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October 25, 2010

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here we are now, in a world where the US just engaged in 20 years of technology transfer and wholesale movement of industrial capital to China

pwned.

What we need to recognize, IMO, is that China is basically a mercantilist economy.

For "gold and silver" read "US Treasury bills" and you're kinda there.

I feel their pain, they're trying to leapfrog from a third world agrarian economy to something more modern in one or two generations. That's a tall order.

But I feel our pain as well.

Yet here we are now, in a world where the US just engaged in 20 years of technology transfer and wholesale movement of industrial capital to China in the vague hope that democracy and friendliness would follow

I know that people have said that, but it is really hard to believe that the vague hope was anything but a way to offshore costs and have multinationals make more money. As such, this is less a notion of we were tricked and more like the rigorous application of karma...

Yet here we are now, in a world where the US just engaged in 20 years of technology transfer and wholesale movement of industrial capital to China in the vague hope that democracy and friendliness would follow...

As I read this, I was just looking at this shoe on my other foot.

The US hid behind a mercantilist doctrine for most of its history. We gladly joined in the imperialist exploitation of China during the 19th century. We isolated the communists after '48 and propped that little bald headed fascist up in Taiwan.

Given our current economic trajectory and the hollowing out of our economy one can only wonder how we shall feel when the Chinese start selling advanced technology to the backwards primitives in North America.

Will we be equally grateful?

Maureen F. McHugh's 1992 first novel, China Mountain Zhang is excellent.

It's one possible answer to bobbyp's question:

[...] Given our current economic trajectory and the hollowing out of our economy one can only wonder how we shall feel when the Chinese start selling advanced technology to the backwards primitives in North America.

"the vague hope was anything but a way to offshore costs and have multinationals make more money."

Mr. Jensen would like a word with you. Be in his office at 10:00 am tomorrow morning.

http://www.youtube.com/watch?v=zI5hrcwU7Dk

At some point, of course, the Tea Party and Glenn Beck will discover the "nature" of the Chinese deal as a bullet point for populist demagoguery and audience share. Rupert Murdoch, the Koch Brothers, Dick Armey, Rick Santelli and the bond market, and the U.S. Chamber of Commerce will encourage and succor the hostility for domestic advantage until it gets out of hand.

Then they will kill Glenn Beck and the Tea Party.

But you never know. Maybe all of them will join together, take over our government, and work together to start a nuclear war with China.

Nixon had the Southern strategy and the China strategy.

It's Obama's fault.

China confuses me. As a nation, the Chinese produce more than they consume. That's what it means to run a trade surplus. They would have a higher material standard of living if they consumed more of what they produce. But they prefer to live less well than they could, for some reason.

The best I can figure is that "they" is a misleading word. The average Chinese is worse off than he could be. But the people who run the place (be they capitalists or Party apparatchiks) are better off. Suppose you were running China, and you had a choice between two policies:
1) Make yourself rich by paying your industrious workforce more, so that they could buy more of what they produce, and leave less for export; or
2) Make yourself obscenely rich by keeping their wages low so that you can sell more to foreign customers.
Would you hesitate for even a second?

The flip side of "they" is of course "we". In one sense, "we" live better when the Chinese work to make stuff for us, without demanding that "we" make stuff to trade for it. "We" get to consume more than "we" produce. But "we" are no more homogeneous than "they" are. The capitalists and apparatchiks on this side of the trade imbalance are just as well-served by it as the Chinese ones. The rest of us, maybe not so much.

--TP

Yet here we are now, in a world where the US just engaged in 20 years of technology transfer and wholesale movement of industrial capital to China in the vague hope that democracy and friendliness would follow

Uh, you think that's the reason for the "wholesale movement"? For someone demonstrating a healthy skepticism about Shambaugh, you're displaying a remarkable naivete about US motives.

long after the value of China as a strategic counterweight to Russia was exhausted, and long after expectations of liberalization should have been dashed.

Uh, China remains a strategic counterweight to Russia, albeit an enormously weakened Russia, but even allowing that point, China's central position in Asia makes it a player of extreme value, like it or not.

And as to liberalization, economic liberalization has certainly made progress, and you can value that or not.

"Given our current economic trajectory and the hollowing out of our economy one can only wonder how we shall feel when the Chinese start selling advanced technology to the backwards primitives in North America. "

I don't think we have to worry too much about that, until they give up on being a command economy, with large sectors of industry run by the army. Command economies seem to advance rapidly to a certain point, and do well in the areas where they chose to do well at any expense, but history suggests they only get so far and then stall. Remember, we entertained the same fears of the USSR at one time.

IOW, I don't think they currently have the economic liberty necessary to eclipse us. Though we could arrange to be eclipsed, by abandoning economic liberty...

As for rare earths, they're not really all that rare, it's just that China is the price leader, having the typical communist attitudes towards environmental damage and worker safety. At two or three times the price, we could mine them ourselves.

I'm actually concerned about all those economic warfare munitions we've been selling them. You don't think their government is buying our treasuries as an investment, do you?

I think Brett's mostly right on this score. I've always thought that that it wasn't that a free market would necessarily make for a freer China, but that if they didn't institute a more open political system, then they will never catch up to the Western Europe standard of living. As Krugman has been saying, it's all about growth of inputs so far in China, and growth of outputs (or gains in efficiency) is a much more difficult nut to crack, especially if you have huge corruption festering under the command structure.

I also think that more corporatist economies are more vulnerable to financial cataclysm, similar to the USA in the gilded age (and today, to some extent). A major real estate collapse in China is looking more and more likely these days.

There is the financial MAD doctrine. China could destroy the US economy by dropping all $$$ reserves on the market and not buying more US treasure bonds but this would lead shortly after to the implosion of their economy too since the US could not buy all that cheap crap anymore. So for the time being the system stays in place because neither side can afford to rock the boat. We simply don't know how long it will take for the boat to capsize on it own accord.
---
Brett, how long do you think it would take for the US to become rare earth independent*? If that would take a considerable time, then blackmail is perfectly feasible (somewhat similar: Iran has oil but not enough refineries to cover domestic demand for gas => threat of sanctions credible provided China and Russia participate).

*Iirc Australia's production has been built up to act as a counterweight to China on this but I don't know, if that is enough to cover world demand.

“Command economies seem to advance rapidly to a certain point, and do well in the areas where they chose to do well at any expense, but history suggests they only get so far and then stall. Remember, we entertained the same fears of the USSR at one time.”

Given the difference in population, if China “stalls” when its per capita GDP is about 40% of America’s, that will mean that total Chinese GNP is not very far from double that of the USA. You might be wise to worry about what happens when a juggernaut like that stalls and what its leaders might try in order to restart it.


Why would the Chinese not want to discourage US production of "advanced equipment like guided missiles"?

'.

propped that little bald headed fascist up in Taiwan

I hear he had bad breath, too. Seriously, though: however flawed Chiang was, I don't think support of Mao would have been any more palatable.

We isolated the communists after '48

They did a rather neat job of isolating themselves, I think. Sure, we probably didn't do ourselves any favors in supporting the Kuomintang, but I don't see that Mao could ever have been a friend, ally and trading partner with the US. The USSR poured money and arms into China, and look what happened to their relationship. And Stalin and Mao were ideologically much, much closer than Mao was with the US.

The latest source of tension is over reports that China is withholding shipments of rare-earth minerals, which the United States uses to make advanced equipment like guided missiles.

It looks like we'll be maintaining a relatively large force in Afghanistan for a while.

NPR has had some good stories lately on rare earth metals and the Chinese situation:

http://www.npr.org/templates/story/story.php?storyId=130704695

I'd get over there quickly since the first entry on my Google search was a "Defund NPR" site -- probably brought to you as a joint effort by the bureaucratic state capitalists in the Chinese Government and the Republican Party (the most dangerous organization on the face of the earth, rare or not), both of whom plan to defund EPA and OSHA as well, which I think is what Brett meant by "typical communist attitudes towards environmental damage and worker safety."

NPR also had an interview the other day, which I couldn't find, with a gentleman who runs a company planning to mine rare earth in the United States. Japan is also mining rare earths in Vietnam (also NPR).

As an aside, this weekend's Barron's had a profile on American chemical company NALCO, which is deriving a large part of its business from cleaning up Chinese water supplies -- so there is environmental cleanup in China and for sure its a top-down effort.

I have no doubt that environmental cleanup and worker safety will play an increasingly important role in China as they ramp up their own EPA at the people's request.

Of course, there will be virulent attacks on such efforts, probably by Dickxuan Armey, Li Newt Gingrich, the Kochfang Brothers, and the Chinese Chamber of Commerce as worker safety and a cleaner environmental cut into profit margins.

The zombie vermin scourge will spread the world over.

having the typical communist attitudes towards environmental damage and worker safety.

