Trading with the Enemy?
O'ROURKE, P.J.
Trading with the Enemy? China wants to sell to us. We should be happy. BY P.J. O'ROURKE I just got back from three weeks in China. So I'm a China expert—by Bush administration standards. Of...
...and Medicare reforms and a 2006 budget deficit equal to 80 percent of the Chinese government's annual budget...
...Howard Dean thinks Hu Jintao wants to steal all of America's jobs and industries...
...The Japanese ended up spending a decade with their economy stuck where the rising sun never shines...
...currency...
...The factories are constructed with so much sleek novelty of architecture and lush fancifulness of landscaping that the industrial zones of Wuxi make the Dulles corridor look like I-90 through Hammond, Indiana...
...Instead of the luxuries of life, the Chinese import money...
...The Americans want the computer monitor, and the Chinese want handsome portraits of Benjamin Franklin...
...Wuxi is full of the holiday decorations of imported capital...
...But the client will take five million Mexican pesos instead...
...You might as well have free love then claim your partner had sex but you didn't...
...If America's policymakers insist on worrying about the Chinese economy, what should worry them is the calculated ignorance and stupidity about economic principles among China's policymakers...
...We might try a policy of good manners: "Thank you, China...
...Civilization will survive pirated copies of Syriana DVDs...
...It could hardly help but be...
...The best minds of the nation join the Red Guards and run wild through the countryside trying to grow rice with Mao Thought while the fat, crazy peasant who had those thoughts in the first place controls the nation's minds...
...The invention of fire cost many Cro-Magnon workers their jobs—all those people you paid to sit on you to keep you warm...
...Imports are Christmas morning...
...Taking the sack of rice by force destroys the pursuit of self-interest, which destroys the division of labor, which keeps anybody from doing anything about economic progress...
...I was told that existence in Shaanxi is a lot better than it was before the Open Door policy...
...The door smacked American policymakers in the head and they've been wandering around in a daze mumbling nonsense about the unfairness of our trade deficit with China ever since...
...It doesn't matter if America imports all of its goods from China and exports nothing but pieces of paper...
...The Chinese don't have physical property rights...
...Maybe Monica Lewinsky is in charge of America's China policy...
...Somebody has to...
...When Americans traded their rice sack of votes for George Bush's transformation to an ownership society, they got bungled pension P.J...
...And China now has the kind of income disparities that, a century ago, set off a century of miserable turmoil...
...The next landlord may be "Gang of Four—The Adventure Continues...
...China is manufacturing so many products for America and selling them to us so cheaply and helping us pay for them...
...The Chinese have—let us not forget Tiananmen Square—worse politics than we do...
...Or you can try to make everyone else in the world do something that's worthless...
...Even if the software is illegally copied 1.3 billion times—and it was, I saw it on sale—China is getting the short end of the stick...
...Hu Jintao is stuck with his IOU...
...This can be seen in the export boom cities of China's east coast, in places like Wuxi—a town of which I'd never heard that has more people than Chicago...
...But freedom of trade must be allowed...
...It's not like the Opium Wars when the British forced the Chinese to accept shipments of, shall we say, pharmaceutical imports...
...But if bombarding America with clothing, housewares, CD players, HDTVs, play stations, and PDAs is an Oriental sneak attack on America, it's certainly an improvement over Pearl Harbor...
...And I'm not sure about the kids...
...He said, "This is an international acceptable level...
...But the Republicans are going to lose the House this fall...
...Maybe the Chinese will fight a war with America—the Consumer Electronics War of 2007, with Chinese gunboats cruising the fountains in America's malls...
...China holds an enormous amount of U.S...
...No American policymaker— whether elected, appointed, or sitting on the New York Times editorial board—is likely to go on Hardball and tell the voters that when they lose their job because somebody in Wuxi is willing to do what they're doing for $145 a month, then what they're doing isn't valuable...
...Economic progress requires division of labor, freedom of trade, and pursuit of self-interest...
