JUDGMENT CALLS
Robert J. Samuelson
The Real China Threat
Will its takeover over the U.S. economy really matter?
Obsessed with rankings, Americans are bound to see the Beijing Olympics as a metaphor for a larger and more troubling question. Will China overtake the United States as the world's biggest economy? Well, stop worrying. It almost certainly will.
China's economy is now only a fourth the size of the $14 trillion U.S. economy, but given plausible growth rates in both countries, China's output will exceed America's in the 2020s, Goldman Sachs forecasts. But this is the wrong worry. By itself, a richer China does not make America poorer. Indeed, because there are so many more Chinese than Americans, average Chinese living standards may lag behind ours indefinitely. By Goldman's projections, average American incomes will still be twice Chinese incomes in 2050.
The real threat from China lies elsewhere. It is that China will destabilize the world economy. It will distort trade, foster huge financial imbalances and trigger a contentious competition for scarce raw materials. Symptoms of instability have already surfaced, and if they grow worse, everyone—including the Chinese—may suffer. China is now "challenging some of the fundamental tenets of the existing [global] economic system," says economist C. Fred Bergsten of the Peterson Institute.
This is no small matter. Growing trade and the cross-border transfers of technology and management skills contributed to history's greatest surge of prosperity. Living standards, as measured by per capita incomes, have skyrocketed since 1950: up 10 times in Japan, 16 times in South Korea, four times in France and three times in the United States. Significantly, these gains occurred without serious political conflict. With the exception of oil, world commerce expanded quietly. The chief sources of global strife have been ideology, nationalism, religion and ethnic conflict.
Economics could now join this list, because the balance of power is shifting. The United States was the old order's main architect, and China is a rising power of the new. Their approaches contrast dramatically.
Economically dominant after World War II, the United States defined its interests as promoting the prosperity of its allies. The aims were to combat communism and prevent another Great Depression. Countries would make mutual trade concessions. They would not manipulate their currencies to gain advantage. Raw materials would be available at nondiscriminatory prices. These norms were mostly honored, though some countries flouted them (Japan manipulated its currency for years).
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Member Comments
Posted By: LaSwede @ 10/02/2008 5:41:42 PM
Comment: Dear darrelcc ,
Do you believe in Santa also? USA is a arrogant big joke and only blind people like you don´t see how fake it is
Posted By: Generic Person @ 08/25/2008 4:37:25 PM
Comment: When a nation has a low currency, its exports are in high demand. Everyone wants to buy from them because they can make it the cheapest and they do so it will sell.
After the nation generates high revenue thanks to high demand, the value of their currency increases because of it. They can no longer produce at low prices and the demand for their exports is decreased. They lose revenue, but at the same time their buying power is increased thanks to the higher value of their currency.
The nation is able to focus more on importing, buying with the new power of their currency. Eventually mostly spending will result in a shift of money to other nations with lower valued currency because the nation with the higher currency is doing all of the buying.
http://en.wikipedia.org/wiki/Depreciation
For a long time governments attempted to prevent this part of world trade with tariffs because they saw their nation's economy getting weaker (which is partly true) or because they just didn't like their neighbors. Then, after the war, America and other allied nations realized that free trade was beneficial in the long run, so they worked to remove the tariffs and create the systems of trade we have today.
Then China comes along and realizes it can have its cake and eat it too. All it has to do, is artificially control its currency. When the value would naturally increase because of high sales, it can put a stop to the rise and continue the high exports. The consequence is that the value of other nations' money decreases and when it comes time for china to do the buying, it's literally competing with it self.
"Symptoms of instability have already surfaced, and if they grow worse, everyone???including the Chinese???may suffer."
In capitalism there are winners, and losers, there is no right or wrong, all's fair. Mr. Samuelson is not saying that China is some evil nation that wants to take all of our money, hes saying that their current course of action is SELF DESTRUCTIVE (stated in the article) and that it happens to screw everyone else in the process.
"Both the United States and China are self-interested"
Yes Mr. Samuelson states examples of how America aided in creating global trade which ended up helping everyone who took part in it, but he's certainly not trying to fool anyone about America's true goals, making money.
By the way, nice call on America's huge deficit screwing us and everyone else, Mr. Samuelson wrote an article about it just a few months back, it was a good read.
Posted By: darrelcc @ 08/25/2008 12:58:36 AM
Comment: How dare you put down the greatest country on earth like that. It scares me to see you use the word "ours" as I would . Name a dissaster in this world that the US wasn't the first to mobilize itself and come to the rescue. C. MacLean, I trunever consider you a true American if you truly believe all that garbage you wrote. American's have the best of everything thanks to this great country we live in. Freedom, security, liberty, the ability to apply ourselves and be succesfulll. Why don't you pack your bags and drag your anti-american ass off this continent. Perhaps residents of the middle east or some obscure comminist ruled island will accept an unpatriotic worthless piece of *** like you.