Eh? Does this mean we're no longer smearing the green movement in the US as commies? Or that OSHA is some unforgiveable socialist intrusion into the capitalist system? It's so hard to keep up with the talking points these days.

I think we're getting a taste of what's to come in the "who's our next enemy, who's the next designated Other" by Sharron Angle's hallucination that those Mexicans are starting to look a little Asian to her.

God, the ignorance in this post is appalling. I don’t know where to start. Maybe here:

“Yet here we are now, in a world where the US just engaged in 20 years of technology transfer and wholesale movement of industrial capital to China in the vague hope that democracy and friendliness would follow… long after expectations of liberalization should have been dashed. Technologies have been transferred to China that would have been - in many cases were - protected by intense secrecy during the Cold War. More mundanely, by moving a lot of industrial production to China we have provided funding and training for an expansion of industrial output that would have been difficult to achieve alone.”

The author implies that had we not spent “20 years of [transferring technology]” to China, they would not have achieved modern industrialization. While it’s sort of impossible (and thus stupid) to play games where we predict an alternative reality, I’ll play along with the author, and note that regardless of our own policies, China would still acquire Hong Kong in 1997, thus having plenty of access to Western technology. Pursuing the policies it does today towards Taiwan, South Korea, Singapore, Japan would give it further access. It’s not like the United States is the only owner of all the toys.

Secondly, this whole concept of “if we didn’t give them our stuff, they would be a backwater” is causally spurious. The author is unclear as to exactly what technology we supposedly gave them, but reverse engineering production processes is not difficult. Nor is stealing stuff. China knows all about our most secret weapon systems – Aeigis – why would we assume they wouldn’t be able to find out all they want about anything else we make?

The author doesn’t realize that the real benefit of US business interaction has nothing to do with gadgets, and has everything to do with business culture. After 20 years of cultural revolution, and 50 or so (depending on where we are counting from) of communist central planning, the real knowledge that the Chinese wanted from our JVEs with them was our business practices. How to reward/promote/fire and otherwise run a modern company. And again, if we didn’t show them, they would have had plenty of other partners.

So, to sum point 1: Since we’re playing games with alternative reality, the death of Mao and subsequent end of the cultural revolution would probably have led to the modernization of China, regardless of US involvement. Deng and other less ideological, more pragmatic leaders wanted it. It was the SEZs, and the Hong Kong/other Asian nations investment in those SEZs that led to Chinese growth in the 80s, not the US giving stuff away.

Point two: You are also incredibly ignorant of Chinese domestic politics. In the last 30 years, there has been considerable liberalization of village-level politics. The election of public officials at the village level is nearly ubiquitous throughout the countryside, and the use of political protests to force local officials to actually implement the policies promised by the national government is common. Do protests still get put down violently? Yes. Does it happen often? Well we don’t really know, given government secrecy with (accurate) protest data, but most political scientists who examine this phenomenon would likely say no, protests are no longer often met with severe repression.
While the pace of national-level change is apparently slower than you would like, that in no way suggests it is not or will not happen. The very access of Chinese to Western media, culture, universities (and thus our very neighborhoods and way of life) forces them to consider alternative social/political structures, and evaluate their own. Naturally, because of Hong Kong/Japan/etc. some educated Chinese would have still had this access, without the US opening up to the mainland in the 1970s. But our willingness to engage in commerce, joint ventures, and exchanges of information dramatically increases both the absolute number of Chinese who receive this influence and the rate at which they are exposed.

Point three, yours and other commenter’s fears of us becoming “primitives” is again, stupid. We have twice the population of Japan, and yet I don’t see anyone suggesting they’re a backwater. The same for any other industrialized nation smaller than us. Simply having “a lot of people” does not ensure your economic or military supremacy. Domestic stability, among many over factors, is far more important. Our advantage as a well-functioning and venerable democracy is that foreign and domestic companies seeking to invest here don’t have to worry about their assets being nationalized, major swings in tax/gov. policies, or a looming revolt. Will China be able to replicate the Singaporean model on a grander scale? Maybe. Will it be forced to instead decentralize its political structure and offer its citizens the same civil liberties as Western societies? I see no argument here why this wouldn’t be just as likely an outcome, especially given the Chinese citizen’s already demonstrated willingness to shake up political structures when they are feeling unjustly treated.


I encourage you to stop writing about things of which you have such little exposure to actual knowledge. Take a few classes, or read a few non-sensationalist, non-pop pulp books, first.

Not only is China's current economic policy (especially as regards trade with the rest of the world) mercantilist. It's foreign policy in other ways is pretty similar to US and European (and Japanese) foreign policy approaches in the 19th and early 20th centuries. When, interestingly, their economic development was much like China's today.

It's enough to make one wonder whether economic determinism has some merit when it comes to foreign policy.

given the Chinese citizen’s already demonstrated willingness to shake up political structures when they are feeling unjustly treated.

Can you provide some examples of this?

I'm not saying they don't exist, but I'm having a hard time coming up with a long list of Chinese political reforms driven by popular initiative.

Could be due to my profound ignorance of Chinese domestic politics. Maybe you could fill me in.

"I encourage you to stop writing about things of which you have so little exposure to actual knowledge. Take a few classes, or read a few non-sensationalist, non-pop pulp books, first."

Ah, heck, if Jacob or anyone else stopped writing about things of which they have so little knowledge (assuming you're correct about that, which you may well be), folks who really seem to know what they're talking about wouldn't be moved to comment with brilliant riffs and licks.

Eric Clapton, would you agree that as the Chinese people demand and receive greater liberty in its many forms, including higher wages, perhaps union activity, better worker safety, and a cleaner environment that corporations will begin moving they're operations to countries which provide less of the above (or perhaps to regions within China that provide less of the same)?

I understand (my understanding is admittedly shallow) this is happening already in China.

At some point, a Madame Chang-Kai Angle might arise to remove those liberties on behalf of corporate and bureaucratic state interests

Thanks and welcome to OBWI.

On the bright side, our efforts to help the Chinese boost their economy have also helped boost ~600M people out of poverty.

"given the Chinese citizen’s already demonstrated willingness to shake up political structures when they are feeling unjustly treated.

Can you provide some examples of this?

I'm not saying they don't exist, but I'm having a hard time coming up with a long list of Chinese political reforms driven by popular initiative"

1900s was basically one large political upheaval after another. The official fall of the Qing Dynasty in 1911, the periods of warlordism and Yuan Shikai afterwards, Chiang Kai Shek, followed by Mao, fallowed by the Great Leap Forward, followed by the 1960s-78 Cultural Revolution, followed by Deng Xiaoping's reforms in the 1980s.

Several of these were elite-driven, granted, but they would not have been successful without the mobilization of large portions of the countryside.

Thanks Eric.

I guess I was looking for popularly-driven reforms during the Communist period. With, frex, Tienanmen Square being perhaps the notable counter-example.

My general impression is that China is a pretty top-down place. I actually don't know a lot about internal Chinese politics, so I could be wrong.

Hi Jeff,

I am (a little) sorry about my tone, after reading it again, but posts like the one above really anger me. They are irresponsible if they contribute to more and more people thinking that China will never liberalize, and hasn't liberalized at all in the last 30 years, and thus we should somehow change our policies towards them.

Despite the fact that we're more than willing to be friends with many other authoritarian regimes world wide.

""Eric Clapton, would you agree that as the Chinese people demand and receive greater liberty in its many forms, including higher wages, perhaps union activity, better worker safety, and a cleaner environment that corporations will begin moving they're operations to countries which provide less of the above (or perhaps to regions within China that provide less of the same)?""

well, if that drives up the price of good production sufficiently enough to outweigh leaving behind a trained workforce and connections to the Chinese market, then sure. The textile industry always seems to go first. It moved from Taiwan, to China, and now to other SE Asian countries like Vietnam and Indonesia.

As far as a leader taking away rights that it's already promised...that doesn't sound like it would end very peacefully, and the Chinese politburo is crazy-concerned about stability.

Their is English for "they're".

Chiang, not Chang

China knows all about our most secret weapon systems – Aeigis

That's Aegis, and its existence is not any kind of secret at all.

Before I say anything else, though, it'd be good if you said a few words about what they know that they oughtn't, and how they acquired said knowledge.

The most egregious spilling of military secrets onto Chinese soil that I'm aware of is when we allowed them to launch one of our secret payloads, which crashed, key hardware components never having been recovered.

"Eric Clapton": The author implies that had we not spent “20 years of [transferring technology]” to China, they would not have achieved modern industrialization.

Ah, this would be one of those uses of the word "imply" that actually means "I don't feel like arguing with what you actually said, so I'm going to make up a bunch of stuff you didn't say and argue with that."

