Even among those who think President Trump is wrong, oh so wrong, about nearly everything, there is a grudging admission that some of his observations about China are correct. “China is eating our lunch!” They have subsidized their own industries while creating obstacles to US companies wishing to enter their markets and they steal our intellectual property. If Trump can make progress on those issues, he will have served us well.
But it’s China’s long game that troubles me. They are likely to make concessions to Trump because the global trade paradigm feeds their coffers. In spite of the capital flight of recent years, China still has over $1 Trillion in US Treasuries on deposit in the Bank of China. They are using that capital to fund a long-term strategy to build a China centric supply chain with outposts in developing nations hungering for foreign investment. In addition, they are investing in military technology to bypass the US as our military budget has declined precipitously since 2010.
Americans tend to take our global hegemony for granted. The US long game from its founding was Manifest Destiny, expanding the nation from one coast to the other and extending our buffer zones across two oceans. It took about 150 years to achieve this position and the commitment of Cold Warriors to maintain it. We’ve been so secure for so long that we can’t imagine it might change nor can we imagine impact when it does. Now, that hegemony is in jeopardy as a defense strategy based upon aircraft carriers and foreign military bases is undermined by American withdrawal, reduced military budgets and foreign powers investing in asymmetric capabilities like cruise missiles and cyberwarfare.
Enter Senator Marco Rubio (R-FL) who now proposes a China style national industrial policy for the US. He would protect American manufacturing, restrict capital flows and change the tax code to incentivize technology companies to invest in R&D. Senator Rubio might be looking at how Japan used its industrial policy to become the world’s second largest economy over 40 years following WWII (they are third behind China now). But it’s noteworthy that policies that worked well during their rise from the ashes have not served them well since. The senator should also brush up on economics. Comparative advantage still works. Competing with China in manufacturing may sound nice to American labor unions; however, our real advantage is in technology and innovation. And the best way to support innovation is for government to get out of the way.
A better (non-Trumpian) approach would be to create economic alliances with China’s other competitors, such as India, South Korea and Japan and to invest in military technology to counter China’s cyberwarfare military expansion. We should also expand our economic development initiatives in Africa, the continent most likely to grow economically in this century. Initiatives of this nature won’t fit into the brevity of an American electoral cycle. For the U.S. to play a long game to counter China, a president will have to clearly define our strategy (Manifest Destiny 2100?) and work to gain bi-partisan support. Such a plan must include strategies for economic development in the U.S. that will rebuild communities through investment in infrastructure, education and workforce development. Failing to do so will undermine political support for such an initiative in the long term.
Unfortunately, I don’t expect such long term thinking or leadership to emanate from the current resident of the White House.
WHO WILL LEAD?
What I’m reading…
… "A Brief History of Time by Stephen Hawking”: I was inspired to read it in the wake of the author’s death. Now, I’m not sure I’ll make it to the end. I haven’t studied physics and math since college and wonder why I should start again… “Reimagining Mobility: A CEO’s Guide”: a report from global consulting company, McKinsey & Co., describes how autonomy and electrification will affect automotive transportation over the next decade or two… “Is the Campus Free Speech Crisis Overblown?”: an opinion piece in the Wall Street Journal featuring comments from college students on the topic.
The Poll
Well, the poll favors the short form of essay that I’ve experimented with since the beginning of the year. (It’s still open if you’d like to vote.) However, the vote was close, and my wife voted for the short form. Maybe we should disallow her vote since she’d just like me to shut up. What do you think?
I've commented and lamented for years that we are blindly promoting this as the Chinese century through our unwillingness to take the long view and our apparent reliance on yesterday's thinking. We're always prepared for the last battle, not the next.
ReplyDeleteRubio's report sounds nice, but his notion of revitalizing manufacturing is nothing more than puffery. Worse, the headline on his site reads, "Rubio Releases Report Outlining China's Plan for Global Dominance and Why America Must Respond." Why, exactly, is it that his working group is advocating responding instead of initiating? A quick scan of the 80-page report leaves me with the distinct impression that it is entirely reactive.
Biggest ache over this: There is no clear goal or set of goals - just a bunch of sound-good policy ideas, many without any notion of what to do or how to do it. It is typical brain-numbing politic-speak, something at which Rubio excels. Instead of that, we need bold leadership based on the realities on planet Earth.
Which brings us back to your excellent question, John: Who will lead?