Gregg Easterbrook

Here we go again.

With a sort-of withdrawal from Iraq in progress, and a scheduled withdrawal from Afghanistan approaching, Washington needs a fresh adversary. How about China?

China is big and getting bigger. Its wealth and power is increasing. It’s inscrutable, whatever that means. (Just try understanding the United States.) And according to super-secret intelligence reports, China is pursuing national interest. This can’t be allowed — we’ve got to confront them!

Of course it is a standby of politics for governments to create international adversaries, in order to deflect criticism away from themselves. There’s a theory – best expressed in the great spoof Report From Iron Mountain — that while dictatorships can issue orders, democracies need enemies in order to prevent free men and women from saying, “To heck with central government.”

Polls suggest many Americans right now are contemplating the phrase “to heck with central government,” so perhaps Barack Obama’s White House thinks voters will be distracted if China is converted into an adversary. The idea is not new — the George W. Bush White House attempted the same.

When the younger Bush took office, the international scene was fairly tranquil, and at that point, people were tired of hearing Saddam Hussein blamed for everything. So Bush started talking tough about Beijing. This culminated in the Hainan Island incident, which raised international tensions. Cable news was abuzz with confronting China; Dick Cheney darkly hinted of war. The Council on Foreign Relations went to red alert.

Then 9/11 happened, and the China menace disappeared from headlines. Though not from intellectual discourse: this 2005 issue of The Atlantic, home to the very best general-interest public- policy writing, had “How We Would Fight China” as its main cover headline.

The cover photomontage, in creepy distorted color, shows an ominous, slanty-eyed sailor. Maybe he has inscrutable intentions! The Chinese sailor stands in front of, well, you can’t really tell, but the stuff in the background looks threatening too. “The American military contest with China in the Pacific will define the twenty-first century. And China will be a more formidable adversary than Russia,” The Atlantic warned.

Is the Chinese navy really a threat? Politically, is Beijing “newly assertive” or merely going through a natural transition as its stature grows? Do Beijing’s stances on exchange rates, trade and security threaten the United States, as opposed to merely annoying us? Because we annoy the living bejeezus out of them.

The United States wishes China would float its currency, rather than sustain fixed rates that promote Chinese trade. Governments make national policy based, usually, on what they believe advances their national interest. They may be wrong – maybe China should indeed stop managing the renminbi. But it’s ridiculous for Washington to act all horrified about Beijing using money to pursue its vision of national interest: if other nations told Americans how to use our money, we’d be outraged.

It is highly unrealistic for America to think China will fund the U.S. borrowing binge by purchasing Treasury bills; and also suppress its own consumption, while underwriting our middle class living standards by selling us cheap goods; and then also manage their currency to our liking.

U.S. political posturing about currency exchange rates go back at least as far back as the Ronald Reagan administration. American interest groups complain about exchange rates because this feels like something Washington should be able to control, whereas larger economic trends aren’t controlled by any government. When strong currencies benefit America, U.S. interest groups demand that. When weak currencies benefit us, we switch demands
Timothy Geithner just said:

G-20 emerging market countries with significantly undervalued currencies and adequate precautionary reserves need to allow their exchange rates to adjust fully over time to levels consistent with economic fundamentals.

Now, to whom could he be referring? Imagine how infuriating Beijing must find this sort of condescending hectoring, especially from a nation whose leaders will not take any step at all to put their own fiscal house in order.
China has many internal problems, including human rights abuses, corruption, pollution and lack of free speech. China’s relationship with Taiwan is a tense mess. The Han mistreat the Tibetans. The list of China’s faults could go on at some length.

But in the main, there has never been a superpower relationship like the one between Washington and Beijing — mainly constructive, mainly cooperative, neither side positioning to destroy the other.

The world’s largest public works endeavor — the $75 billion South-to-North Water Transfer Project in its early stages in China — could be smashed from the air in a day by United States precision-guided bombs. China is building the project because Chinese leaders assume they will never go to war with the United States. That’s what we should assume too — and not make China into a distant whipping boy for our own domestic problems that U.S. leaders are afraid to face.

Should the United States fear the Chinese navy?
China is expanding its navy, which today is equipped only for coastal operation, though perhaps someday will venture into the “blue water” where the United States Navy rules. Not long ago, the U.S. Navy and Chinese navy (its delightful formal name is the Army Navy) conducted joint exercises. Recently they have not, though China just conducted a joint naval exercise with Australia. Here is the Pentagon’s latest report on the Chinese military, which is decidedly non-alarmist.

This is the warship in the background of the 2005 The Atlantic cover. It’s the lead ship of a class that was cancelled, which makes it sound a lot less menacing. The vessel is a guided-missile destroyer. China has a handful of this type, while the United States Navy has many dozens. The United States has large numbers of more potent guided-missile cruisers, and a huge lead in nuclear attack submarines capable of long stays submerged: any one of them could eat the entire Chinese surface fleet for lunch.