I'm not really interested in that game, although I am interested in learning more about things I admittedly don't know as much about as I'd like. I don't mind vigorous disagreement, but I'd rather you tried arguing with what I actually said and not what you imagine I "implied".

China would have continued to develop without free trade agreements with the US and access to US technology and market discipline, yes. But it's ridiculous to say that those things had no effect on Chinese development. I mean, is that really the case you want to make?

The author doesn’t realize that the real benefit of US business interaction has nothing to do with gadgets, and has everything to do with business culture.

The author does realize this; in fact the author thinks that access to the market discipline and business practices of the US was an enormously important part of the technology transfer. The way I put it is that what China gets from exports is not just cash, but access to the demanding tastes of developed markets, which forces manufacturers to a competitive level of quality.

Without access to export markets, developing countries have to pursue import-substitution strategies for industrial development, and those have a hard time making products that are competitive on the world market.

You are also incredibly ignorant of Chinese domestic politics.

I'd say "reasonably ignorant". I welcome expert correction, especially if it comes with cites and examples. Pseudonymously-posted assertions aren't all that convincing.

In the last 30 years, there has been considerable liberalization of village-level politics. The election of public officials at the village level is nearly ubiquitous throughout the countryside, and the use of political protests to force local officials to actually implement the policies promised by the national government is common.

Great if true, not particularly important to the official/military/elite attitudes towards the US or the one-party structure of national power in China, which are the things that matter to the US.

yours and other commenter’s fears of us becoming “primitives” is again, stupid.

Please show me where I said anything about becoming "primitive" or expressed any fear that the US would "fall behind". You are making things up again. I don't worry about that; I worry about the inherent dangers of an economic superpower rising to compete with the currently-hegemonic United States, because exactly that sort of situation has led to very unpleasant things in the past that I don't wish on anyone.

I encourage you to stop writing about things of which you have such little exposure to actual knowledge.

I encourage you to bite me. I'll write about the things I'm interested in to the best of my knowledge and abilities, and, if you feel like it, you can make informed rebuttals. Or you can go away. What you can't do is stick around here but tell everyone else to shut up because you, "Eric Clapton", are so much more enlightened than they are. OK?

Total: Uh, you think that's the reason for the "wholesale movement"? For someone demonstrating a healthy skepticism about Shambaugh, you're displaying a remarkable naivete about US motives.

That was the way it was sold to the US population. I'm not an idiot; US business access to Chinese markets and cheap labor were the real motivations. But the point is that the ostensible motivation of liberalization in China has not been substantially achieved - not at all surprising, but like the lack of WMDs in Iraq, I'm not willing to just pretend that "everyone knew" that that was not the real motivation now that it's been shown to be false.

Model62: our efforts to help the Chinese boost their economy have also helped boost ~600M people out of poverty

I don't think we had all that much to do with that, actually. That was a result of basic industrialization that didn't require technology transfer (at least, nothing you couldn't get from books published before 1940). But yes, it's a great accomplishment. China is pretty awesome. I have high hopes for a peaceful 21st century in which the education and employment of that large part of the world's population now living in poverty leads to even faster advances in science, technology, and human development. I'm a great optimist, in general.

Eric Clapton: I am (a little) sorry about my tone, after reading it again, but posts like the one above really anger me. They are irresponsible if they contribute to more and more people thinking that China will never liberalize, and hasn't liberalized at all in the last 30 years, and thus we should somehow change our policies towards them.

The linked article talked about a recent perceived hardening of official/military Chinese attitudes towards the US. Is that not a tendency you think is real?

What use is local-scale liberalization to the US if the national-scale politics remain authoritarian and become more hostile to the US?

The fact is, trade liberalization with China was sold to Americans with the promise that political liberalization would likely follow. It was supposed to be a self-interested act. If the promised benefits don't materialize, why should Americans continue with policies that have turned out to have substantial costs?

Despite the fact that we're more than willing to be friends with many other authoritarian regimes world wide.

Oh I think that's mostly a terrible idea too. "Friends with" in a neutral sense is okay. Sales of military and industrial equipment, not so much.


"That's Aegis, and its existence is not any kind of secret at all.

Before I say anything else, though, it'd be good if you said a few words about what they know that they oughtn't, and how they acquired said knowledge."

Thanks for correcting my typing error.

Aegis was meant as a general example of western military hardware China routinely tries to get its hands on. They steal it like this:

http://news.softpedia.com/news/Chinese-Hackers-Stole-Korean-Defense-Secrets-161261.shtml


That was the way it was sold to the US population.

As I said above, I don't think that was the case. I think it was more the case that it was an after the fact rationalization. In fact, I think the argument that all this business investment was to encourage liberalization occurred after the first wave of businesses (led by Coca Cola in the early 90's?) into China.

I also think this is a particularly American conceit. Japanese have lots of investment there, but you don't hear Japanese saying they are doing it because they welcome the liberalization arising from having Toyotas and Sonys built there.

Eric Clapton: I am (a little) sorry about my tone, after reading it again, but posts like the one above really anger me. They are irresponsible...

If you want to write a short or long piece about the ways in which China has been liberalized by free trade with the US, I would be happy to post it on the front page. I don't mind being wrong. I mind having arguments ascribed to me that I wasn't making.

LJ, I'm thinking of entry into the WTO in particular, which happened around 2000. My perception is that there was an air of "Forget about Tienanmen Square, contact with wholesome American business practices will fix everything" at the time. I don't have direct experience about the way pre-90s trade agreements were sold but my impression was that the same kind of thing was in the air since the 80s, along with "Access to 1 billion Chinese consumers will be great for American business and jobs!"

I welcome corrections to these impressions though.

I don't think we had all that much to do with that, actually. That was a result of basic industrialization that didn't require technology transfer (at least, nothing you couldn't get from books published before 1940).

Weird. In your riposte to Eric Clapton, you claim "technology transfer" which also includes "business practices" together enabled Chinese industry to compete in foreign markets (Europe and North America). But in your riposte here, you seem to be claiming that China could have industrialized and raised ~600M out of poverty without modern industrial technology and business practices. I guess the question is, if that's so, Why didn't they?

Great if true, not particularly important to the official/military/elite attitudes towards the US or the one-party structure of national power in China, which are the things that matter to the US.

Those are things that matter to economic and political elites in the US. The magic fairy dust works its magic from the bottom up. And its work takes time.

The fact is, trade liberalization with China was sold to Americans with the promise that political liberalization would likely follow. It was supposed to be a self-interested act. If the promised benefits don't materialize, why should Americans continue with policies that have turned out to have substantial costs?

Capital and technology transfers to China should have been attached to more explicit demands for economic and political liberalization. They weren't because our political and economic elites are not much interested in those things. What policy changes do you have in mind?

Thanks for correcting my typing error.

My pleasure.

Aegis was meant as a general example of western military hardware China routinely tries to get its hands on.

I don't know about how things are done in South Korea, but I do know that one cannot obtain classified documents in this way in the United States. And I'd bet if such a slip was actually made (as opposed to: was misreported on because the reporter didn't know what they were talking about), that South Korea will have to completely revise its rules for dealing with classified material before we share any more with them.

Aegis was meant as a general example of western military hardware China routinely tries to get its hands on.

It's not just China. One of the more persistent and effective (IMO) hotbeds of military espionage is Israel, who is at least notionally our ally.

Jacob Davies: ""More mundanely, by moving a lot of industrial production to China we have provided funding and training for an expansion of industrial output that would have been difficult to achieve alone.""

Imply. v. strongly suggest the truth or existence of (something not expressly stated)

This fits the definition of imply quiet nicely, thank you.


"But it's ridiculous to say that those things had no effect on Chinese development. I mean, is that really the case you want to make?"

Ahh yes, because where did I say that the United States had no effect? Quote me I dare you. I said that if we continued to isolate them, China would simply acquire what it wanted from other nations.

If you read my post, you would see that I said the exact opposite. US soft power has quite a large effect on Chinese citizens. That's why it is stupid to deter such interaction.

"in fact the author thinks that access to the market discipline and business practices of the US was an enormously important part of the technology transfer. The way I put it is that what China gets from exports is not just cash, but access to the demanding tastes of developed markets, which forces manufacturers to a competitive level of quality"

Actually, the words you used were "technology and capital transfers" "technology" and "industrial production" "industrial output" "funding and training"

Maybe I was supposed to assume "training" means corporate business practices and not machine operation? Kind of hard to assume that when it's sandwiched between several references to money and industrial output.

It's difficult to backtrack on the Internet, when I can just read your post.


"I'd say "reasonably ignorant". I welcome expert correction, especially if it comes with cites and examples. Pseudonymously-posted assertions aren't all that convincing."

I didn't realize you held your commenters to a higher standard than yourself.

