The China Threat?

The normally sober Financial Times has a truly bizarre article on the perceived threat posed by China:

Marketing slogans aside, since at least the 1980s there has been no presumption that US companies had to operate in the national interest. Goods, capital, and labour could move where they liked — that is the definition of globalisation. Most people believed that if US companies did well, Americans would prosper. But, as the past several decades of wage stagnation have shown, the fortunes of US companies and consumers are now fundamentally disconnected.

The wealth gap alone wasn’t enough to persuade politicians from either party to rethink the rules. But China is. While tariffs are President Donald Trump’s personal preoccupation, fears over losing an economic and cultural war (and possibly a real one at some point) with China is a worry that is shared broadly in the US, no matter what circles you travel in.

In my entire life, I’ve never met a single person worried about losing a cultural war with China.  What does that even mean?  Are we worried that Americans will give up Hollywood films and start watching Chinese movies?

As far as losing an economic war, that reminds me of the absurd claims in the 1980s that Japan would overtake us.  By the early 2000s, those Japanophobes had become widely ridiculed.  Have we already forgotten that fiasco?  Is America condemned every 30 years to engage in hysterical fears about the “yellow peril”?  What “circles” does this reporter travel in?  I could sort of understand talk of a military threat, although the threat is to Taiwan and some uninhabited atolls, not the US, but a cultural and economic threat?

As far as the first paragraph, is the author unaware that for many decades US companies have been banned from selling sensitive technology with military applications to countries such as China?  Yes, it’s difficult to decide exactly which technologies meet that definition, and undoubtedly a fair bit of useful stuff slipped through, but it’s simply false to claim that companies had complete freedom to sell technology to China.

And how about the logic here:

But, as the past several decades of wage stagnation have shown, the fortunes of US companies and consumers are now fundamentally disconnected.

Let’s make the list even longer:

But, as the past several decades of wage stagnation have shown, having a democratic form of government does not guarantee consumers will do well.

But, as the past several decades of wage stagnation have shown, developing an internet does not guarantee consumers will do well.

But, as the past several decades of wage stagnation have shown, having private private property rights does not guarantee consumers will do well.

But, as the past several decades of wage stagnation have shown, having freedom of the press does not guarantee consumers will do well.

During Mao’s 27 years in office, China lacked a democratic form of government, private property rights, freedom of the press and an internet.

Therefore . . . ????

And BTW, American consumers have done fabulously well in recent decades, at least in terms of autos, TVs, phones, cameras, internet, entertainment choices, restaurant quality and choice, cheap clothing, etc., etc., etc.

PS.  I have a related post at Econlog.

PPS.  V.S. Naipaul, RIP.  Whatever you think of him, Naipaul had no patience for bullshit, from either colonialists or anti-colonialists.  I notice that his death is receiving relatively little attention in the mass media.  We lavish praise on warm and fuzzy people and shun those telling us things we don’t want to hear.  At one time or another, he said things that would annoy almost everyone (including me.)

 


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60 Responses to “The China Threat?”

  1. Gravatar of E. Harding E. Harding
    12. August 2018 at 10:02

    Japan has always had about the same GDP per capita as Italy, and only about twice the population. Like Italy, it is militarily occupied by the U.S. It was never a real threat to the U.S.

    China is different. It is now once again the world’s largest economy and a leading center of innovation (look at the supercomputer rankings). It has the world’s largest population. It is not militarily occupied by the U.S. It still has a lot of room for economic growth, and, with pro-natalist policies, might soon catch up to the U.S. in population growth as well. Its leadership does not seem obviously less competent than ours, though its institutions lag behind in many respects.

    The U.S. lagged Britain in cultural power until about the 1930s-1950s, despite having persistently higher living standards and, since the 1850s, a larger population as well. Cultural heft is a lot harder to gain than economic heft.

    Are we worried that Americans will give up Hollywood films and start watching Chinese movies?

    Yes. But that takes a while to happen. About 50 years, is my best guess.

  2. Gravatar of ssumner ssumner
    12. August 2018 at 10:21

    Harding, 90% of US and Chinese films are crap–what difference does it make which ones we watch?

    China’s population will likely decline sharply, pro-natalist policies don’t work very well.

    You have presented no evidence that China is a threat to the US. China is much poorer than Italy.

    As far as your comments on Japan, those facts didn’t stop people from fearing Japan during the 1980s. The people who fear China today are pretty much the exact same fools who feared Japan during the 1980s.

    But your comments do highlight one point—this has always been about race. For China, you can point to its size. No such excuse applies to the anti-Japan hysteria of the 1980s. As you point out, it doesn’t have a giant population, and was only about as rich as Italy. It was all about racism. And that’s still the elephant in the room.

