Monday, January 03, 2011

Getting ready for the next American century

Snarky, contrarian pundits have been doing their best of late to come up with reasons why China's rise (and America's accompanying decline) is not as soon as everyone seems to think, or is not inevitable, or is not such a bad thing in any case. Gideon Rachman does an excellent job of taking down these silly folks in
a piece in Foreign Policy. Some excerpts:
Americans can be forgiven if they greet talk of a new challenge from China as just another case of the boy who cried wolf. But a frequently overlooked fact about that fable is that the boy was eventually proved right. The wolf did arrive -- and China is the wolf...

The Soviet Union collapsed because its economic system was highly inefficient...China, by contrast, has proved its economic prowess on the global stage...This is no Soviet-style economic basket case.

Japan, of course, also experienced many years of rapid economic growth and is still an export powerhouse. But [t]he Japanese population is less than half that of the United States, which means that the average Japanese person would have to be more than twice as rich as the average American before Japan's economy surpassed America's. That was never going to happen. By contrast, China's population is more than four times that of the United States. The famous projection by Goldman Sachs that China's economy will be bigger than that of the United States by 2027 was made before the 2008 economic crash. At the current pace, China could be No. 1 well before then...

Successive U.S. presidents, from the first Bush to Obama, have explicitly welcomed China's rise...But whatever they say in formal speeches, America's leaders are clearly beginning to have their doubts, and rightly so. It is a central tenet of modern economics that trade is mutually beneficial for both partners, a win-win rather than a zero-sum. But that implies the rules of the game aren't rigged. Speaking before the 2010 World Economic Forum, Larry Summers, then Obama's chief economic advisor, remarked pointedly that the normal rules about the mutual benefits of trade do not necessarily apply when one trading partner is practicing mercantilist or protectionist policies. The U.S. government clearly thinks that China's undervaluation of its currency is a form of protectionism that has led to global economic imbalances and job losses in the United States. Leading economists, such as New York Times columnist Paul Krugman and the Peterson Institute's C. Fred Bergsten, have taken a similar line, arguing that tariffs or other retaliatory measures would be a legitimate response. So much for the win-win world...

In fact, rivalry between a rising China and a weakened America is now apparent across a whole range of issues, from territorial disputes in Asia to human rights. It is mercifully unlikely that the United States and China would ever actually go to war, but that is because both sides have nuclear weapons, not because globalization has magically dissolved their differences.

So, even if they never become as rich per person as we are, China is about to displace the United States as the most powerful country on the planet. This is generally a bad thing for us, especially considering the predatory mercantilism and geopolitical aggressiveness that are accompanying China's rise.

So, the question now becomes: What do we do about this? On the economic front, I agree with Krugman and Bergsten that tariffs are an appropriate tool for discouraging Chinese mercantilism. Pushing them to revalue their currency may bring some of our jobs back, as well as reducing future financial bubbles, but it won't check China's rise or make them less aggressive. For that, we need to deal with the geopolitical threat with geopolitical means. That means forming alliances.

Alliances are the key to national power. Germany and Japan lost World War 2 because Britain and the U.S. managed to ally with the Soviet Union and China; the USSR was stymied in the Cold War in part by the U.S.' alliance with Japan and Germany, as well as (later) China. China is easily big enough to beat the U.S. in any conceivable kind of one-on-one confrontation; hence, we must follow the lessons of history and build a gang that is capable of overcoming China should they make aggressive moves.

Who will be in that gang? The key alliance must be with India, which is the only country with a population to match China's. Japan is another obvious one, given China's antipathy toward and proximity to that country. Smaller Asian countries threatened by China or its proxies - Vietnam, South Korea, Indonesia, and the Philippines - can be important members of the emerging coalition as well. Then there's Russia, which also has reason to fear China's proximity and might, but is always somewhat of a geopolitical wild card; instead of persuading Russia to join us in a China-containing coalition, our best hope is to persuade Russia to adopt a policy of cagey neutrality (thus making China nervous).

These alliances should be cemented by free-trade agreements. If given a choice between sourcing manufactured products from our chief rival vs. one of our allies, we should choose the ally; thus, we should use free trade agreements to bias our foreign investment toward India, Indonesia, Vietnam, etc. and away from China. In addition, creating multilateral free-trade areas between rich allies like Japan and Korea and poor allies like India and Vietnam will form the core of a Pacific alliance that is largely independent of the U.S. - something that we want to promote in any case.

In addition to alliances, the U.S. should be building up its own power. In the short term, that means rebuilding our infrastructure, reforming our educational system, fixing our dysfunctional Senate, controlling health care costs, and raising taxes. In the longer term, it means one and only one thing: immigration. The ability to add population by assimilation of foreigners, coupled with America's large endowments of land and resources, is America's ace in the hole. We can comfortably fit more people on our land than China can on its own; in the long run, this means that we will be more powerful than China or any other country. We should take advantage of our nation's riches and abundant space to bring over immigrants from every corner of the globe, boosting our population and keeping our fertility rates at the safe "replacement" level. What's more, we should focus on bringing over highly skilled and intelligent immigrants, assuring that the U.S. remains the world's research and development center even as manufacturing supply chains move to more densely-populated Asia.

In order to remain a superpower, therefore, the U.S. needs to be a multiracial nation with a multilateral foreign policy. The Tea Partiers' drive to exclude foreigners, and the neoconservatives' (now largely failed) attempt to have America go it alone, are anathema to our long-term national power. These self-defeating conservative impulses must be resisted.

In any case, the American Century is over, and the Chinese Half-Century has begun. Given the facts of population and resources, there is nothing we can do to stop China's rise, but there is plenty we can do to make sure that, if nations are still around by then, the 22nd Century belongs to America.

1 comment:

  1. Hi, Noah. Two good posts, this and the previous one. You write well, I'd say, because I stuck with both rather long posts -- long, compared to my attention span, at least.

    Not saying I agree with you. On this one I was with ya until the "Alliances..." paragraph; then you got too political for me.

    Good blog name.