Do a JSTOR search for "China and Democracy" and find your own citations. I'll even help you out: start with anything written by Kevin Obrien, Li Liangjiang, or anything within the China Quarterly.


"yours and other commenter’s fears of us becoming “primitives” is again, stupid.

Please show me where I said anything about becoming "primitive" or expressed any fear that the US would "fall behind". You are making things up again"

I commented early on this post, but bobbyyp and gary farber have mentioned it already, encouraged by your own writing.

"I encourage you to bite me."

Lol, well if you want to play policy expert and make assertions about topics you are unversed in, be my guest. But consider the people you influence.

"Or you can go away. What you can't do is stick around here but tell everyone else to shut up because you, "Eric Clapton", are so much more enlightened than they are. OK?"

You wrote the post about China. You made the assertion that the past 30 years of US China relations were a mistake. If you don't want to be critiqued, then don't post.

I'm certainly no enlightened expert. But I at least bothered to read some stuff before making broad generalizations about the state of democracy in another country.

This is not a style of argument I'm particularly interested in having.

However:

I didn't realize you held your commenters to a higher standard than yourself.

You have no track record here, you are posting pseudonymously, and you provided no cites or sources for any of your assertions, which you have presented as the opinions of an expert.

I do not present myself as an expert, am not telling anyone else to stop talking about anything as long as they're willing to be reasonably polite, and am willing to sign my name to what I write. Who exactly is being held to a higher standard here?

Now you've provided the names of a few authors who - you claim - provide convincing evidence for your position, without providing any actual citations. Again, you are asserting expertise without any of the things that would lead anyone else to grant you expert status, and you're doing so in a very hostile way. Don't expect a friendly reception to that sort of thing.

The linked article talked about a recent perceived hardening of official/military Chinese attitudes towards the US. Is that not a tendency you think is real?

No not really. The linked article points to a statement by a Lt. Cmdr who was talking because they were doing a joint exercise with the Australian navy. The article notes breathlessly that

The stakes have increased as China’s armed forces, once a fairly ragtag group, have become more capable and have taken on bigger tasks. The navy, the centerpiece of China’s military expansion, has added dozens of surface ships and submarines, and is widely reported to be building its first aircraft carrier. Last month’s Yellow Sea maneuvers with the Australian Navy are but the most recent in a series of Chinese military excursions to places as diverse as New Zealand, Britain and Spain.

This fits in with the neat notion that we are going to be challenged by China in the next 25 years, but since the US military budget is close to 50% of the aggregate world military expenditure, I don't see that China having joint exercises with Oz, the Kiwis, the Brits and the World Cup champs is really that threatening.

The article also says

That makes it crucial to help lower-level Chinese officers become more familiar with the Americans, experts say, before a chance encounter blossoms into a crisis.

How precisely do we do that when you seem to be proposing that we should no longer engage in liberalization (precisely what we should stop and how we should stop it, I'm not sure, but you say we ought to do something)

Also, when a company says "Access to 1 billion Chinese consumers will be great for American business and jobs!", I don't see any promise that China will be liberalized, just that that particular company can get money out of those billion chinese. Here's an example. No promise is made about more liberal attitudes on the part of the Chinese in the article, but the changes in the way foreign businesses and the licensing process is treated, that seems like a textbook definition of 'liberalization'. As for the entry in the WTO, the process about 5 years before Tiananmen Square and ascension took place 10 years after the event. Now, I would like the government to be more honest about how it was a mistake, but given that Wen Jiabao is in the top leadership group, I don't think that it is the case that the government thinks that they were totally in the right (though whether Wen is a populist or not is a bitterly debated question). That a government won't admit that it screwed up is not a particularly Chinese trait, they probably learned it from us.

However, while I agree with Eric Clapton's points, I do think you should listen to what Jacob has pointed out. Taking this all down a few notches would be A Good Thing.

This is exactly why the Yardbirds broke up.

How would you know, Jeff?

Brett on China:

I don't think we have to worry too much about that, until they give up on being a command economy, with large sectors of industry run by the army. Command economies seem to advance rapidly to a certain point, and do well in the areas where they chose to do well at any expense, but history suggests they only get so far and then stall. Remember, we entertained the same fears of the USSR at one time.
I simply have to stop and marvel at this suggestion -- this assertion -- that the contemporary economics, and economic policy, of the Chinese Communist Party, remotely resemble those of the Soviet Union of any period.

Ah, ideology, why must I bother with reality, when I have you to sleep with?

This is exactly why the Yardbirds broke up.

Hey, if they hadn't, we wouldn't have bought a stairway to heaven.

Can't we all just get along?

"I commented early on this post, but bobbyyp and gary farber have mentioned it already, encouraged by your own writing."

Unless you consider quoting another person as having "mentioned" something, I've made no such mention.

Eric Clapton, I think you've had some valid points to make, but conversation would be much more productive if you might consider lightening your angry tone. I very much expect that your exchanges with Jacob would have gone better in both directions if you hadn't started by being angry and using angry language, which tends to provoke a counter-reaction.

Flinging general insults and instructions also tends to be unproductive.

Myself, I question how much more the U.S. could have done to limit "technology transfers" to China, which is to say that I think the answer is clearly "some," but I'm unconvinced this would have truly had significant effects on either Chinca's economics or politics, or would have been worth the complications of the attempt, and we could discuss any number of aspects of Chinese-American economic and political interaction, if you like, but, again, please, only if we're assuming generally honest interlocutors and good faith.

Thanks.

You wrote the post about China. You made the assertion that the past 30 years of US China relations were a mistake. If you don't want to be critiqued, then don't post.

EC, you've got some interesting things to say, but you did come in with an ugly tone. A tone that's pretty common on the internets, but not so much here. If you had said exactly the same things without the 'your ignorance enrages me' stuff, I think you'd been having a much more useful discussion with Jacob, since you both appear to have considerable interest in this subject.
Id suggest starting over- wipe the slate clean, everyone can drop the 'did you assume X? I think you did' and get back to the good debate that I suspect is lurking in the backround.

I've got my own crititque fwiw although I claim no expertise:
Jacob, as you suggested, narrow-minded, self-interested, truculent, hyper-nationalist, and powerful is not a bad description of the US over the past 50 years or so. So Im not sure if you're arguing that:
1)China is a particularly bad case (that might be ameliorated by increased political liberalization) or
2)It it not in the self-interest of the US to help China even though objectively their motives and attitudes are comparable

I think it's more like point 1, but then...
while I see liberalization of China's political or economic systems as very good things, I don't necessarily see those as remedies to China being militant, nationalistic, or self-interested. So there was never a world where helping China was going to turn it into an economic and military powerhouse that was also a friendly teddy bear... and really, never a world where China was not going to turn into an economic and military powerhouse, period, despite the actions or inactions of the US.

As for the unusual, peaceful coexistence of the Western nations, I think that quite a bit of that is a product of WWII and the Cold War- the generation in power now grew up in the 1950-1980 period, so there's still a great deal of almost instinctive goodwill (almost familial in some cases). The US and China have no such shared struggle to bond over- and again, as you say, the natural state of superpowers is competitive.
So, my only critique on that point is that I don't think it's a lack of investment in the relationship that's failed to produce more of a cooperative effort. It's just an almost-unavoidable circumstance. I do think that, in a more general sense, the US would've been wise to put more emphasis on international institutions and giving legitimacy to those institutions, but only insofar as we can get the people of other countries to respect that legitimacy. But that would've just served to produce outlets for the inevitable conflicts as opposed to quashing them.

In any case, what worries me about conflicts between the US and China isn't that they'll occur, it's that both parties need to be invested enough in international norms and reputation, plus in the benefits of their mutual relationship, that these factors will act as a counterweight to the inevitable nationalistic desire to crank up tensions or cast the other side as a villain. And I don't know if the economic interactions up to this point have served that end, but I think we can hope that they have. The last thing I would want to do now is sow the seeds of distrust or attempt to pull back from the economic embrace. I don't care if they outproduce us, or even out-tech us, as long as we manage to keep the peace.

Eric Clapton: Actually, the words you used were "technology and capital transfers" "technology" and "industrial production" "industrial output" "funding and training"

Maybe I was supposed to assume "training" means corporate business practices and not machine operation? Kind of hard to assume that when it's sandwiched between several references to money and industrial output.

M-W,">http://www.merriam-webster.com/dictionary/technology">M-W, "technology":

1 a : the practical application of knowledge especially in a particular area b : a capability given by the practical application of knowledge 2 : a manner of accomplishing a task especially using technical processes, methods, or knowledge 3 : the specialized aspects of a particular field of endeavor

The Book of Wikipedia:

Technology is the usage and knowledge of tools, techniques, crafts, systems or methods of organization.