  3. Gravatar of E. Harding E. Harding
    12. August 2018 at 11:00

    pro-natalist policies don’t work very well.

    No doubt true. But that is because most countries’ leaderships value personal liberty to a much greater extent than China’s. China’s leadership’s disregard for personal liberty can lead it to provide much stronger incentives to have more kids than most other low-fertility countries.

    But your comments do highlight one point—this has always been about race.

    Arguable, but not provably false. It does seem both parties’ increasing hatred of Russia is correlated with their increasing racism against the White Man, and is probably driven by Jewish perceived racial interests. I don’t know if the GOP’s anti-Iran agitation is about race. Maybe it is; maybe it isn’t. I really can’t see how the Democrats’ hatred of Germany back in the 1910s was about race (though I can see the relevance of race to the 1930s, when American foreign policy became increasingly dominated by Jews). The Democrats really liked Germans as a race back in the 1870s.

    90% of US and Chinese films are crap–what difference does it make which ones we watch?

    I think the British felt a bit left out at America’s increasing cultural dominance during the postwar era. It just results in a different perspective about the world being dominant, one that isn’t ours. Take it as you wish.

    China is much poorer than Italy.

    So was the Soviet Union; it was still the second-largest economy in the world and the leading threat to the U.S., both militarily and ideologically. China’s economy as a percentage of the U.S. is much larger than the Soviet Union’s economy as a percentage of the U.S.’s ever was, and its military capability will, thanks to China’s population advantage, probably be equivalent to that of the U.S. in a few decades. China may not be an obvious threat to the U.S. now, but it is likely to become so within the next few decades. Just as the Soviet Union was not an obvious threat to the U.S. in 1930, but did become one by 1950.

    The people who fear China today are pretty much the exact same fools who feared Japan during the 1980s.

    Really? Where’s your evidence for this? And even if it is true (which I doubt), that’s an ad hominem argument, which is quite weak.

    No such excuse applies to the anti-Japan hysteria of the 1980s. As you point out, it doesn’t have a giant population, and was only about as rich as Italy.

    True, but Japan’s GDP per capita was still growing faster than that of the U.S. throughout the 1980s, leading Japan to become the world’s second-largest economy in 1987 (though it lost this status to China in 1995). Italy was only the sixth largest economy in the world at the time (after Japan, the Soviet Union, China, and Germany). Italy was not an island with twice its actual population separated from the rest of the rich world by over a thousand kilometers of water, with the closest countries to it second or third-world ones it invaded back in the 1940s. If it was, I think Americans’ reaction to its economic rise would have been much different than it actually was.

  4. Gravatar of Raver Raver
    12. August 2018 at 11:02

    Do you think US companies could or should have done a better job at keeping more manufacturing in the USA over recent decades?

    I recently read Vaclav Smil’s Made in the USA, in which the argument is made that US companies needlessly (as in, perhaps it wasn’t in their own long term interests) moved too much manufacturing offshore and that the big problem with it is you can’t innovate technology you no longer know how to manufacture. For instance, US engineers aren’t in a good position to design the best television sets anymore because television design is now a lost technology to the US.

    Apologize that this is a bit off-topic. It’s a question I’ve been wanting to post here for a while.

  5. Gravatar of Robbie Robbie
    12. August 2018 at 11:21

    I’ve never met a single person worried about losing a cultural war with China

    Just like a fish does not realize he is surrounded by water, prof Sumner cannot realize that the current US definition of “human rights” (worshiping homosexuals and coloreds, among others) is not quite a human universal.

    So I’d say that, yes, the US losing the cultural war would have real consequences.

    The best thing about this is that the Chinese don’t have to lift a finger.
    All they have to do (which they are in fact currently doing) is say – “you can deal with us, or you can deal with American insanity”.

    Not a difficult choice to make.

  6. Gravatar of ssumner ssumner
    12. August 2018 at 14:11

    Harding, Interesting to see one of your comments on how small and weak Japan was, followed by another post about how big and rich and powerful and scary they were.

    Raver, We are still a big manufacturing nation, we simply do it with fewer workers. (Nice to occasionally get a commenter who’s not a fascist.)

    Robbie, Your comment is so silly I don’t know why I respond, but I’ll take the bait. Gay rights have made huge advances in China since the 1980s. Sorry to disappoint you.

  7. Gravatar of jroll jroll
    12. August 2018 at 14:32

    I’ve long attributed Brian Wilson’s nervous breakdown post-Sergeant Pepper to hatred of the British race and I think we can now look back on the term British Invasion for what it really was.