The United States has 11 supercarrier strike groups: China doesn’t even have an aircraft carrier, let alone a supercarrier strike group. China has purchased unwanted medium-sized aircraft carriers from Moscow and is tinkering with them, though none sail. China is believed to be designing its own 50,000-ton conventional-power aircraft carrier, which would be similar to what the United States called a “fleet carrier” during World War II, and not as powerful as the 100,000-ton nuclear supercarriers the United States builds at enormous expense.

Today’s Chinese navy would not dare throw a stone at the United States Navy, and that relationship should continue for a generation or more. Will it change eventually?

By toying with aircraft carriers, China may be testing the waters, as it were. In the mid-1930s, when treaties forbid Germany from building heavy combatant vessels, Hitler ordered construction of “pocket battleships,” largely to see how Paris and London would respond. When they did nothing, he approved  a rearming program for the Germany navy.

Certainly Beijing might be engaged in modest naval expansion to see how we respond, thinking that decades from now, it too will command supercarrier strike groups. Friendly Washington-Beijing relations seem a better hedge against that day than scowling and finger-wagging. The United States asserts a unilateral right to sail as many advanced warships as it pleases. On what grounds could this right be denied to China?

An Asian nation with a roaring economy will eclipse the United States … America has entered a cycle of decline, while the sun is rising in the East … soon all our products will be made overseas and America will falter … doom is at hand.

The above paragraph does not describe Monday’s news about the expansion of the Chinese economy — this is what opinion-makers were saying about Japan in the 1980s. And how’d that work out for you, Tokyo?

“Experts,” the New York Times intoned on Monday, are impressed by “China’s clout” and believe “China will pass the U.S. as the world’s biggest economy as early as 2030.” If experts think this, then it’s certain not to happen.

Yet the sentiment is widespread. This recent Pew Research Center poll found that a plurality of Americans — 44 percent — think China already is the world’s number one economic power, while just 27 percent of Americans think the United States still anchors the global economy.

It is wise therefore to remember what was said about Japan in the 1980s. Japan’s GDP growth was rapid, Japanese investors were snapping up New York City real estate, Sony just bought CBS Records. Japan’s Ministry of International Trade and Industry was whispered about as possessing near-supernatural prowess. Commentators said only “industrial policy” – direct government control of business decision-making – could save America from becoming a vassal to Tokyo’s super-ultra-unstoppable economy.

The epitome of this thinking was a 1980 book called “Japan As Number One,” by Ezra Vogel of Harvard, which became a bestseller in Japan and sold well in the United States, too. “It is a matter of urgent national interest for Americans to confront Japanese successes,” Vogel warned, before Japan takes control of the global economy. As Meredith Woo of the University of Virginia has written of the early-1980s U.S. mindset reflected by this book, “Japan seemed superior to America in every way.”

You know the rest: the Japanese economy stagnated in the 1990s while the U.S. economy roared, Japan replaced Turkey as the “sick man” of major nations, the Japanese experienced a real-estate crash, low growth, deflation – and MITI was folded in 2001, after compiling a track record of one bad decision after another.

But historical perspective isn’t the U.S. long suit. Here we are thinking about China what we once thought about Japan. There are good things to be said for Chinese political, cultural and economic trends. But overall, China is a chaotic nation with a weak social fabric, perilously poised on the assumption of rapid economic growth. China has far more potential for major social problems than the United States.

As for those experts who think China will pass the United States for number one economy in just 20 years?
This year China is on track for a $5.2 trillion GDP, very impressive compared to where China was economically just a generation ago — but still staring at taillights of the United States, whose GDP should finish the year at around $15 trillion. Even if China’s annualized growth stabilizes at 6 percent — and most nations would be quite happy with that level — it will take China until about 2030 to match America’s $15 trillion GDP.

But the United States won’t be sitting still. If U.S. growth is 3 percent, half of China’s, in 2030 the American GDP will be about $27 trillion, comfortably ahead. If the United States sustains half the growth rate of China indefinitely, China’s GDP will not pass America’s for several generations.

China might end up number one — or become Japan: the Sequel. China’s national economic policy of mercantilism, coupled to its social policy of attempting to discourage individualism, seem awfully similar to what backfired for Japan.

For more than a century, Westerners, and especially Americans, have experienced some form of yellow-peril fear. Exaggerating the shadow of Japan was a manifestation of such fear in the 1980s, and exaggerating the shadow of China is a manifestation today. I’ll take a “buy and hold” attitude to stock in the United States, thanks.

For points that didn’t quite make the main column, click here.