The most important parts of the transfer (in my opinion) were still technology in the "machines and how to work them" sense. But any successful technology transfer includes the business practices necessary to run a business of that sort. So for instance with lj's example of Coca-Cola, it wasn't just bottling machinery and recipes for syrup that were transferred, but also the knowledge of how to run a successful soda company, which includes everything up to and including management techniques and marketing.

"Space technology" does not mean the blueprints for Apollo and a primer in how to work machine tools. It includes the organizational knowledge needed to run a space program. I do not think this is a controversial or unusual use of the word "technology", and I would say that the equation of "technology" with "gadgets" would be the idiosyncratic usage. I'm not sure why we're arguing this point, since I agree with you that business practices were an important part of the transfer and would readily acknowledge that I could or should have made that more clear, but it was a 500 word blog post and stuff gets left out, I'm afraid.

I commented early on this post, but bobbyyp and gary farber have mentioned it already, encouraged by your own writing.

I am not responsible for what other people write, "encouraged" or not. I do not believe that the US is going to "fall behind" in either an absolute or relative sense and I certainly don't think it will become a "primitive" nation, and I would (and have, though not yet in this thread) vigorously argue against any such assertion.

You wrote the post about China. You made the assertion that the past 30 years of US China relations were a mistake. If you don't want to be critiqued, then don't post.

Critique away. Don't expect me to agree with everything you say on the basis of a declared but unsupported expertise. Don't tell me (or anyone else) to stop writing about things they're interested in because you feel they lack the requisite expertise. Pretty simple stuff.

lj: How precisely do we do that when you seem to be proposing that we should no longer engage in liberalization (precisely what we should stop and how we should stop it, I'm not sure, but you say we ought to do something)

I'm not sure either what we should do now. I do think we - the wider "we", including the other developed democracies - made a mistake in not tying free-trade status to concrete liberalizations. We did that for smaller countries too, but unlike China, they weren't contenders for superpower status. China is a special case and should have been treated that way.

Later on, I think we should have looked at the growing trade deficit and its causes - Chinese restrictions on access to markets for foreign companies and currency manipulation - and taken steps to address it, which could include WTO sanctions if barriers to entry for US firms were not removed and currency manipulation not ended. We could have done what was done with Japan when their car imports surged, which was cap imports and force foreign manufacturers to locate plants in the US. (This is basically what China did with the requirement that foreign firms form joint ventures with local firms to participate in the market.)

I think we could and probably should do those things now, which might mean tariffs and import restrictions or requirements that Chinese exporters locate assembly plants in the US, but I think that the economic events of the last couple of years make all of this much more fraught. We should have spent the 00s working this stuff out, but we wasted the opportunity, let a yawning chasm of a trade deficit emerge, and now we're all in a much more difficult spot.

Model62: you seem to be claiming that China could have industrialized and raised ~600M out of poverty without modern industrial technology and business practices. I guess the question is, if that's so, Why didn't they?

Well, we're dealing with counterfactuals that make it hard to say what would have happened, but my take is roughly this: the poverty in China was the result of much of the population being involved in agriculture at very low levels of productivity. The technology needed to improve that situation is not very sophisticated. Well, take a look at this graph:

And you could go further back and see even sharper drops in the share of the population involved in agriculture. So, the technology we're talking about is that available to the US between 1900 and 1940, say - tractors and harvesters and trucks, the products of heavy industry. It would have been perfectly possible for China to do all of that heavy industrial development without substantial foreign help (in fact they were well on the path to it before 1980), but it would have meant a lot more of the population working in heavy industries than is now the case there.

On the other hand, developing an indigenous electronics industry would have been a lot harder. Blast furnaces and steel mills and tractor plants are one thing, semiconductor fabs are quite another.

I don't think it's the end of the world that it happened this way. I wouldn't want China to be any less developed today, but I sure wish it was friendlier, and I think we didn't do all that we could have done on that front.

But I mean, I find this graph intensely cheerful:

I heart tractors.

Ugh, the right hand side got cropped. Source was here.


"cropped", heh

lj: How precisely do we do that when you seem to be proposing that we should no longer engage in liberalization...

I'm surprised that in addressing this comment, you didn't directly address the words bolded above, Jacob. I mean, you are suggesting that the things we have done haven't met some expectation of resulting liberalization in China, not that liberalization efforts in general toward China are wrong-headed, right?

CW: I've got my own critique fwiw although I claim no expertise: Jacob, as you suggested, narrow-minded, self-interested, truculent, hyper-nationalist, and powerful is not a bad description of the US over the past 50 years or so. So I'm not sure if you're arguing that:
1)China is a particularly bad case (that might be ameliorated by increased political liberalization) or
2)It it not in the self-interest of the US to help China even though objectively their motives and attitudes are comparable

I think I'd go for 3) - it is dangerous for a second hyper-nationalist superpower to emerge in a world where the existing hyper-nationalist superpower has gotten used to hegemony. I hope and believe that that doesn't mean that war is inevitable, although I'm not confident that the evident stupidity and nihilism of war is enough to head it off - that has repeatedly failed in the past.

But for instance, what does the ubiquitous "Made in China" on consumer products do to US sentiments about China at a time of sustained 9.5% unemployment in the US? I'd say that in itself is a dangerous thing, and it's something that China has made worse with currency manipulation.

On tone, the main thing I ask for is that nobody be told that they are unqualified to express an opinion - that's what we're here for - nobody make overt claims of expertise without backing them up, and a general assumption of goodwill be extended. It is also not polite to assert that someone who disagrees with you simply cannot have read anything about the subject or know anything about it. We all read different things.

My opinions are based on the reading I've done, which includes a lot of "pop pulp", some of which probably shades into academic reading, and a lot of newspaper and blog reading. I'm an interested amateur and I don't claim any special expertise. The mode of discussion on blogs does not require explicit disclaimers for all of that; unless someone says otherwise, a blog post is "What some person thought at a particular moment in time", and credentials or lack of same are implicit; it is not a scholarly argument, and it is explicitly open to counterargument, which is what we're doing here.

In the course of which, hopefully we all learn something. If you don't like this mode of discussion, and I can see why a lot of people don't, I suggest that maybe you shouldn't drive yourself to distraction by reading blogs. I can't stand academic writing and discussions but I don't spend a lot of time writing to journals explaining that their authors are full of it.

hsh: I mean, you are suggesting that the things we have done haven't met some expectation of resulting liberalization in China, not that liberalization efforts in general toward China are wrong-headed, right?

Well, that was in response to this, quoted from the original article:

That makes it crucial to help lower-level Chinese officers become more familiar with the Americans, experts say, before a chance encounter blossoms into a crisis.

I think it's an open question how much trade liberalizations contribute to, say, military contact. Obviously if the US & China didn't trade at all there would be less reason to meet (like e.g. North Korea) and less at stake when hostilities developed. But do the exact parameters of trade materially affect that? Would a tariff barrier with China that only reduced trade by some fraction affect military contact?

Now I also think there's a lot to the idea that trade encourages contact between citizens and decreases tensions. I think "citizen diplomacy" is more important than the official kind. But China and the US are a special case because they're both so damn big. It's impossible for more than a tiny fraction of the population of either country to have direct experiences with the other.

And when the economic relationship is perceived as unbalanced - which I think is the case in both directions right now - there is a risk that the trade contact leads to heightened tensions. As I say, I think the impact of "Made in China" on ordinary Americans is pretty substantial. I hear very overt hostility towards Chinese goods all the time.

Maybe I'm misunderstanding the use of "liberalization," mistaking trade liberalization for political liberalization.

I was just going to say, it would be helpful if discussants distinguished among trade liberalization, economic liberalization and political liberalization. They're very different things. (For one thing, the US has no ability to "engage in" political liberalization *in China.*)

I heart tractors, too.

Look at the shape of that chart. It's as if in ~1980 or so they decided to change capital investment strategies. And then changed again in 2000.

Here's an idea. All those tractors pre-1980 made a lot of farm labor redundant, which is bad in terms of stability. What to do with them? Put them to work in factories built with foreign capital -- and serving foreign markets. The upside for China is obvious. Jobs for farmers, infrastructure improvement, operations know-how, all of it. The upside for foreign capital is obvious, too -- cheap labor means bigger ROI than available back home. Foreign investors would have been more interested in investments in factories that produced goods for their home markets (starting with t-shirts and doo-dads and moving up to higher margin stuff such as computer parts and TV screens and, soon, automobiles), in general, than in investments in heavier industries (such as tractors) that served China's industrialization needs because the home market stuff offers the better ROI and growth potential. Plus, the heavy industry stuff probably requires a whole lot more complex infrastructure to pull off than was available. A T-shirt factory doesn't need much to get rolling. A truck factory needs a whole lot.