    It also seems quite clear that Stanley Kubrick was working with both the racist CIA and Hollywood Scientologists to undermine the limeys from within with his subversive adaptions of their literature and his promotion of our own superiority through Stephen King’s stunning masterpiece The Shining. Seeing our glorious city of New York represented from within “Great” Britain in Eyes Wide Shut was surely the demoralizing coup de grace to “British” “culture.” Is it any wonder Bush turned out Blair for Iraq? Close your eyes Brits, your done.

    Not to mention that awful Churchill’s racial animus toward the Nazi Germans. Sure Poland and it’s millions of Jews maybe had reason to worry.

    And what have Japanese ever done to America? Not that any American has ever shed blood fighting the I-talians.

    More seriously if people feared Japan but no longer do, is it because they’re wrong or they’re racists? And I’m sure their fear had nothing to do with their preference Japanese cars, electronics and video games. Just as competition with Samsung or K-pop is not about economics and nationality but race. East Asia has open borders, no?
    And what ever became of Japan? Shithole or nah?

    Trump’s competition with the EU is clearly racial. And as it was pointed out above the entire Cold War.

    North Korean rockets that can reach the US or Chinese space missiles? Race. But yeah, maybe like Poland our allies should worry but not us, it’s not who we are.

    I’m also not sure the wasteland of the Internet, technological (military) marvel it may be is a great measure of improvement in the quality of life. Nor are our flat screens or touch screens or even cars (self driving cars are impressive though). People seemed perfectly happy with CRTs (which are still better in some ways), desktops and dumb phones. I think the quality of people’s homes, health, jobs, family vacations, would be more impressive.

    People seemed to have plenty (more than enough) of entertainment, news, fashion, video games, etc before the internet started to take off in the mid 90s.

  8. Gravatar of Christian List Christian List
    12. August 2018 at 14:49

    China is a rising power with the potential to become the next world power. It is a deeply illiberal expansionist authoritarian even Stalinist police state opposed to democracy and the rule of law. It is fostering similar states all over the world, from Cambodia to Africa, from North Korea to South America.

    You have to be extremely naive not to be worried about those negative developments. Not being afraid in these times is a sure sign of only two things: Pure naivety and zero imagination.

  9. Gravatar of E. Harding E. Harding
    12. August 2018 at 17:20

    followed by another post about how big and rich and powerful and scary they were.

    Uh, no. I was attempting to explain why looking at Italy the same way as Japan would not have been justifiable under the Japanophobes’ premises regardless of the racial question. I certainly have no interest in justifying the common reaction to Japan’s economic rise at the time. Read my posts, Sumner, and don’t make things up.

    We are still a big manufacturing nation

    Arguable. Manufacturing output per working-age person in the U.S. peaked in Q4 1999:
    https://fred.stlouisfed.org/graph/?g=kQur

    Gay rights have made huge advances in China since the 1980s. Sorry to disappoint you.

    I am disappointed.

  10. Gravatar of Benjamin Cole Benjamin Cole
    12. August 2018 at 17:59

    What is creepy about China is that the Chinese Communist Party is increasingly repressing, suppressing, and oppressing the Chinese people, led by Xi.
    As a Westerner, I keep expecting China to liberalize, as material living standards rise.
    Instead we have 30 years of movement towards all-encompassing authoritarianism.

    Shamefully, US multinationals are more or less compromised, and have become mouthpieces or mute in relation to the Chinese Communist Party. And the perspective of multinationals is probably dominant in US foreign-policy making.

    Xi makes Trump look like Peter Pan.

  11. Gravatar of Benjamin Cole Benjamin Cole
    12. August 2018 at 18:16

    Actually, I should have said, “The perspective of US multinationals is probably dominant in foreign- and economic policymaking in the US.”

  12. Gravatar of Robbie Robbie
    12. August 2018 at 21:43

    It is a deeply illiberal expansionist authoritarian even Stalinist police state

    Because liberalism is just so wonderful.

    Reminds of the late Roman Empire chroniclers.
    Their world was crumbling, yet they were insisting on the eternal glory of Rome.

  13. Gravatar of Mark Thomson Mark Thomson
    13. August 2018 at 02:07

    There may be some flaws in Foroohar’s article at the margin, but I think calling it “truly bizarre” kind of misconstrues its overall thrust. It doesn’t seem to me that she claims anything about an actual threat herself (except to express skepticism) but rather about a shift in the kind of rhetoric increasingly considered reasonable in Washington and elsewhere, together with some of the potential practical impacts of that shift in the future. The Noah Smith piece you cite at Econlib seems to illustrate exactly her point.

