The Hollow Men

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3 Responses

  1. Frank says:

    Brilliant post–thanks for pointing out how a supposedly mutually beneficial relationship has turned into codependency.

  2. A.J. Sutter says:

    I think you’re right about how the countries became intertwined, and the illusory nature of many of the benefits each obtained from the development of their economies in recent years. But I’m not so sure that your suggestions are at all politically realistic, or that there is such a coherent lesson to be learned from history.

    You note — correctly, I think — that “”Both countries fear that each will turn to a solution that favors its own citizens at the expense of the other’s, triggering a mutually destructive race to the bottom.” But really, despite those fears, is either country going to try to make policy that balances the interests of the other country’s citizens? Don’t US domestic political realities require that the US adopt policies favorable to Americans, and then try to pressure China also to adopt policies favorable to Americans? This has pretty much been the American track record for decades in multilateral and bilateral negotiations. Similarly, it’s hard to imagine the Chinese Communist Party not adopting policies favorable to Chinese citizens, though maybe they have more imagination when it comes to asking the US to do the same.

    Second, you recommend in favor of both countries “directly confronting their guilt and shame.” But What guilt or shame do you think the Chinese government perceives? What guilt or shame — leaving aside the issue of human rights abuses, which the CCP surely does not perceive as we do — should they feel when it comes to the economy? To the extent their decisions were based on flawed theories by Nobel laureates, the World Bank, IMF et al., should the Chinese be the ones feeling guilty or ashamed? And hasn’t China done a lot that’s economically right — in Realpolitik terms, at least? Doesn’t China now wield a lot of power over the US, given its holdings of our debt? And won’t the US be even weaker if, as seems to be only a matter of time, the dollar ceases to be the sole international reserve currency? Economically, at least, the CCP seems to have been relatively skillful. (BTW, I am the farthest thing from being a fan of the CCP.) Certainly, it’s troubling to hear about how Chinese execs close up their companies and skip town in order to avoid paying their workers, to say nothing of adulterating milk and other foods, etc.; but is that a matter of government policy, or capitalists’ mores? I think it’s not at all clear that the US and China are equally “hollow” in their economic policies.

    You also recommend that Chinese savers should spend more. First question is, who are the savers? Government, business or households? If households, does Chinese society really need to become more consumeristic? (The same question could be asked of the US.) What does that do to the values in the society? But no less important, what are the environmental consequences of all that extra spending, by anyone? Is the US prepared to reduce its environmental footprint drastically, to compensate? Do you really think there is enough political will in either country to be sufficiently green (cf. your reference to “sustainability”)? While some expansion of consumption in China is inevitable, we may (once again) regret if we get what economists wish for.

    I share your wish for more of a social safety net in China, but there I think history is against us. The Chinese government has been in the process of dismantling what safety net there used to be during the past decade or so. It seems quite unrealistic to expect them to reverse policy so soon. (And BTW, as US experience has shown, consumerist attitudes also can make it difficult to maintain a social safety net, e.g. if people feel they shouldn’t have to pay higher premiums that benefit their less healthy neighbors.) OTOH, I wonder why you mention the safety net only in the Chinese context. Don’t you think the US should take the lead in this regard? Poet, heal thyself.

    In this light, it’s not clear what we are to learn from Fergsuon when he says, “If it stays together, you can see a path out of the woods. If it splits up, say goodbye to globalization.” What is the path? (And does it lead out of the woods because the woods have been chopped down, or die?) And if globalization has led to this “dysfunctional” situation, is saying goodbye to it necessarily a bad thing? You seem to assume so in your post, but the rest of your comments could, on reflection, leave one thinking otherwise.

  3. Shruti Rana says:

    With respect to U.S. and Chinese policies, my intent was to illustrate that to create a truly sustainable relationship, both countries will have to stop taking the easy or politically expedient way out—which in this case would be seeking more of the “drug” that led them into this situation in the first place. In China’s case, one risk is that it could simply push its currency down further to help its exporters instead of stimulating domestic demand or incomes. (Other issues it could “confront” include environmental damage, wage suppression, and political corruption). Obviously changing course will require political will and farsightedness, and we’ll have to wait and see what both countries do.

    I also agree that simply pushing consumers to spend more (especially if they do so by incurring more debt) in a precarious economy is not an ideal solution and carries long-term risks. However, given our need to jump-start the economy, this places the U.S. in a paradoxical situation: we need to spend and lend more to get out of the current crisis, but those are the very things that put us in this situation to begin with. One way out of this paradox, I believe, is to “spend from a position of strength” as opposed to weakness. Simply encouraging consumerism, in my view, would be perpetuating the weakness that led us to the crisis. On the other hand, for both countries, enhancing or creating social safety nets may free up consumer funds, or stop eroding incomes, and hopefully allow consumers who want or need to spend to do so from a more sustainable position.

    Also, while many fear that the U.S. is more “hollow” than China, since China was the one supplying the funds, I don’t think that it is entirely clear that the U.S. is really in a worse position, or that the U.S. won’t be able to ultimately rise above the current crisis. First, despite its claims that it pursued the more prudent financial path, China also relied on artificial and potentially unsustainable mechanisms, such as currency manipulation, to spur its growth. Furthermore, I don’t think we should discount the resilience and depth of the U.S. economy.

    Finally, I don’t think that it was globalization, but rather things like shortsighted policies and greed, which led to the current dysfunction. In my view, the current dysfunction is fixable and doesn’t need to mean the end of globalization (in a positive sense—such as economic, social, and political growth and innovation built on transnational links and exchange).