...Chinese civil rights don't bear thinking about, not that there are enough of them to warrant much thought...
...So the Japanese decided to buy America itself...
...The problem is that America is wrong about economic principles...
...And that's an official Chinese government figure...
...Chinese economic development has cost many American workers their jobs...
...The trade may not be a wise one...
...They went into the backyard blast furnaces of Mao's Great Leap Forward...
...Forget intellectual property rights...
...Factories have been built by Volvo, GE, Panasonic, Sony, Bosch, Nikon—by seemingly every known corporation and by plenty of unknowns, such as the plant with a sign reading "Nature Factory," in case you're wondering where America gets its outdoors...
...It's like going to an L.A...
...Although I could be wrong about that...
...Given China's economic strategies, what policy should America adopt...
...No coercion is involved...
...Japan kept giving America radios, TVs, stereos, and cars, and we kept giving Japan money...
...To say that the poverty and suffering were unchanged since the Manchu Dynasty was to pay the countryside a compliment it didn't deserve...
...This worries America's policymakers, although I'll be damned if I know why...
...It's up to China to buy U.S...
...When it comes to foreign trade, the other country's currency can't be pegged too low...
...Maybe it is a plot to harm America...
...Free trade is balanced trade...
...We don't want the Chinese doing worthless things like coming across the Yalu in hordes the way they did during the Korean War or crossing the Formosa Straits to belatedly settle Chiang Kai-shek's hash...
...In the great American tradition of foreign policy bipartisanship, it's stupid too...
...But all the Fed will give anyone for their American money is other American money...
...I went by car across 150 miles of the back-breakingly terraced, shank's mare-cultivated midget grain fields of drearisome Shaanxi province...
...Maybe China will be more successful than Japan was at making us poor by giving us things...
...China's state-run banking system seems to have been modeled on a combination of 1980s American Savings and Loan crisis and Jack Abramoff...
...It is the concrete, high-rise version of where pledges live at fraternities, though cleaner, but with not many Volvos parked outside...
...I could be wrong about everything to do with America's China policy...
...Imports are good...
...And, on top of that, the Chinese are underwriting America's national debt...
...The Chinese have no say in that government...
...The Japanese didn't want anything America made except Michael Jackson tapes, and we didn't even make the valuable part—the tape cassette part—of those...
...If Hu Jintao brought a $100 bill with him to Washington, and if he took the $100 bill over to the Federal Reserve, what he got for it was a hundred dollars...
...That's the price of progress...
...dollars, our pet shops will be stripped bare...
...Maybe America's policymakers are worried that China will spend that cash and this will somehow damage sectors of the American economy...
...And lives are gone, from people the worst warlords wouldn't have thought to kill, murdered in collective famine and commune purge...
...Between Republican spending and Democratic campaign promises for more spending plus John Q. Public's penchant for saving bupkis, America isn't going to do anything about America's national debt...
...You can be Chinese, or you can be French...
...America is wrong about economic principles so basic that even a doddering old Commie with a high school education like Deng Xiaoping understood them...
...He claimed the situation was under control, with really bad loans down to 10 percent...
...Trapped in the theater of Maoism, the Chinese finally noticed the emergency exit marked "Adam Smith...
...Exports are January's Visa Card bill...
...trade imbalance with China is the last thing America should worry about, especially since, as I note, there's no such thing...
...China's economy barged though Deng Xiaoping's Open Door...
...The problem with America's China policy is not ideological...
...And China doesn't seem to have learned much from Japan's experience with export-driven growth...
...China still legally limits the movements of "immigrant workers" seeking a job...
...Treasury securities...
...Worse things than corrupt court eunuchs and rack-rent landowners have swept through Shaanxi in the meantime...
...They have brown eyes and small noses...
...A U.S...
...But, just from an economic point of view, putting people in jail for clicking on the wrong website icon is not a great marketing strategy...
...When what you're doing isn't valuable you have two options: You can try to do something that is valuable...