  14. Gravatar of Robbie Robbie
    13. August 2018 at 02:20

    There’s this thing

    https://www.google.com/search?q=lactatia

    Liberalism is truly something amazing

  15. Gravatar of Brian McCarthy Brian McCarthy
    13. August 2018 at 05:48

    Pulling the race card with terms like “yellow peril” is a deflection. Did we allow the Soviet Union to be welcomed and heavily integrated into what is supposed to be a rules-based system of global trade and finance? No we did not, and they were largely white.

    Why didn’t we invite the Soviet Union in? Because large slave colonies are incompatible with participation without warping the system itself and should not be welcomed.

    While the Chinese Communists have doled out “marketization” to the extent it has served their interests, the fact remains that 1.3 bn people in China are denied civli rights, property rights, speech rights, reproductive rights, and in the case of many millions, basic human right.

    In the economic realm, the denying of any right to capital movement should itself disqualify China from central participation in global trade. China’s capital controls are an equilibrium-preventing device that when applied in the country with the largest gross global trade flows on the planet will inevitably infect the entire system and foster damaging global imbalances. The one simple, cure-all demand we could be making on China to force marketization would be to open the capital account. But of course, no one wants to deal with the fallout, which given years of equilibrium-prevention would surely entail and RMB maxi-devaluation.

    The only two possible outcomes of continuing to accommodate Authoritarian Communism and wide scale capital misallocation in China is that the resultant asset bubbles will either burst or they won’t. If they’re going to burst, the sooner the better. If they’re not going to burst it will only be as a result of continued accommodation by Western leadership (with the necessary complicity of the central banks). In that scenario, we end up with Xi Jinping executing on his stated goal of spreading the doctrine of Communist authoritarianism across the developing world. Is that what we want?

    The Trump Administration’s goal is to gradually disengage China from global trade and finance because if you have a $12T non-market economy at the center of the system you no longer have a market system.

  16. Gravatar of bill bill
    13. August 2018 at 06:20

    I read somewhere that US manufacturing stats are distorted because much (maybe more than all) the growth is based on quality adjustments in the tech sector. Can anyone suggest a good source to investigate that statement?

  17. Gravatar of Jordan Jordan
    13. August 2018 at 07:43

    On the cultural war point, isn’t France constantly worrying about losing a cultural war with America, and so they have all these restrictions of movies and TV shows and subsidized movie makers and so on?

  18. Gravatar of LK Beland LK Beland
    13. August 2018 at 08:18

    The presumed “disconnect” between corporate and labor well-being can be measured by the Compensation/Profits ratio.

    It seems to fluctuate quite a bit:
    1976-1986: Rapid increase
    1986-1996: Decrease
    1996-2002: Rapid increase
    2002-2006: Very rapid decrease
    2006-2018: Very slow increase (and a huge spike in 2008-2009)

    The ratio is currently at a level comparable to the 1950-1965 average.

    “Globalization” can be approximated as 0.5*(imports+exports)/gdp

    Honestly, it’s difficult to see a correlation between “corporate-labor disconnect” and “globalization”. Here’s the FRED graph:
    https://fred.stlouisfed.org/graph/?g=kR6i

  19. Gravatar of ssumner ssumner
    13. August 2018 at 08:36

    Christian, You said:

    “It is fostering similar states all over the world, from Cambodia to Africa, from North Korea to South America.”

    Africa is similar to China? North Korea? Sometimes it’s hard to tell when you are joking.

    Mark, She’s making some very bizarre claims, such as implying that there have been no restrictions on what US firms could export to China, and that lots of Americans are worried about losing a cultural war with China. The first is false, and the second seems bizarre–I’ve never met such a person.

    Brian, You said:

    “Pulling the race card with terms like “yellow peril” is a deflection.”

    The Eurozone’s current account surplus is an order of magnitude larger than China’s. Which is the Trump administration most obsessed with?

    Russia invades the Ukraine and China invades some uninhabited atolls. Which is Trump most upset about?

    You said:

    “The Trump Administration’s goal is to gradually disengage China from global trade and finance because if you have a $12T non-market economy at the center of the system you no longer have a market system.”

    That’s wrong, for several reasons. First, almost all countries are mixed economies, including the US and China. Second, whether Chinese firms are private or state owned has no bearing on whether voluntary trade between the US and China is mutually beneficial. China isn’t forcing us to take their goods, I buy Chinese stuff because I gain from doing so—as do the Chinese.

    Your “let’s blow up the world since it’s not perfect” is the worst possible approach to public policy. Let’s make the best of a bad China, and hope it improves over time. Do you deny that it’s improved vastly in recent decades?

