Monday, April 14, 2008
Admonition of the Day
Years ago, the Chinese might have averted today’s pressures by choosing a slower and more balanced approach to growth. If they had it to do over again, I suspect they would in fact choose just the same path—they have gained so much, including the assets they can use to do what they have left undone, whenever the government chooses to spend them. The same is not true, I suspect, for the United States, which might have chosen a very different path: less reliance on China’s subsidies, more reliance on paying as we go. But it’s a little late for those thoughts now. What’s left is to prepare for what we find at the end of the path we have taken. —James Fallows writing in "The $1.4 Trillion Question"
Fallows gives a lucid account of the downside for the Chinese people of their government's subsidy of the United States over the past decade or so and of the issues now facing the Chinese government. It's a "must-read." But aside from Fallows' cryptic warning at the conclusion, he does little to review what was the downside for citizens of the U.S. As he says, "It's a little late for those thoughts now."
For America, it has meant cheaper iPods, lower interest rates, reduced mortgage payments, a lighter tax burden. But because of political tensions in both countries, and because of the huge and growing size of the imbalance, the arrangement now shows signs of cracking apart.
The odd thing about the first sentence is that while its tone implies that these were benefits, they were in fact aspects of the downside. Ipods, along with all the other forms of mass entertainment and distraction provided by the Chinese toy machine, have in my view contributed mightily to the unprecedented levels of public ignorance and obliviousness. Certainly the lower interest rates and reduced mortgage payments were a large component of the trigger mechanism for the current financial meltdown. Yet perhaps the worst consequence was "a lighter tax burden."
The Chinese subsidy has been an incalculable boon to right-wing politicians and their corporate paymasters. Since the time of Ronald Reagan, when the flimflam of "supply-side economics" and "trickle-down theory" came into fashion, the public has bought into the illusion that cutting taxes is the greatest spur to economic growth since slavery.
If state governments don't have the money to maintain schools, roads, and bridges, the solution is simple—cut taxes, privatize and deregulate. And if the federal government needs more money to go to war or to prevent starvation during a crisis, the right-wing solution is to cut taxes, privatize and deregulate. Meanwhile the Chinese have been working behind the scenes, and to their own purposes, to maintain this grand illusion. It has had the ironic consequence that we may all become a nation of slaves.
While the American people have been by far the most gullible of the Western economies (and the most indebted to the Chinese), the apparent success of the American experiment in right-wing economics has affected the politics of Europe both in individual countries and through the European Union (EU). When the Dutch and French rejected the proposed EU constitution by popular vote—a constitution that would have enshrined neoliberal economics—their leaders simply went behind their backs to create a treaty of the same effect.
And what is the ultimate aim of that treaty? Lower taxes, privatization and deregulation. Fortunately for the Europeans, the public has put up enough resistance to at least slow the process. And with the lessons to be learned from the Americans, the moves toward a reversal may gain rapid momentum.
Have you been trickled on yet? (7/28/04)
The best place in the world to do business (11/8/04)
The death of the Left? (11/27/04)
France votes "No" on EU Constitution (5/29/05)
Quote of the Day (6/3/05)
Another harm of globalization (12/28/06)
China shakes the dollar market (11/8/07)
Free-Market Objective of the Day (11/10/07)