Investment returns

America shouldn't try to correct its record-high trade imbalance with China by rushing to increase exports

As US Treasury secretary Henry Paulson meets in Beijing with Chinese vice-premier Wu Yi to discuss the US-China trade balance, the US commerce department has just released its monthly report on the widening trade deficit. Journalists report this in hand-wringing terms that consistently reflect little understanding of real economics. "Oh no, imports from China are up," blares my radio. "The only solution is to increase American exports to China."

And that's supposed to be the free-trade position, a counter to the argument for tariffs or other coercive measures to prevent China from forcing its products on innocent American consumers. (I'm omitting the safety and health problems with Chinese products for now, as we heard the same economic complaints when Japan was the biggest non-white exporter to the US. Somehow we've never worried so much about imports from Canada, the UK and Germany.)

But this whole framework is misguided. Twenty-four years ago in the Cato Journal, the economist Ronald Krieger explained (comment beginning on page 667) the difference between the economist's and the non-economist's views of trade. The economist believes that "The purpose of economic activity is to enhance the wellbeing of individual consumers and households." And, therefore, "Imports are the benefit for which exports are the cost." Imports are the things we want - clothing, televisions, cars, software, ideas - and exports are what we have to trade in order to get them. (I see that Tim Worstall made the same point just last month on Comment is Free in response to the German foreign minister.)

Adam Smith wrote in 1776: "Nothing can be more absurd than this whole doctrine of the balance of trade." When two parties trade, each expects to gain. It doesn't matter whether they live in different neighbourhoods, different states or different nations. Each of us seeks to give away as little of our own wealth as possible to get as much possible from others. And as consumers pursue their wellbeing, trade will inevitably balance, though monthly statistics will offer many "imbalances" to raise alarms about. Secretary Paulson shouldn't worry too much about increasing exports, and he definitely shouldn't pressure the Chinese to send American consumers fewer products.


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Posted on December 14, 2007  Posted to Asia Pacific,Business,China,Comment,Comment is free,guardian.co.uk,International trade,The Guardian,US economy

Investment returns

America shouldn't try to correct its record-high trade imbalance with China by rushing to increase exports

As US Treasury secretary Henry Paulson meets in Beijing with Chinese vice-premier Wu Yi to discuss the US-China trade balance, the US commerce department has just released its monthly report on the widening trade deficit. Journalists report this in hand-wringing terms that consistently reflect little understanding of real economics. "Oh no, imports from China are up," blares my radio. "The only solution is to increase American exports to China."

And that's supposed to be the free-trade position, a counter to the argument for tariffs or other coercive measures to prevent China from forcing its products on innocent American consumers. (I'm omitting the safety and health problems with Chinese products for now, as we heard the same economic complaints when Japan was the biggest non-white exporter to the US. Somehow we've never worried so much about imports from Canada, the UK and Germany.)

But this whole framework is misguided. Twenty-four years ago in the Cato Journal, the economist Ronald Krieger explained (comment beginning on page 667) the difference between the economist's and the non-economist's views of trade. The economist believes that "The purpose of economic activity is to enhance the wellbeing of individual consumers and households." And, therefore, "Imports are the benefit for which exports are the cost." Imports are the things we want - clothing, televisions, cars, software, ideas - and exports are what we have to trade in order to get them. (I see that Tim Worstall made the same point just last month on Comment is Free in response to the German foreign minister.)

Adam Smith wrote in 1776: "Nothing can be more absurd than this whole doctrine of the balance of trade." When two parties trade, each expects to gain. It doesn't matter whether they live in different neighbourhoods, different states or different nations. Each of us seeks to give away as little of our own wealth as possible to get as much possible from others. And as consumers pursue their wellbeing, trade will inevitably balance, though monthly statistics will offer many "imbalances" to raise alarms about. Secretary Paulson shouldn't worry too much about increasing exports, and he definitely shouldn't pressure the Chinese to send American consumers fewer products.


theguardian.com © 2013 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds

Posted on December 14, 2007  Posted to Asia Pacific,Business,China,Comment,Comment is free,International trade,The Guardian,theguardian.com,US economy

Taking Marxism to China

Vermont socialists are trying to revive socialism in formerly communist China

Marxism is a bore in China, but tie-dyed American socialists are trying to revive it. Apparently it's easier to believe in socialism if you haven't actually tried to live under it.

The Los Angeles Times reports:

It isn't easy teaching Marxism in China these days.

"It's a big challenge," acknowledged Tao, a likable man who demonstrates remarkable patience in the face of students more interested in capitalism than "Das Kapital." The students say he isn't the problem.

"It's not the teacher," said sophomore Liu Di, a finance major whose shaggy auburn hair hangs, John Lennon-style, along either side of his wire-rim glasses. "No matter who teaches this class, it's always boring. Philosophy is useful and interesting, but I think that in philosophy education in China, they just teach the boring parts."

Classes in Marxist philosophy have been compulsory in Chinese schools since not long after the 1949 communist revolution. They remain enshrined in the national education law, Article 3 of which states: "In developing the socialist educational undertakings, the state shall uphold Marxism-Leninism, Mao Tse-tung Thought and the theories of constructing socialism with Chinese characteristics as directives and comply with the basic principles of the Constitution."