    Jordan. Yes.

    LK, Good point.

  20. Gravatar of Richard Richard
    13. August 2018 at 08:54

    “In my entire life, I’ve never met a single person worried about losing a cultural war with China. What does that even mean?”

    How would you like if a developer came to your home and told you to get out immediatly so they could demolish it. You could always resist, but they would happily remove you in the middle of the night, rape your wife, and then bring over the bulldozer. And in chinese culture there is know need to complain, because the local police and politicians will shrug their shoulders and tell you to fuck off. After all, they are getting a nice little kickback.

    Want to travel abroad? Need a loan? No problem. The govt will check a database and let you know what your citizen score is.

    Meanwhile in America…..

    Corrupt news that cares about click bait and speed (getting it out first), rather than getting it out right.

    A justice department that fears politicians.

    An education system focused on cramming and test taking, rather than learning…

    Contract jobs being awarded to political friends (possible kick backs)

    Lobbysists and corporations controlling the futures of politicians…

    Political correctness that seeks to stifle freedom of speech

    Abuse, fraud and waste of tax payer resources for personal gain and comfort.

    Is the picture becoming clearer. It should be. Because this is the beginning of a cultural shift towards a world where our rights are slowly eroded under the disguise of progress.

    If you are not afraid…..

    Then you should be!!

  21. Gravatar of Brian McCarthy Brian McCarthy
    13. August 2018 at 09:03

    Scott, you wrote:

    “First, almost all countries are mixed economies, including the US and China.”

    Comparing the “mixedness” of the U.S. and China is like comparing someone who shoplifts a can of soup to an armed bank robber and saying “they’re both criminals.”

    You wrote “Second, whether Chinese firms are private or state owned has no bearing on whether voluntary trade between the US and China is mutually beneficial. China isn’t forcing us to take their goods, I buy Chinese stuff because I gain from doing so—as do the Chinese.”

    Mutually beneficial to whom? In China’s case the answer is not households or consumers. Its the government and vested interests. So you’re enjoyment of cheap goods from the $1.3b-person slave colony entails negative externalities that the market is not capturing.

    One such externality is that your consumption supports the Chinese government’s ability to spread cash around the globe in exchange for influence which, if the history of communism is any guide, will not be used for the good.

    Secondly, it supports the suppression of Chinese Households because it is NOT a voluntary exchange on the Chinese side. It can’t be if their capital account is closed, which ultimately necessitates that the government intermediate all international exchange. At some point, free Chinese households likely would have said they no longer wanted to exchange their labor for your paper. They were given no such choice.

    Third, there are negative domestic societal externalities resulting from forcing U.S. manufacturing workers to compete with forced labor.

    Fourth, there are capital misallocation externalities. For instance, I’ve read that China’s subsidized dominance of the global solar industry has led to the proliferation of a technology that many experts believe to be sub-optimal. Free markets produce better end results for all.

    Lastly, while China may have “improved vastly in recent decades,” over the past decade they have become more authoritarian and less market-oriented by almost all accounts. One decade is long enough for me to determine that the trend is in the wrong direction.

    If by “making the best of a bad China” you mean accommodating Communist authoritarianism and helping them along so as they can cling to power as long as possible, then yeah, count me out.

  22. Gravatar of rayward rayward
    13. August 2018 at 10:28

    Jeepers, Trump starts a trade war with China and lots of Americans become anti-China; indeed, they now seem itching for a real war with China. I suppose I am a something of a Sinophile, but that doesn’t mean I’m not a realist. China is different from the U.S., and the U.S. has something to learn from China. Starting with a focus on investment over consumption, including investment in public goods that makes China productive and promotes economic growth. Rather than propose the investment in public goods Trump promised in the campaign, Trump’s trade negotiators with China demanded a veto power over China’s fiscal policy so China wouldn’t continue with its policy of investment over consumption. Has any American president ever made such an admission of an inability to compete with a foreign competitor? As for China’s population, the midrange estimate of demographers is that China’s population will continue to grow during the first half of this century and then decline by roughly 400 million during the second half. Think about the economic and political ramifications of China’s population declining by the total current population of the U.S.

  23. Gravatar of Brian McCarthy Brian McCarthy
    13. August 2018 at 10:34

    rayward,

    An over-reliance on state-driven investment is almost universally acknowledged as the Chinese economy’s biggest problem. Because much of the investment is inefficient, the system is forced to carry a heavy load of non-income producing assets, which is why any attempt by China to slow credit growth – compounding at a high teens rate for well over a decade now – results in a quick descent into debt-deflation which necessitates, you guessed it, a quick return to accelerated credit growth and state-sponsored investment.

