Candidates indulge in China-bashing. But it's a distraction, not a solution.(Read article summary)
Every presidential election seems to create a foreign bogeyman. But China in 2012 is no more a threat than NAFTA in 1996.
Xenophobia is the oldest trick in the book. Another election and another foreign bogeyman conveniently appears.
In my own political memory, first it was the Saudis. In the mid-1970s, they were going to buy theÂ United StatesÂ with all their OPEC oil revenues. Then it was the Japanese. In the late 1980s, the American public was more afraid of Japanese yen taking over the country than Soviet missiles.Â MexicoÂ via NAFTA would wreck the economy, or so said the Republicans in 1996 at their convention, strategically positioned inÂ San Diego. For the 2000 election it was Chinese spying, Al Gore visiting a Buddhist temple, and such.
Just one of the problems with crying wolf is exemplified by our tragic vulnerability to Al Qaeda in 2001. You may remember the Bush administration was distracted playing Spy vs. Spy with the Chinese â€“ bargaining for the return of our crash-landed spy plane fromÂ HainanÂ IslandÂ that summer, just short days before Sept. 11.Â
Somehow in 2012, while the Middle East boils and roils once again, weâ€™re talking aboutÂ ChinaÂ as our biggest problem.Â Really?
Chinese defense spending is second in the world, but still just 20 percent of ours. American job losses? You cannot blame the Chinese, unless you ignore the facts. Indeed, my colleague Peter Navarro at theÂ UniversityÂ ofÂ California,Â Irvine,Â is head xenophobe at the moment with his new book and movie, "Death by China." Perhaps Peter will thank me for adding to the press on his warmongering tome?
Unfortunately, both presidential candidates are pandering in this same vein.
Since 1960, through all the foreign bogeymen mentioned above, theÂ USÂ economy has faltered only once. In 2009, gross domestic product (GDP) per capita in this country declined to $45,192 from $46,760 in 2008.
In other words, the average American has gotten richer every year for the last half a century, except for 2009. The OPEC oil crisis, Japanese Sonys and Toyotas, NAFTA, Chinese made iPhones, not even Al Qaeda disrupted this steady growth in the average Americanâ€™s wallet. If you control for inflation, this positive picture of the power of American commerce dims a bit, but not so during the last decade as cheap goods fromÂ ChinaÂ have kept inflation in check.Â
If the Chinese were stealing our jobs, the flow would have begun in earnest in 2000/01 with our granting them PermanentÂ NormalÂ Trade Relations (PNTR) and their accession to the World Trade Organization (WTO). Even controlling for inflation, the GDP per capita of Americans has marched steadily higher despite those trade liberalizations. During that same period, unemployment was not a problem, meandering between 4.7 percent and 5.8 percent in theÂ US.Â Then in 2009, it abruptly ballooned into a painful 9 percent.
Now, if youâ€™re an unemployed autoworker reading this, you're getting pretty angry â€“ â€śWhat about my job, you academic know-it-all?â€ť Well, you can go along with the xenophobes who blame Mexicans and Chinese and so on. But, I repeat, the average Americanâ€™s income has increased throughout the last half century.Â What has changed is how we distribute that average income.
Circa 2012 we are witnessing a dangerous continuing bifurcation of our people into rich and poor. We are losing the stability of our middle class.
These divisive changes have taken two forms. First, tax policies established during the George W. Bush years are getting scrutiny in the present presidential campaign. And,they are crucial. But the second change is not being addressed directly.Â
Yes, formerly high-paying union factory jobs have gone to the cheapest labor countries around the world. Having worked in a heavy-industry factory myself, I can attest to the mind-numbing and dangerous work in such places. Thankfully, theÂ USÂ is now a services economy.
Think FedEx, teachers, nurses, McDonalds, Wal-Mart, etc. Because of the Bush leagueâ€™s successful emasculation of American labor unions, the wages in such jobs are low. That growing â€śaverage GDP per capita of Americansâ€ť isnâ€™t being distributed fairly for both reasons.
These causes of our economic divide are internal. Exacerbating them is the failure of our pension and health-care systems. In theÂ USÂ we are now in year four of a decade-long adjustment to the demographic shift that is wrecking the social system designed by the so-called Greatest Generation. Social Security and Medicare have served them well, but not us baby boomers. The problem is my parentsâ€™ generation didnâ€™t plan beyond their own demise.
The Chinese have no culpability in this. Thus, bashing them with rhetoric and/or trade sanctions will have no effect on our problems. The Chinese are just a distraction. Indeed, the Chinese have much bigger problems of their own. The reason they maintain such a huge army is to control their own, often unruly people. And if you think the graying weâ€™re now experiencing in America is bad, just wait 10 years when the Chinese run headlong into the consequences of their one-child policy. Who will take care of the elders there?
Aside from being a distraction from our own policy mistakes, the current wave of xenophobia is a disaster for the US in at least two other ways: First, isnâ€™t it too bad we canâ€™t see the common interests we have with the Chinese, such as in keeping the Strait of Hormuz open so oil can flow to thirsty customers around the world. Second, but of primary importance, trade has always enhanced peace. Lack of it has encouraged wars. The burgeoning commercial interdependence ofÂ China,Â Taiwan, and theÂ USÂ will always make war in the region unthinkable â€“ except, of course, for the panderers of xenophobia.
â€“Â John L. Graham, professor emeritus of marketing and international business at theÂ University of California at Irvine, is coauthor ofÂ "China Now: Doing Business in the Worldâ€™s Most Dynamic Market."