December 24, 2008

Foreign Affairs on China

In the current issue of Foreign Affairs, Roger Altman pens an analysis of the Great Crash of 2008 and explains why China is both a causer and a beneficiary of the crisis.

Several other articles in the same issue dissect the issue of trade, China, and America's new economic place in the world.

The Chinese House of Cards

The problem with Foreign Affairs is that is it too non-judgemental, as if to neutrally observe, "maybe it is just that moment in history when the American model is surpassed by the Chinese model." However, this dispassionate attitude is wrong.

America's unique culture of openness has lead to a political and economic meritocracy that is the source of Western power and prosperity. China does not share or respect this culture of openness, yet they believe they can build the strongest economy of the world without it. We are wrong if we do not recognize that as a serious problem. China's approach is both dangerous and incorrect.

China's current economic and political system is unsustainable and a danger to the world and itself. We are seeing now that it is impossible for the largest country in the world to expect to be able to export a third of its GDP indefinitely. It is also impossible for the largest country in the world to expect to be able to sustain an industrial economy built on the fruits of intellectual society while squashing speech, dissent, and transparency inside its borders.

I do not think Americans generally understand the depth and seriousness of the problems in China. Lack of transparency in China means that corruption runs rampant - in China it really is all about who you know. Inequities in China are huge, yet the grievances of the population are suppressed. The export-oriented economic policy is built on Western debt and a massive population of underpaid, underserved migrant workers.

China's engineered prosperity is built on a house of cards.

It would be a terrible mistake, both in form and substance, for the West to validate China's brand of nationalism by implying "maybe they got it right." China does not have it right. China's headstrong industrial policy has been extremely irresponsible and shares more than a small portion of the blame for the current crisis. And by believing that they can continue on their current course, China is in a position to make the problem much worse.

It is time to pivot from marveling at the Chinese miracle to figuring out how to solve the China problem.

Posted by David at December 24, 2008 07:09 AM
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