    Its a macro-economic Ponzi scheme, destined to end in currency crisis.

  24. Gravatar of anon/portly anon/portly
    13. August 2018 at 12:49

    “No such excuse applies to the anti-Japan hysteria of the 1980s. As you point out, it doesn’t have a giant population, and was only about as rich as Italy. It was all about racism. And that’s still the elephant in the room.”

    I really have to disagree with this. It wasn’t (at least primarily) about racism, in my view, nor is it now. Japan was the symbol of America’s decline in manufacturing then and China (along with Mexico, maybe) is now.

    When “made in Japan” meant to people something like “cheap transistor radios,” was anyone complaining about the Japanese? Once “made in Japan” meant “a car that is a much better value than a ‘made in Detroit’ car,” then the complaints started.

    Now of course for some people this situation became one in which the Japanese (then, or the Chinese now) were somehow at fault, for “dumping” or using some nefarious Mercantilist Dirty Tricks or for exploiting their workers or what have you; mostly this to me has always been more about people’s political/ideological motives/desires to avoid facing the reality that the 1945-1970 era of high-wage low-skill manufacturing jobs wasn’t ever going to last forever. (Just as no one likes to face the reality that the 1945-1970 economic era was in large part due to WW2 in the first place).

    To me the animus directed at the Japanese then and the Chinese now is more of a purely political and intellectual nature. Here we are in 2018 and there are lots and lots of left-wing and right-wing politicians, intellectuals, blog-commenters and other assorted dirt-bags and lowlifes who fervently believe that we should be modeling our economy on some sort of “East German” model.

    Rather than focus on the racism angle, which I’m sure is present but I believe is also relatively insignificant, I would focus on the thought-processes of the aforementioned dirt-bags and lowlifes, the people who peddle this stuff. One angle that I can see (maybe no one else but oh well) is that these people don’t really want these high-wage low-skill jobs for themselves (or their own children) so much as they want them for some diffuse class of other people. (They want high-wage high-skill for themselves and their children, I think they understand economics just fine when they have skin in the game).

    I think a large part of the appeal of the current anti-China way of thinking is that re-creating the 1945-1970 economy, or some version of it, or just trying to sell the idea, will help the political fortunes of the side (left or right) that can take credit for it.

  25. Gravatar of E. Harding E. Harding
    13. August 2018 at 13:36

    Russia invades the Ukraine and China invades some uninhabited atolls. Which is Trump most upset about?

    Russia supports the will of the people of Donetsk, Luhansk, and Krim, and China invades some vital shipping lanes. For some reason (Jews?), Trump reacts massively against the former and ignores the latter entirely.

    Africa is similar to China? North Korea?

    In its leadership systems? Yes. E.g., look at Eritrea.

    The Eurozone’s current account surplus is an order of magnitude larger than China’s. Which is the Trump administration most obsessed with?

    The faster-growing economy.

    isn’t France constantly worrying about losing a cultural war with America

    It’s already lost.

  26. Gravatar of E. Harding E. Harding
    13. August 2018 at 13:39

    @anon/portly

    Partly agree, partly disagree. Germany and Italy were similar to Japan in their newfound manufacturing prowess. I believe Japan’s geographic and, to some extent, cultural isolation was more important than its status as a symbol of America’s manufacturing decline (though the latter was also important) in explaining American perceptions of it in the late 1980s.

    @ssumner

    Also, Turkey has actually invaded Afrin not to support the wishes of its inhabitants, but to crush them. Was Trump even remotely upset about that?

  27. Gravatar of P Burgos P Burgos
    13. August 2018 at 17:01

    Would it be incorrect to say that China tries to support authoritarian regimes and to “make the world safe” for autocrats? If that is true, then I think that fearing China’s rise is reasonable, and the US (and other liberal democracies) are in a culture war. If the US and China aren’t in a competition to try and influence other countries to either move towards liberal democracy or towards an autorotarian regime, then there isn’t a culture war worthy of the name.

  28. Gravatar of Benjamin Cole Benjamin Cole
    13. August 2018 at 17:30

    China and Singapore provide free capital and land to export industries.

    The US does not.

    Interesting question: if we believe in the price signal, does not what China and Singapore do result in a misallocation of resources?

    In what way could the US act to restore or mimic a correct price signal to imported items?

  29. Gravatar of Christian List Christian List
    13. August 2018 at 19:19

    Scott,

    your permanent downplaying of China’s aggressive authoritarianism is astonishing. It’s so telling that this completely harmless FT article got you worked up so much.

    Africa is similar to China? North Korea? Sometimes it’s hard to tell when you are joking.