The post 2000 spike in tractor usage is interesting, too. It'd have the same effects on the labor market -- maybe enough to allow China to remain a cheap labor haven. Why's it so steep? China has much more indigenous capital to work with now -- not to mention improved infrastructure -- after a generation of trade surpluses. I don't think those surpluses would have been possible without the technology transfer.

Anyhow. Fascinating. Anybody care to suggest a good economic history of China?



"The US and China have no such shared struggle to bond over- and again, as you say, the natural state of superpowers is competitive."

There was those minor incidents with Japan in the early 1940s.

But in this case you're using "China" as a synecdoche for "the CCP," with which cooperation was minimal and technical at best, and there was little or no propaganda on either side to celebrate the fact that we were mutually enemies with Japan.

That the CCP pretty much only played guerrilla defense, anyway, didn't help, but since Chiang was our ostensible "real" ally, and was pretty much a sinkhole of uselessness against the Japanese (ask General Joe Stilwell), but was wildly propagandized in the U.S. on par with Stalin and Churchill as Our Allies in the United Nations (see "Luce, Henry and Clare"), that seems practically irrelevant.


Ok. But since you've suggested that we ought to have tried to force more democritization onto China, that leads me away from the general proposition that the rise of China is the problem, and towards one where there are specific things about China that would much improve the situation. And that takes me back to observing that self-centered nationalistic behavior is not confined to authoritarian societies.
If we take it as a given that China was going to rise to power, then again Id argue that any short-term friction we could apply to that process by eg refusing them entry to the WTO would be very costly in terms of general souring of the relationship and a missed opportunity to create the sort of socioeconomic bonds that work against militarizing the relationship.

But for instance, what does the ubiquitous "Made in China" on consumer products do to US sentiments about China at a time of sustained 9.5% unemployment in the US? I'd say that in itself is a dangerous thing, and it's something that China has made worse with currency manipulation.

There's going to be a lot of pain in the future for people who 1)relaxed on the rising economic tide post-WWII and still saw significant gains and 2)got significant emotional satisfaction from belonging to the 'winning team' for the last half-century. And those can be very destabilizing. And yeah, it's in China's interests to keep the stability of the US in place.
But I think this was inevitable too. The current crisis is not China's doing, and any crisis that led to high employment would leave consumers grumbling at "made in China" labels. Just as some folks grumbled over Japanese-made cars and motorcycles back in the day. So, I don't see that grumbling as necessarily signifying a problem in international relations, just a symptom of a problem that was always going to crop up- so not really related to a thesis about how the US ought to have restrained China.

You might compare the data on tractors/area with that on total land area under agriculture and the total number of tractors.

But whichever way, there's an interesting drift downwards in tractor numbers during the 80s and 90s that sharply reverses after 2000. I could see an argument that that data undermines my case for agricultural development (and therefore remediation of extreme poverty) being independent of technology transfer and trade, since it's only after the massive-trade era since 2000 that numbers ramp up sharply.

Then again compare the growth in population with the population in agriculture. Population growth was/is substantial and slowing slowly through the 80s & 90s, but growth of population employed in agriculture has tailed off to stasis in the 90s, and will surely start dropping precipitously any day now.

One last note before I get back to work for a while - when looking at how China could fit into the existing world system more comfortably, both the "how" of what they could do and the "how" of how they would need to be different to do those things - I think it's interesting to look at India, which has had slightly less dramatic but still very substantial economic growth and growth in trade, but largely hasn't run into the same conflicts with the developed world. I think - though I'll admit that this is not a well-informed opinion - that a fairly large part of the reason for that is the solidly-rooted tradition of liberal democracy in India.

"Ah, ideology, why must I bother with reality, when I have you to sleep with?"

Disclaimer: I am not an expert. Having gotten that out of the way, let me assert, without citation (having forgotten where it is) that the export sector in China is about the most pure form of wide open unrestrained capitalist competition there is on the face of the earth(i.e., at the micro level-the economics of the firm-pure free market theory, etc.). So this stuff about the bogeyman that the centralized economy is, well, not convincing. But then nothing Brett ever asserts is.

My point about "primitives": It is the heigth of Occidental conceit to assume we shall always "be on top". It is a totally ahistorical viewpoint. Whether this will be good or bad, well--your milage may vary. It is not at all inconceivable that China will at some point in the future, be the pre-eminent world power, much like the U.S. is today.

"I do think we - the wider "we", including the other developed democracies - made a mistake in not tying free-trade status to concrete liberalizations."

Jacob,

Without knowing the goal framework in which you put such a statement, I find it troubling. The West had no such scruples in the past whilst undergoing its economic take-off, and collectively, western hubris in this regard is a shameful embarassment.

That China now "acts out" like a true world power should not suprise people. I mean, does not the US do the same thing? That China has set its course to fully modernize at a bit of expense to the West should also not come as a suprise, and the fact that they see this effort as a right to be jealously guarded should be self-evident.

But again...I do not know the foreign policy goal framework you are operating in.

Thanks.

Jacob,
I agree with bobbyp's point that there is no way that China is not going to go thru some reflexes of hyper-nationalism. and accepting that it is going to happen, like your typical teenage boy getting involved with any number of things, it's far better to acknowledge that it is going to happen and try to explain why it isn't a good thing rather than try to prevent it from ever happening again.

Hogan's observation about three kinds of liberalization is also spot on.

I'm not sure about what point you are trying to make with tractors, the change of population engaging in agriculture is, to my mind, more a result of the green revolution, which increased the yield, rather than mechanization.

As far as a second hyper-nationalist power emerging, India seems to fit that bill as well as China. And India hasn't run into problems with the developing world because we choose to view it as a counterweight to Pakistan, and so look the other way when they militarize, with things like aircraft carriers and nuclear powered submarines. I'd say it is stuff like that that leads the Chinese military to its anti-American attitudes.

There are a number of other points, and while your post doesn't seem to do this, your subsequent comments suggest that we give and we give, and this is the thanks we get. Yet the things that we do are a non minimal part of the equation. It was just noted in TPM I think that in over 30 of the US elections, anti-China ads are being used to whip up the electorate. And the constant calls of unrestricted free market are probably more responsible for companies off-shoring manufacturing than some vague desire to liberalize China. We could start by taking steps to make companies less beholden to share prices and more to some sort of notion of appropriate action (similar to what Russell suggested about trying to find a way to limit/prohibit profit taking sans wealth creation) and by demanding that companies assure that their labor chain is treated correctly, rather than try to race China to the bottom by creating similar conditions in Saipan

India hasn't run into problems with the developing world

That should be developed world, for various potentially bizarre notion of 'developed' (More fast food outlets! Strip clubs! etc)


What we have given China (and India, Brazil, Vietnam, eastern Europe, Malaysia) but mostly China and India, is the ability to leverage cheap labor to attain intellectual property.

These countries have a completely rational view that they can use their current advantages to create future advantages, this is where our policies need to focus.

By the time their economies cost structure has grown to par with the US we need to ensure we haven't offshored every way we create value.

I was in a meeting with a senior executive of an Indian company who was very open and straightforward that the economic policy in Indian was to use the short term cost advantage to capture enough IP to make it unfeasible to bring the work back to the US (and other places) once their growing cost structure evened the cost playing field.

China is running with that philosophy, more openly and aggressively.


That China has set its course to fully modernize at a bit of expense to the West should also not come as a surprise, and the fact that they see this effort as a right to be jealously guarded should be self-evident.

I think it's not so much that China shouldn't do this stuff, or that it isn't natural for China to go through some muscle-flexing etc. It's a question of how we take what's happening in the world and use it to make the world a better place, or at least the best place that we can given the changes that we can't stop.
And I think Jacob is saying that as well eg when he says Now Shambaugh says "narrow-minded, self-interested, truculent and hyper-nationalist" as if these are unusual characteristics of nations. Actually, of course, those are pretty close to universal characteristics of nations...

And, to restate my earlier point (cos it kind of meshes): It is in our self-interest to cooperate with China and aim to make our interests coincide, so that we can both be self-interested truculent hyper-nationalists and still more or less get along.

I was in a meeting with a senior executive of an Indian company who was very open and straightforward that the economic policy in Indian was to use the short term cost advantage to capture enough IP to make it unfeasible to bring the work back to the US (and other places) once their growing cost structure evened the cost playing field.

This sounds right to me.

And, it's hard to hold it against them (not just India, or China, but anyone).

The Industrial Revolution got its start in the US through what was essentially IP theft. People do what they need to do.

And frankly, I hope all of those folks are successful. It sucks to live a life of unrelenting freaking hard physical labor, just to eat.

I just want us to continue to be successful, also.

Dammit, just hit Control-W on a long comment.

Don't have time to rewrite right now. Basically I don't expect China to act significantly differently than it has, given the circumstances, and I don't think it's all that useful to view it in moral terms.