Chinese students are forced to learn the official ideology - or, I should say, they are forced to sit in classes where the official ideology is expounded - few of them seem to be listening any more. And yet, students say, it's still hard to find anyone who will openly criticize communism - partly because it's still very helpful to be a member of the Communist Party and partly because it's dangerous to criticize the official ideology of an authoritarian government.

Fortunately, just as China's Marxists begin to deal with their terminal despair at the decline of Mao's Good Old Cause, a couple of "veteran Vermont activists" are riding to the rescue. Ellen David-Friedman and Stuart Friedman--she's a self-described Marxist, an organizer for the Vermont teachers' union, and vice-chair of the Progressive Party, he's a clinical social worker at Central Vermont Hospital--are leaving their jobs in the People's Republic of Vermont to teach the Chinese about the horrors of capitalism. Communist Party apparatchiks and overseers at Guangzhou University have never attempted to censor her or Stuart's teaching, David-Friedman tells the Vermont weekly Seven Days. "We can say anything we want to in the classroom," she notes - perhaps because these radicals are in fact teaching the official ideology, and it's so hard to find people who want to do that these days!

Communism is always such a disappointment in practice. You'd think by now even romantic communists would have given up on it. But no--neither the activists nor the Seven Days reporter is ready for that:

China's communist revolution has gone off the rails, David-Friedman adds. The party "has divorced itself, tragically, from allowing itself to be led by the needs of workers," she adds. But maybe, in some small measure, these Vermont Progressives can help put the world's largest country back on the track toward socialism.

The LA Times concludes,

Talking over tea at the Education Ministry's modern offices in central Beijing, education official Zhou laughed a bit about today's students.

"They don't believe in God or communism," he said. "They're practical. They only worship the money."

That sounds a lot like the French philosopher Jean-Francois Revel's 1971 book Without Marx or Jesus: The New American Revolution Has Begun. Has the liberal-capitalist revolution begun in China?


guardian.co.uk © 2013 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds

Posted on July 5, 2007  Posted to Asia Pacific,China,Comment,Comment is free,guardian.co.uk,Politics,The Guardian,Vermont,World news

Taking Marxism to China

Vermont socialists are trying to revive socialism in formerly communist China

Marxism is a bore in China, but tie-dyed American socialists are trying to revive it. Apparently it's easier to believe in socialism if you haven't actually tried to live under it.

The Los Angeles Times reports:

It isn't easy teaching Marxism in China these days.

"It's a big challenge," acknowledged Tao, a likable man who demonstrates remarkable patience in the face of students more interested in capitalism than "Das Kapital." The students say he isn't the problem.

"It's not the teacher," said sophomore Liu Di, a finance major whose shaggy auburn hair hangs, John Lennon-style, along either side of his wire-rim glasses. "No matter who teaches this class, it's always boring. Philosophy is useful and interesting, but I think that in philosophy education in China, they just teach the boring parts."

Classes in Marxist philosophy have been compulsory in Chinese schools since not long after the 1949 communist revolution. They remain enshrined in the national education law, Article 3 of which states: "In developing the socialist educational undertakings, the state shall uphold Marxism-Leninism, Mao Tse-tung Thought and the theories of constructing socialism with Chinese characteristics as directives and comply with the basic principles of the Constitution."

Chinese students are forced to learn the official ideology - or, I should say, they are forced to sit in classes where the official ideology is expounded - few of them seem to be listening any more. And yet, students say, it's still hard to find anyone who will openly criticize communism - partly because it's still very helpful to be a member of the Communist Party and partly because it's dangerous to criticize the official ideology of an authoritarian government.

Fortunately, just as China's Marxists begin to deal with their terminal despair at the decline of Mao's Good Old Cause, a couple of "veteran Vermont activists" are riding to the rescue. Ellen David-Friedman and Stuart Friedman--she's a self-described Marxist, an organizer for the Vermont teachers' union, and vice-chair of the Progressive Party, he's a clinical social worker at Central Vermont Hospital--are leaving their jobs in the People's Republic of Vermont to teach the Chinese about the horrors of capitalism. Communist Party apparatchiks and overseers at Guangzhou University have never attempted to censor her or Stuart's teaching, David-Friedman tells the Vermont weekly Seven Days. "We can say anything we want to in the classroom," she notes - perhaps because these radicals are in fact teaching the official ideology, and it's so hard to find people who want to do that these days!

Communism is always such a disappointment in practice. You'd think by now even romantic communists would have given up on it. But no--neither the activists nor the Seven Days reporter is ready for that:

China's communist revolution has gone off the rails, David-Friedman adds. The party "has divorced itself, tragically, from allowing itself to be led by the needs of workers," she adds. But maybe, in some small measure, these Vermont Progressives can help put the world's largest country back on the track toward socialism.

The LA Times concludes,

Talking over tea at the Education Ministry's modern offices in central Beijing, education official Zhou laughed a bit about today's students.

"They don't believe in God or communism," he said. "They're practical. They only worship the money."

That sounds a lot like the French philosopher Jean-Francois Revel's 1971 book Without Marx or Jesus: The New American Revolution Has Begun. Has the liberal-capitalist revolution begun in China?


theguardian.com © 2013 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds

Posted on July 5, 2007  Posted to Asia Pacific,China,Comment,Comment is free,Politics,The Guardian,theguardian.com,Vermont,World news

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