    That’s just your usual strategy of nitpicking and red herrings. I clearly meant that China is fostering authoritarian regimes all around the world. This happens relatively often. Whenever an anti-Western regime (that disregards basic human rights, democracy, and the rule of law) is in trouble, you can count on China backing them up.

    And like P Burgos says: This is meant to be a cultural war. It’s not really about Hollywood movies. It’s about values like individualism, basic human rights, democracy, and the rule of law.

    Do you deny that it’s improved vastly in recent decades?

    It’s all about which scale you pick. For example it’s evident that China got worse under Xi.

  30. Gravatar of ssumner ssumner
    13. August 2018 at 22:09

    Richard, ??????

    Brian, I’d encourage you to visit China, talk to some of the locals. You might learn something.

    anon/portly, In order to be convinced it’s not racism, I need some sort of rational explanation of why we feared Japan. No one is providing such a reason. People were talking about Japan taking over the US (economically). No one talked about Germany taking over the US. Why?

    Christian, China is probably the least “aggressive” great power in all of human history. Name another less aggressive great power. Ever.

  31. Gravatar of Benjamin Cole Benjamin Cole
    14. August 2018 at 03:06

    There is an odd double-standard at play in US media, for various regimes or leaders.

    The Chinese Communist Party just banned the Tencent online-game “Monster Hunter, World” from China (Google the news).

    Suppose the Trump Administration had banned an online game from the US?

    Can you imagine the wet-season Niagara of dismissive ridicule and bile that would descend upon Don Trump (deservedly)?

    So Xi and the Chinese Communist Party can ban “Monster Hunter, World.”

    Not really much of a topic.

  32. Gravatar of Brian McCarthy Brian McCarthy
    14. August 2018 at 04:53

    Scott, with all due respect, this is a non-response:

    “Brian, I’d encourage you to visit China, talk to some of the locals. You might learn something.”

    FWIW, I’m in China regularly, have spent well over 6 months there in theist half decade, visited over two dozen cities, and talked with literally hundreds of individuals involved in all manner of Chinese finance – from high-level policymakers to PLA-connected underground banking thugs and everything in between.

    One thing that stands out is the near-universal belief that that the way to make money in China is to “follow government signals” – basically chase whatever money they’re throwing into the central plan du jour and then bank on the implicit backstop these policies are believed to enjoy. I’ve also spoken to dozens of real estate investors who understand that the market is wildly over-valued but insist that “the government will never let prices fall.” Capital misallocation in China is way of life.

    So if you believe that China’s economy is in any way comparable to the U.S. or Europe in terms of its market-orientation I’d suggest perhaps you’re the one that needs to do a bit more digging.

    Some introspection as to what leads a purported liberal like yourself to espouse actively supporting a regime as illiberal as any in history – at least in terms of the sheer volume of repression they dole out – might also be in order.

  33. Gravatar of ChrisA ChrisA
    14. August 2018 at 05:05

    Ben, if China and Singapore are providing subsidies to their export industries then we should be very happy, I am always happy to buy things at a reduced cost. Personally I think this export fetish is one of the strangest things that people like you indulge in. You do understand that everything exported is something that can be consumed at home so exports are a cost not a benefit ? Countries like Australia that have large balance of payment deficits are better off than countries like Germany which impoverished their population to create surpluses. The root of the issue is confusion between Countries and households. They are not at all equivalent and I for one don’t feel that I have to be taxed or controlled to satisfy such irrational thinking thank you very much.

  34. Gravatar of Christian List Christian List
    14. August 2018 at 07:25

    China is probably the least “aggressive” great power in all of human history. Name another less aggressive great power. Ever.

    Scott, this is really gold and I agree with you. Of all the sick paranoid inhumane regimes in human history who detain millions of people in concentration camps and are persecuting dissidents mercilessly all across the globe, the “great power” of China is the least aggressive one. How lovely is that? I’m sure it’s super-lovely. I can’t wait for the moment when you tell us that Ted Bundy is the “nicest” serial killer of all time.

  35. Gravatar of jroll jroll
    14. August 2018 at 09:53

    Scott, do you mean West Germany or East Germany?

    Fighting two wars with the Germans is not enough?

    Japan had double the population and a higher average IQ, no? Japan had video games cartoons comic books VCRs and on and on. Germany had cars…less popular than Japanese cars.

    US Foreign Trade (Japan, Germany, Italy)

    TOTAL 1989 44,493.7 93,552.5 -49,058.8

    TOTAL 1989 16,862.3 24,832.3 -7,970

    TOTAL 1989 7,215.0 11,933.1 -4,718.1

    And again, it’s not like Japan has gone away, they’re still someone to worry about.

