behavior is low level predator conduct. It will always emerge when any predator group starts thinking and behaving like prey. The drawing room ethos is prey behavior unless it is coupled with an overarching, alpha-predator toughness.

“We are able to sleep soundly in our beds because rough men stand ready to act in our behalf....” [Attributed variously to Churchill or Orwell, but you get the idea.]

The drawing room, genteel, rational self interest paradigm is the disease of the modern intellectual. It is seductive because, after all, who is better equipped to determine what is in your rational self interest than some professional economist, political scientist or even a REAL scientist. Does it matter how removed your problems and concerns are from somebody’s doctoral dissertation? Not if they have risen to the top of the heap of punditry.

Paul Krugman is a Nobel Laureate in Economics and he writes in the New York Times about a variety of political topics. The common thread in his pieces is that economics and politics are inseparable and that Dr. Krugman knows best. To be fair: Sometimes that works out. Though a liberal, Dr. Krugman has served as the current administration’s most effective critic.

On January 1, Paul Krugman got something right. Then he flinched from the implications.

Here’s an irony for you: The part that Krugman nailed was in complete accord with the views of two populist gadflies, Lou Dobbs and Ross Perot. Such a right/left/populist concordance alone is enough to make us commoner types wake up and take notice.

Mr. Dobbs has been a trenchant critic of American trade policy for years, pulling no punches when the Bush Administration continued down the same suicide trail that was blazed by several previous administrations. Ross Perot was the first major figure to apply the ‘emperor has no clothes’ clarity of vision to the US borrowing and outsourcing addiction.

Let me quote Krugman and Dobbs side by side:

Krugman said this on 1-1-10:

China has become a major financial and trade power. But it doesn’t act like other big economies. Instead, it follows a mercantilist policy, keeping its trade surplus artificially high. And in today’s depressed world, that policy is, to put it bluntly, predatory.

Dobbs said this on 3-28-04:

... in the two years since the United States paved the way for China's entry into the World Trade Organization, our trade deficit with China has increased by nearly 50 percent. The total U.S. trade deficit has reached nearly a half-trillion dollars.

And on 1-23-08, Dobbs added:

The irresponsible so-called free trade policies of Democratic and Republican administrations over the past three decades have produced a trade debt that now amounts to more than $6 trillion, and that debt is rising faster than our national debt. All of which is contributing to the plunge in the value of the U.S. dollar.

LINKS:

Krugman: http://www.nytimes.com/2010/01/01/opinion/01krugman.html

Dobbs: http://www.usnews.com/usnews/opinion/articles/040405/5dobbs.htm

AND: http://www.cnn.com/2008/US/01/22/Dobbs.January23/index.html

On a separate, but related point, Dobbs trenchantly connected another set of dots:

By entering costly free-trade agreements and allowing the WTO to extend its reach, the United States has been complicitous in broadening the strength and scope of the multinational corporations, which resemble nation-states in wealth but have none of the limitations of national borders. And huge multinational corporations, unlike nations, also have no significant responsibility to the citizens of any particular country.

Let me complete the circle:

This is about China, Inc., the worlds largest, most dangerous and least socially responsible “multinational” corporation. Its behavior is textbook consistent with a predatory corporation bent on destroying the competition by flooding the market with underpriced commodities (driving other manufacturers out of business) and goods and securing exclusive supplies of essential raw materials (think of China’s quiet acquisition of “rare earth” metals with the goal of achieving monopoly control of the essential ingredients for high-tech energy - http://www.theaustralian.com.au/business/news/china-builds-rare-earth-metal-monopoly/story-e6frg90f-1111119076188 ).

China is also an ancient culture for which long term thinking is hard wired.

We have been losing a three decade chess game with an ancient empire. There is just time enough to wake up before we reach the checkmate stage.

It is no coincidence that China is “not helpful” when it comes to Iran’s nuclear ambitions. One more 911 would be the Coup de gracé for the American economy.

Rational self interest? Perhaps. But drawing room ethics? Forgetabout it.

JBG