The pleasures are enjoyed by the few, while the pain is shared among the many. It is hard to think of a less desirable outcome.
Mark Gilbert, Complicit (2010)
I had decided that day to teach my six-year-old son to play checkers and so picked up a set at Wal-Mart for a mere $4.99. Life seemed good, we happily set up the game, and all was going well until he declared his red pieces able to "throw bombs" at my black. A rout ensued. It was only afterward, while cleaning up the widespread carnage, that I noticed the "Made In China" emblazoned on the box. It was then I had my epiphany.
China, I finally realized, has officially replaced Japan as the "economic threat" to America's well being. Japan, come to think of it, is so Duran Duran at this point. Their heyday was years ago, their best economic export since 1990 has been Ichiro, and his baseball career is nearing its end. The Red Dragon of China has taken center stage in America's Pantheon of Bogeymen. Congress appears suitably frightened. Should I be?
On the face of it yes, I should. According to the Census Bureau, the US trade deficit with China has exceeded $200 billion every year since 2005, hitting $252 billion in 2010. US manufacturers claim millions of American jobs have been lost to the explosive growth in China's exporting industries. Yet, while China appears to be an exporting powerhouse, like all politically subsidized entities her manufacturing/exporting sector is punching above her true strength. How far above, I am sad to report, is impossible to measure, but that its strength is, in part, a pure fiction is impossible to deny.
This can't last. We are importing from China far more than we are exporting to her, a clearly unsustainable trend, as if we don't export to her how can we pay for what we have imported? Avid mercantilists never seem to wonder — if you only export and discourage imports, how will you get paid for all the goods you are shipping to foreign climes? The Chinese, I suggest, should take a moment and think about what they are doing.
The US Congress is certainly thinking about it, in that muddleheaded, over-emotional manner that defines their every action. My local senator Chuck Schumer has started up his own little PR machine with constant brays of protest towards China's "undervalued" currency. These signal Treasury Secretary Timothy Geithner to pop up like a groundhog from a hole and declare six more weeks of observed Chinese currency manipulation, which strikes me as ironic since the Chinese monetary authorities, sitting on a mountain of US dollar denominated debt, are at the same moment deeply worried about America's currency manipulation.
Granted, "undervalued" versus pretty much everyone's currency the Chinese yuan most assuredly is, and that nation's pile of $2.75 trillion (or thereabouts) worth of foreign currency reserves proves the point. The best minds of China's political elite believe that engaging in currency manipulation will increase their exports; and they are correct. But if they believe that such a policy has no long-term cost they are fooling themselves.
The cost to America's manufacturers is obvious, and a recent Bloomberg piece tells us "The Obama administration and U.S. lawmakers say China's currency policy gives the nation's exporters an unfair competitive advantage." An advantage, yes, but "unfair" to whom, exactly? Who does this Chinese policy of export subsidies benefit? The Chinese export sector and the American consumer. Who does it hurt? The Chinese workers forced to pay for these export subsides and US domestic manufacturers, as this flood of cheap Chinese imports has decimated their customer base.
As for the American domestic producers who are now busy lobbying Congress for Chinese imports to be slapped with higher tariffs — a move which would doubtless benefit their bottom lines — I am reminded of Adam Smith's take on such creatures in The Wealth of Nations "They are silent with regard to the pernicious effects on their own gains. They complain only of those of other people." (Smith, I, 9, 24) I can't help but ask — where do you feel you have a right to the American consumer? Who said we belong to you?
Such calls for "retaliation" against "China" are unjust and irrational. To be forced to pay a higher price for something that you could buy cheaper elsewhere is no way to run a railroad, no country ever got wealthy by paying more where less would have done just as nicely. Where the Chinese political elite is lambasting the Chinese worker to benefit their exporters, the response of the US Congress is to lambaste the American consumer to benefit their domestic industries.
Yet why should I, an American consumer, look a gift horse (dragon?) in the mouth? A mercantilist policy is, at its terminus, a subsidy for the consumers of a foreign country. It's the political grandees of Country A forcing their workers to give away sales rebates to the consumers of Country B in order to benefit the exporters of Country A. Does China believe it can get rich doing this?
It has been proved beyond dispute by economic science that trade, in and of itself, is beneficial to both parties. Unfortunately like so much in life, something as innocent and necessary as trade is turned into a battlefield as soon as the factor of power is thrust into it. Trade between US and Chinese businessmen would present absolutely no problem — and be of great benefit to both our nations' peace and prosperity — if the big, college-educated brains, uber-patriots, and arrogant central planners in both Beijing and D.C had minded their own business, left their mitts off the currencies, and instituted a simple, flat tariff on all imports for revenue purposes.
Despite all I have said that may seem to welcome this subsidy of my consumerism by Beijing, I am declaring a boycott. This decision is not taken due to any sense of misguided patriotism or xenophobia, but purely to stay true to the sadly unheeded clarion call of the great Karl Marx, "Workers of the World, Unite!" All these Chinese imports are "cheap" partly due to the political exploitation of the Chinese working masses, all this to benefit a few Chinese exporters. It's unseemly, and I'll have nothing to do with it. So on my honor, I will forevermore buy only American made checker games.
Assuming, of course, we still manufacture any.