Economies are like battleships -- they can't make immediate U-turns. As Martin Wolf observed yesterday, the unwinding of serious macroeconomic imbalances has to start now -- but it can't be done immediately and efforts to do so would be very problematic.
The gist is, China is making a lot of noise about moving away from its current macroeconomic policy - namely, sucking up American debt to prop the dollar up and keep competitive export-wise - but it is unlikely that it will, at least in the short term, abandon the strategy en masse. Of course, this is a good thing for America, as it will make an economic recovery much harder if China stops investing in the US, but I think we should be wary of what China's been saying nonetheless.
Why? Well, China is obviously aware of the effect they have/could have on the American economy - they have substantial leverage, the kind of leverage that can float over into all kinds of other discussions. I would argue that we shouldn't expect much progress to be made from a human rights perspective in China, at least until (knock on wood) this recession passes. Furthermore, if the eventual goal of the Obama stimulus is to kick-start actual production within American borders, something China most likely does not want, is dropping the dollar not a potential "nuclear option" for China? As you all know, I'm not much of an economics person, and my interest is clearly more on the political economy side, but I just get the vibe that China is making a fuss right now because they want to make their position clear to the Obama administration as it navigates the next year or so of policy-making - you need us more than we need you.
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I was listening to a discussion on China on the radio the other day. When one caller asked about the potential pressure the U.S. might be able to exert on China on the issue of human rights, the response was "people generally don't criticize their bankers."
ReplyDeleteAs for the nuclear option, I think China's reaction to Obama's proposal of propping up American industry will look less like a threat and more like that smirk of befuddled bemusement you can't hide while watching two fratboys take a roof-dive onto a coffee table. Part of China is going to be like, "wait dude, don't," but the other side is going to like, "no, I want to see you try this."
Or "tly this", as it were.
it's always a mitzvah to be wary of buzzwords. china has been fast on its way to being a new soviet union, and would have already taken its place up on that much-reviled pedestal if warhawks in the RNC weren't muzzled by the business side of the party. i don't believe for a second that american industry can rise up from the ashes to combat the chinese 'juggernaut'. aside from pure price considerations, the china question is really that of values; and those values that, in particular, are fundamental to what americans (and other neo-marketist states) view as a 'good life'. acquisition is still the lynchpin of happiness in our imagination, and i want that taken in as matter-a-fact manner as it is meant. i'd wager that the imagery which serves as a metaphor for progress in the imagination of the states is a curve of positive slope which is increasing at an accelerating rate. this curve outputs an aggregate of material wealth (and by that i mean physical goods themselves, not investments or liquidity) as a function of time. hence, the popularity of a wal-mart, a business designed not so much around the principle of servicing necessities, but instead of reducing the distance between the individual and a set of non-necessary consumer goods. if americans continue to have a psychological and social dependence on consumer goods, they will have a similar dependence both on china and on the type of high-wage, low-hour jobs that permit consumption-as-leisure to begin with. the result? no renaissance in american manufacturing, and you can bet that the chinese who track u.s. markets and are entirely aware of that fact won't do much to rock this very profitable boat.
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