The Chinese Invasion
Even some people who were not alarmed when Japanese companies started snapping up famous American businesses 15 years ago are succumbing to alarm about Chinese companies doing the same thing today. The alarmists were wrong the last time, and the please-remain-calm types were right. Are there good reasons to think that things are different this time around?
The Japan scare came with a lot of xenophobia, verging on racism, and foolish analogies between Japan’s military imperialism of World War II and the so-called economic imperialism of half a century later. That earlier Japanese imperialism had involved killing millions of foreigners in an attempt to rule half the world by military force. The later Japanese so-called imperialism involved selling high-quality goods to millions of willing foreigners and then investing part of the proceeds in job-producing assets in those foreign countries.
Anti-Japanese hysteria also featured quite a bit of anthropological poppycock about how the basic laws of economics don’t apply to cultures that emphasize production over consumption. Or to novel forms of organization (remember the keiretsu?) that combine all the evils of socialism and corporate capitalism into a production machine that is too efficient to be tolerated. Virtues morphed into cheating: They work hard and save while we spend and borrow -- it’s not fair!
The current and growing anti-Chinese sentiment has the same basic causes: resentment at another country’s economic success and fear that it threatens our own well-being. But there are distinctions in flavor. Yesterday’s Japanophobia and today’s Sinophobia draw from different themes of classic Western prejudice against the East. Japan was the wily Oriental with his devilish plots. China is the Asian hordes. It’s not that they’re so smart, it’s just that there are so darn many of them, and they are all being orchestrated by a fiendish Communist Party. Peasants pour out of the countryside into huge factories where they work 20 hours a day for $3.25 and produce enough of everything to fill an entire Wal-Mart every 7.3 minutes.... And we, like fools, buy this stuff. It’s not fair!
But it turned out that Japan was not one big, unstoppable economic machine. Its economy has been in the tank, while ours has thrived, for most of the period since the Japanophobia pandemic. The Japanese are not robots. A touching human weakness -- vanity -- caused them to overpay for prestigious American assets such as Rockefeller Center and Columbia Pictures, which they then managed badly. And who today feels humiliated because a major studio is named “Sony” -- or even thinks of Sony as especially Japanese, or even foreign?
Old-fashioned economics has more to say about these episodes than cultural theorizing does. Economic point No. 1 is that if there is a problem, it’s our fault, not theirs. When you spend more than you earn (or consume more than you produce), you go into debt. We’ve been doing that with a vengeance lately, both as individuals and as a society, through the government. Others then have your IOUs.
In international trade, these IOUs are known as “dollars,” and they’re ultimately only good for one thing: buying stuff from the United States. For misguided reasons of its own, China keeps its currency and consumer demand artificially low, resulting in a larger trade imbalance: We buy a lot more from them than they buy from us. But another way to look at it is that they send us all those lovely things on the shelves at Wal-Mart and we send them in exchange small pieces of paper. (Or actually not even that: just some electronic pulses representing pieces of paper called dollars.)
We complain about this. But when they start spending their dollars instead of hoarding them, we are horrified at what they are able to buy: IBM’s ThinkPad computer line, the Maytag appliance brand name, an oil company (Unocal). But it is our own spendthrift ways that supply the dollars. If foreigners ever lost interest in accumulating or spending dollars, we would really be in trouble.
Economic point No. 2 is the golden oldie: Free trade is good, even if it is unilateral. The United States benefits from being open to anything China wishes to sell to us, whether or not China reciprocates. Trade is disruptive. But people tend to focus on the lost jobs and lose sight of the cheap shirts.
During the Japan fuss, this trade-off was often described as destroying a blue-collar worker’s life so that a yuppie could drive a Lexus. But imports from China tend to be more down-market. They effectively raise the standard of living of the lowest-income Americans. The much smaller number of Americans who are hurt by trade deserve generous help from the vast majority who benefit from it. But restricting trade with China to help those few would harm the many.
Then there’s globalization, the third economic reality. In the emerging world economy, American investors will own shares in Chinese companies that invest in Albania or Zambia, and so on. Already, much of what we are buying “from China” is being produced by U.S. companies there, and today’s anti-Beijing chorus overlooks the extent to which our culture is changing China in our image.
Americans needn’t fear the prospect of the world’s largest country joining the global middle class. This -- or the more prosaic possibility that some country might definitively unseat the United States as the world’s richest country -- is not some tragic possibility that Americans must acknowledge with good grace or world-weary resignation (like the British waving farewell to their empire). The wealth of other nations is good for Americans in the narrowest selfish terms.