...It's not backed by gold or silver...
...In that case they can quit worrying about Chinese exports because these will be as expensive as hell, which will cause rampant inflation, and the policymakers can worry about that...
...real estate agent and being told, "There's a house in Beverly Hills...
...A good wage is $145 a month...
...I talked to an official of one of these banks...
...He knows the guy, he just met with him...
...All the Chinese got in return were those pieces of paper and an occasional 747 and some Microsoft software...
...This is another economic principle that America's policymakers can't get through their lumpy, bruised skulls...
...It's a promissory note that doesn't actually promise anything...
...And a certain American president did claim that...
...That could be disastrous in a country that, for all its growth, is still poorer in per capita terms than the Dominican Republic...
...The payback is over in Wuxi's worker housing compounds...
...And not fancy economic principles such as Income Velocity of Money, which caused some of us to get a D on our Econ 101 midterm...
...O'Rourke is a contributing editor to THE WEEKLY STANDARD and author, most recently, of Peace Kills (Atlantic Monthly Press...
...Great Leap Backwards...
...They're giving us zero percent financing on the money we owe them...
...Another person produces another sort of thing—transformation to an ownership society, maybe...
...When America's policymakers are acting really ignorant and stupid about economic principles, the calculated ignorance and stupidity of politics is usually involved...
...There is no such thing as a trade deficit...
...The Japanese bid up the price of American real estate until the bubble did what bubbles do...
...But, instead, America is upset that China's currency is pegged too low...
...The U.S...
...And George Bush can't figure out why his speechwriters keep making him ask, "Who Jintao...
...I look around my house, and everything except the kids and dogs was made in China...
...But there is no such thing as a trade imbalance...
...Of course, by Bush administration standards, I'm an expert on Iraq strategy, Social Security privatization, and hurricane relief...
...If Wuxi folks work in the factories, they're supervisors...
...Those of us with a Bush administration level of expertise have been, on occasion, wrong...
...If what you mean by international is Peru...
...All land is leased from the government...
...The price is five million dollars...
...dollar is an IOU from the Federal Reserve Bank...
...Buyers and sellers decide that one thing is equivalent to another...
...You can build cars, or you can burn them...
...The Chinese are doing our work for us, making the things we want...
...Trade can't be out of balance because a balance is what a trade is...
...True, there is the difficulty of dealing with a single-party state where the entire governmental apparatus is under the control of a small, doctrinaire political elite...
...But it hasn't happened yet...
...There's no such thing as a trade deficit, but there is such a thing as a current account deficit...
...Nobody is making Americans buy Chinese goods...
...On the other hand, maybe America's policymakers are worried that the current account deficit will cause the dollar to be devalued...
...They bought office complexes, hotels, and golf courses...
...By the 1990s America had all the radios, TVs, stereos, and cars, and all the office complexes, hotels, and golf courses, and all the money...
...I spent three weeks eating Chinese regional delicacies, and I'll admit that, if the Chinese spend all their U.S...
...It has plumbing and stuff and only four or six workers to a room...
...The locals call the factory employees "foreign workers" or "immigrant workers," which doesn't mean Burmese or Mongolians, it means rural Chinese...
...Not that it's terrible housing...
...One person produces one sort of thing—a sack of rice, perhaps...
...Maybe the entire Asian economic boom is a wily Oriental sneak attack on America...
...But let us consider the parable of Japan in the 1980s...
...The majority of the population lives in rural areas where the GDP per capita is $415 a year, one-third of the national average...
...He may have gotten it in twenties, tens, or dimes...
...The trees are gone...
...Exports are bad...
...Let's keep them busy making money...
...But even a fellow with a Bush administration level of expertise can take a quick trip to the Mainland and see that America's China policy is ignorant...
...God knows what's really in peasants' pockets, if they have pants...
...Being self-interested, both people want both things, so they trade...
Vol. 11 • May 2006 • No. 35