I think nations should look out for their own interests, within reasonable bounds, but I think it's just as important for the US to do that as it is for China. So it's reasonable to look at the past 20 years of trade with China and think about what the consequences have been for the two countries. For China it has clearly been a gigantic boon. For the US I think the case that it has been positive is far less clear. I wrote much more about that & lost it, but I'll have to get back to it another time.

As far as "acting out" goes, the US has been much worse than China in the last decade. Which is something I don't enjoy writing. I like the US, I think that the US action in Iraq was absolutely unconscionable and did enormous damage to the very, very strong US interest in having disputes settled through international institutions. This is certainly not about "Ooh, China is bad."

This is certainly not about "Ooh, China is bad."

I am so being China for Halloween now.

Be an Uighur, for triple bonus points.


I'm suddenly having nightmarish visions about kids dressing up as Israel and Palestine, and fighting each other.

And all the kids in the neighborhood picking boogyman countries to play, and we wind up in a local world war.


JD's mistake here is presuming that there is a sort of single consolidated US national interest.

The investor class in the USA has done splendidly from the China boom, as have their counterparts in China.

Since during the past 30 years, it has been that same investor class who have been allowed to determine the "national interest," who can be surprised that they managed affairs in a way to benefit themselves? "L'etat, c'est nous!"

TonyP had it right, earlier in these comments. Both the US and China have serious class divisions.

In a class-divided society, a united national interest comes about only under threat--whether real or propagandized.

So I guess it's not surprising that two countries with deep class divisions have both featured increasingly strident nationalist rhetoric.

JD's mistake here is presuming that there is a sort of single consolidated US national interest.

The investor class in the USA has done splendidly from the China boom, as have their counterparts in China.

And it's not just the investor class in China and the US who have done well. It's the investor class in Europe and everywhere. The Capitalists are global. The working class has a lot of catching up to do.

JD's mistake here is presuming that there is a sort of single consolidated US national interest.

In fairness, he's saying what he thinks we ought to do (or have done) for our national interest. He did say The Bush administration turned a blind eye to it because it suited their commercial sponsors..., so he's not presuming that unified allegiance to national interest actually exists.

"Eh? Does this mean we're no longer smearing the green movement in the US as commies?"

No contradiction: The typical communist attitude towards environmental protections and worker safety, is that they want none of it on their own territory, and as much as possible on the territory of their opponents. Because they view us being slowed down by those protections as a good thing.

This, of course, doesn't make those protections a bad thing. It just means that communists want different things at home and abroad.

"when we allowed them to launch one of our secret payloads, which crashed, key hardware components never having been recovered."

IIRC, key hardware components were discovered to have been removed from the satalite. If the crash had gone off as planned, and the satalite's remains not been recovered, we might never have known they'd stolen the components. Though the technology we deliberately transfered to them, to help with the launch, might have been as significant, as it helped them improve their balistic missles.

"I simply have to stop and marvel at this suggestion -- this assertion -- that the contemporary economics, and economic policy, of the Chinese Communist Party, remotely resemble those of the Soviet Union of any period."

"Disclaimer: I am not an expert. Having gotten that out of the way, let me assert, without citation (having forgotten where it is) that the export sector in China is about the most pure form of wide open unrestrained capitalist competition there is on the face of the earth(i.e., at the micro level-the economics of the firm-pure free market theory, etc.). So this stuff about the bogeyman that the centralized economy is, well, not convincing. But then nothing Brett ever asserts is."

Last I heard, the Chinese, as an alternative to fully funding their military, gave the military business monopolies, a practice which is hardly consistent with a "wide open unrestrained capitalist competition". Perhaps you're confusing the government not heavily regulating what it's own military does in the business realm, with a free market?

Now, I will agree that China is, in detail, run rather differently from the way the USSR was. But there are two rather important similarities:

1. What the government wants, the government gets. No rule of law to speak of, and if you speak of the rule of law in China, expect to disappear.

2. Only an idiot trusts economic statistics coming out of the former USSR, or today's China.

Here's my prediction: One day, probably within a decade or two, we will find that China was as much a house of cards as the USSR. A terrifyingly dangerous house of cards, in an age of nuclear tipped missiles, to be sure. But economically, a house of cards.

Jacob,

As others have alluded to above...who's interests are we speaking of here? Our trade with Chine makes us richer. We get cheap goods. Assuming prices remain relatively stable, this means our standard of living goes up. In return, the Chinese get Treasuries...or a promise to get dollars in the future. We can print dollars in infinite amounts with the click of a mouse.

So the real question is this: Why has our standard of living stagnated? Our elites have made the political choice to quash wages in this country.

Guess who benefits.

No contradiction: The typical communist attitude towards environmental protections and worker safety, is that they want none of it on their own territory, and as much as possible on the territory of their opponents.

Never change, Brett. Ever.

Brett,

re: pure capitalism in China and PLA

The last you heard was what? 1975? See wiki entry on the PLA regarding "commercial interests".

Thanks.

No contradiction: The typical communist attitude towards environmental protections and worker safety, is that they want none of it on their own territory, and as much as possible on the territory of their opponents. Because they view us being slowed down by those protections as a good thing.

So you're smearing American Greens as commies *and* as being loyal to some other country. Gotcha.
I am curious though- to which country are they loyal? I suppose I should be able to tell by finding the country where they don't object to environmental issues.
Oh, but to throw us off the scent, they'll probably continue to protest those just for show, so even when they protest about Russia or China at least one of those is for show.
But I need your help on this one, I don't think a mere mortal can piece the subterfuge here and determine where their loyalties lie. Only a true-blue Red-Watcher can do the job. Please tell us.
[Also, Im just dying to know which foreign power controls the nascent Chinese Green movement, I can't make sense of that at all].

I don't really understand this post. I'm pretty sure that for most of the "freer market/freer China" boosters it was just a simple recognition that our best hope for China political liberalization was through the influence of market liberalization paired with the realization that the Chinese people weren't doing as well as the rest of the world. So far as I can tell that remains true. Of course you have to understand that 'best' doesn't necessarily mean 'good' or 'great' when your options suck. But compared to say war with China, or a campaign of constant public outrage or something like that, it is still the best hope. (For the utility of the public outrage option, see the developments after Tiananmen Square.)

"So, you're smearing American Greens as Commies *and* as being loyal to some other country. Gotcha."

Well, you could deconstruct Brett's point in the opposite direction as well.

Perhaps he meant that China is a libertarian paradise vis a vis environmental protection and worker safety and illustrates the true promise of the American experiment wherein, say, the Chinese characters for environmental and worker safety regulation are nowhere to be found in the Constitution.

Perhaps he meant that Dick Armey and Tom Delay are loyalists to the capital paradise called the Marianas, although in Armey's and Delay's case, at least, I think that has more to do with cheaper and more plentiful prostitution.

Perhaps he meant that the U.S. Chamber of Commerce has succeeded through secretive giving in turning China away from the regulatory scourges of environmental protection and worker safety and, if we're lucky, they will do the same for say, North Carolina, come November 2.

I don't know. It's hard to say what's what in this crazy effing world.

I've read commentary at Redshite that at least China doesn't have to put up with the liberal commie scourge of gummint regulation of the environment, worker safety, and civil rights enforcement ... but that they could use a good nuking anyway.

Seb: I don't really understand this post.

You and everyone else, apparently, so I think the fault lies with the author.

I'll have to think about this.

bobbyp,

I think you answered your own hypothetical question with the sentence that immediately preceded it:

So the real question is this: Why has our standard of living stagnated?

We can print dollars in infinite amounts with the click of a mouse.

Chicagojon has it right.

When the USA can buy real goods from China with money it creates for free, that's a bad outlook for any Americans who are trying to sell real goods.

Basically, "money creation and management" is now the foremost sector of the American economy, literally displacing the rest.

In today's USA, if you're not somehow involved in the money creation racket, your're screwed. If you sell your labour for a living, you're simply in the wrong racket. So the question is not why most Americans' living standards have stagnated.

The real question is: why would so many people elsewhere continue to accept US paper in return for their real goods?

That gets into bigger geopolitical and military matters, because the US in effect has "invisible earnings" from its role in their thriving "global enforcement services" business, which is the concomitant of the money creation/management sector.

Well, considering that the CPUSA was basically just a USSR run astroturf operation that imploded when they stopped funding it, sure, I do kind of doubt the loyalty of American communists to this country. I doubt the basic humanity of anyone who remained a communist after Duranty was exposed as a propagandist for the USSR, too.

But, leaving aside the fact that, a hundred million plus murdered later, anyone who's still a communist is presumptively either a moron or a monster, and leaving aside that the idiot communists in the US would have been the first up against the wall had communism actually taken us over, my point was simply that communists actually in power are fine with workers dying and the environment being fouled, it's only communists in non-communist countries that are into worker safety and environmental preservation.

But, of course, they're completely different people, so no contradiction. Useful idiots, one side, murdering tyrants, other side. Why should we expect them to agree?

Well, I'm glad that's cleared up.

Well, Brett was over at Crooked Timber standing up for all of us poor Japanese Americans who were kept out of school because of Affirmative Action, so coupled with this, his new found concern for his Asian brethren warms the cockles of my heart.

When he wasn't busy cheerleading the latest dose of QE, Brad Delong actually found time to write a pretty good piece on China a few days ago:

http://delong.typepad.com/sdj/2010/10/department-of-huh-john-cochrane-edition.html

Quoting Delong:

"Instead, anybody--anybody--anybody at all--in China, when asked why the Chinese government has invested so much money in dollar denominated assets, will say something like this:

'Look. China has 900 million rural dwellers who are still living at a standard of living not that far above subsistence. The pressure to migrate from the countryside to the coastal cities is enormous. China needs to grow at more than 8% per year in order to avoid mass unemployment in the coastal cities. And mass unemployment in the coastal cities is likely to be followed by political collapse and turmoil on a gigantic scale.

'Part of growing at 8% per year is to continue to rapidly expand exports to the North Atlantic core of the world economy. But in order to expand exports Chinese-produced goods must look like good values. And if demand for dollar-denominated assets falls and the value of the dollar falls, Chinese-produced goods will no longer look like good values. We know very well that when we unwind these purchases of dollar-denominated assets a generation from now the financial rate of return on our investments will be lousy. But in the meantime we get something much more important to us--export growth, full employment in Shanghai, and societal stability.'"

"his new found concern for his Asian brethren warms the cockles of my heart."

"New found"?

Roland,

Like most you see this exactly backwards. It is not the printing of dollars that has lowered our standard of living. Our standard of living has suffered due to consciously taken political decisions having to do with deliberately screwing workers and the middle class.

Since the 70's we have embarked on a resolute path to shift income to the upper class. The dollar printing follows....not the other way around.

Brett, threadjacking various threads with complaints about China isn't really a demonstration of open-hearted support for the East.

Complaining about the government of China is pretty much essential to demonstrating actual concern for the people of the East. Who either live under it's despotism, (In many cases die under it.) or far too near it for comfort. And how the hell is it "threadjacking" in this case?

You claim your concern for Asians is long standing. You are more than welcome to demonstrate that by pointing to some comments where you do that. However, all of your invocations of China have been, in my recollection, when we are discussing some problems with the US, or Israel, or the West, and you feel compelled to say 'but what about China, they really treat their citizens badly' and I wanted you to avoid embarrassing yourself by citing one of those threadjacks as proof of your concern, which to me seems as deep as your knowledge of Anatole France.

I wanted you to avoid embarrassing yourself by citing one of those threadjacks as proof of your concern

If you can't voice a concern unless you've voiced it on prior occasions, you'll wind up never being able to say anything.

If you're going to simply gainsay that Brett has a legitimate concern here, you might as well just do it straight out, so we can go directly into do too!/do not! mode.

Slarti, I don't think we've had a lot of China threads here, so everything that I can think of Brett talking about China has been a threadjack. I'm open to the possibility that Brett has been involved in some other conversations that have been discussing the future of China and has demonstrated his concern in those and he is welcome to cite those. However, to be clear, given Brett's contribution here, I think that his concern over Chinese being mistreated by their government (which some might say stands as a testament to some type of liberalization, in that before, Brett probably would never had heard about it)) is not sincere. He could certainly simply say he is sincere, and we would be left with the situation you mention, but I entertain the faint hope that Brett might actually look at all the places where he has brought up Chinese repression and see that they were in threads unrelated to China and realize that there is a reason someone might believe that he isn't sincere. And if not that, perhaps stop embarrassing himself with assertions that the Chinese Communists are just a copy of the Russians or making connections to the US Green party and the Chinese Communists.

I hear you, lj, but this thread isn't about Brett.

Or is it?

Anyway, the question of whether anyone's concern about some issue or other is in fact genuine is one of those discussions that drive me absolutely up a tree as being utterly pointless. Probably me bringing this up is annoying in the extreme to still other people, so: as you were.

"Probably me bringing this up is annoying in the extreme to still other people, so: as you were."

So I will too.

LJ,

Asking for cites to support a stated concern is not the way to go. If you want to cite Brett contradicting his concern, have at it. I don't recall him ever being on the other side of this issue, so please, if you have a cite show it or quit attacking his veracity. Very much bordering on a pure personal attack here.

Brett on China:

"I don't think we have to worry too much about that, until they give up on being a command economy, with large sectors of industry run by the army. Command economies seem to advance rapidly to a certain point, and do well in the areas where they chose to do well at any expense, but history suggests they only get so far and then stall. Remember, we entertained the same fears of the USSR at one time. "


Gary Farber: "I simply have to stop and marvel at this suggestion -- this assertion -- that the contemporary economics, and economic policy, of the Chinese Communist Party, remotely resemble those of the Soviet Union of any period.

Ah, ideology, why must I bother with reality, when I have you to sleep with?"

Brett is a nasty POS; he was on another blog earlier blaming that woman who got curb-stomped by Ron Paulists. Apparently it was her fault due to clear intentions of exercising her First Amendment rights.

And he claims himself to be a libertarian.


But back to facts - Brett, what advanced tech was being sold to the people of the First World by the USSR, back in the day?

Was it simply coincidence that one couldn't go into the stores in the 1980's, and buy PCs made in Leningrad?

Marty,
when someone invokes my ethnicity to attack something that I have no intention or desire to attack, it leaves a rather bad taste in my mouth. I'm sure Brett wasn't thinking of me in invoking Japanese Americans (comment 45), but that makes it all the more galling, because it is indicative of a person who claims to not see races, but uses race whenever it suits.

Brett claims concern, but can't be bothered to at least be historically accurate. It is akin to making the claim that you want to stop welfare because you want to help African Americans more. Concern has to be coupled with knowledge, not prejudices.

Not that I'm saying this is relevant to anything, but PCs made in China are largely using CPUs made in the US, at least for now, and motherboards and such that are designed in Taiwan.

Sorry, I should have added that I respect Slarti enough to note that if it does really annoy him, (and I'm sure it does), I should try to end this here, which I will.

For whatever it is worth, there is nothing by Brett anywhere near comment 45 at that link, so we can't have any idea what you are talking about. (This probably isn't your fault. Crookedtimber is notoriously bad about letting comment numbers slip around.)

So far as it goes, it is an interesting point of justice that Asian-American students bear the brunt of the collective punishment for affirmative action in admissions even though their racial groups had nothing to do with the injury that the government is attempting to rectify. So far as that is the topic of the link (which it sort of seems to be) I don't see how his opinions there are dissonant with the ones he has here.

And the fact that you personally aren't bothered by it, doesn't mean that no Asian-Americans are. In fact the very sentiment seemed incredibly common among Asian-Americans at UCSD, usually coupled with complaints about why they weren't attending at least UCBerkley with much higher test scores and grades than other students who were attending Yale.

[edit] I think I found the comment you mean, probably 145.

People complain. It is, in my experience, what people do. However, I know of no organized efforts by Asian-Americans to put an end to affirmative action. While I'm not from the West Coast, a large number of my relatives are there and went to West Coast schools, just to put my knowledge in perspective.

Free trade is about moving production and factories from place to place for the sake of cheaper labor. This means countries like China have to hold their ground with cheap labor. This will leave them with a perlexing problem as workers expect more from the global economy.

It means that China must find ways to make money in more ways than one. Consuming the debts of other nations to keep the flow of products constant is a dangerous way because debtor nations are running out of gas as their own economies based on making money on money instead of making things are burning out.

Their distributing agents like Walmart also represent a middle man approach and most likely China is eyeing more of a direct approach. They opened their first direct factory store in New York and perhaps this is what is coming now. There is no reason for China to have a middle man where they do not need them.

Free trade has failed us all and China is no exception. Nothing can replace local value added economies that grow in balanced geopolitical settings. Nothing seems to be in balance when it comes to free trade which in the end is not really trade at all as historically practiced and defined.

The working poor classes and under classes that replaced middle class consumers no longer have enough money to buy even the cheaper imports. Everything is running out in the Bewildered New World. ( Search under tapsearch bewildered new world. See http://squid.me/R or http://tapsearch.com/tapartnews/ featuring Ray Tapajna Chronicles that forecasted our economic crisis years ago through experts like Manuel Castells who predicted the coming of the Bewildered New World and Sir James Goldsmith, a former corporate raider, who wrote The Trap.

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