  36. Gravatar of cbu cbu
    14. August 2018 at 11:18

    @Brian McCarthy,
    You sounds bitter, like some foreigners who did not make it in China. Otherwise you would have noticed the big improvement in the quality of life of Chinese people over the last decades.

    @Christian List,
    It’s the U.S. that has invaded one country after another since its independence, from Mexico, to Philippines, to Iraq, and has military bases and extraordinary rendition centers all over the world.

  37. Gravatar of brian mccarthy brian mccarthy
    14. August 2018 at 12:17

    cbu,

    “Quality of life improvement” as a justification for supporting the Chinese Communists is logically faulty.

    Why was China so far behind at the beginning of Deng’s so-called “reform and opening?” Answer: Communism

    Would China be in better economic shape or worse if, instead of rolling tanks through Tiananmen Square in ’89, the Communists had pledged a transition to a truly open, free-market economy with rule of law and the Democratic transfer of power? Answer: better.

    Your argument is the logical equivalent of saying “The Chinese Communist party was not quite as disastrous as it could have been if it had continued to do absolutely everything wrong over the past 30 years. Ergo, the Chinese Communist Party is Great!”

  38. Gravatar of Jeff Jeff
    14. August 2018 at 14:04

    The anti-Japanese rhetoric of a couple of decades ago was mostly the work of American manufacturers and their unions who didn’t like the competition. It failed for two reasons: the big Japanese carmakers built non-union plants in the US to avoid import restrictions, and American consumers really liked Toyotas and Hondas, both of which have well-earned reputations for quality.

    It’s harder to see just who’s actually funding the anti-Chinese campaigns today. Manufacturers and their unions have much less political influence these days, and many of them are heavily into exporting. I would guess the biggest complainers these days are the domestic pharmaceutical companies, who don’t like the competition from Indian and Chinese generic drugmakers holding down their profits.

    Politically, the anti-Asian rhetoric is a loser, as too many whites think of Asians as “the good minority” that mostly speaks English in public. The anti-Mexican rhetoric works better. Anti-black rhetoric is mostly considered outside the pale these days, but you can still be anti-Mexican like Trump and get a lot of support.

  39. Gravatar of Jeff Jeff
    14. August 2018 at 14:05

    The idea that any country in the world poses a serious military threat to the United States is bananas.

  40. Gravatar of cbu cbu
    14. August 2018 at 16:49

    @brian mccarthy,

    The Chinese government did a reasonably good job in the past 30 – 40 years because China achieved arguably unprecedented development in human history during that period, not because China avoided greater disaster during the same period. China did far more than avoiding greater disaster.

  41. Gravatar of LC LC
    14. August 2018 at 18:04

    Scott:

    Both this post and the one at Econlog are great posts. I have been reading Steven Pinker’s “Enlightenment Now” and these are few of the enlightened pieces amid the craziness of this world.

    @cbu, please refrain from ad hominem attacks. They do nothing to strengthen your position.

    @Brian McCarthy, you point out a lot of the problems with Chinese economy, so would you agree that Chinese economy need to be more market oriented to be the center of the world? If so, why is that a threat now? Or are you saying China’s model could succeed, then in that case, would you suggest US follow it? What would be a more likely path for China to succeed (assuming it has to be reformed and market oriented), to keep it isolated and its people poor or keep it developing and its people getting richer? (I think you pointed to answer yourself when you said China pre-Deng was the darkest period in history. I agree with that BTW.) Finally, you seem to believe that democracy and free market can be achieved overnight. Evidence from Russia and Eastern Europe is far from conclusive. One of the key learnings from Eastern Europe is capitalism requires human capital to flourish and communism deprived nations of human capital. (Scott has posted on that too.) It will take time to develop.

  42. Gravatar of Benjamin Cole Benjamin Cole
    15. August 2018 at 02:14

    If Brian McCarthy is who I think he is, he is also an admirably modest fellow.

    ESG Nexus Fund?

  43. Gravatar of E. Harding E. Harding
    15. August 2018 at 09:26

    No one is providing such a reason.

    Uh, hello, Sumner? Anybody home?

    Italy was not an island with twice its actual population separated from the rest of the rich world by over a thousand kilometers of water, with the closest countries to it second or third-world ones it invaded back in the 1940s. If it was, I think Americans’ reaction to its economic rise would have been much different than it actually was.

    You really need to work on your reading comprehension.

    China is probably the least “aggressive” great power in all of human history.

    Low bar.

  44. Gravatar of ssumner ssumner
    15. August 2018 at 10:30

    Christian, Is that your view of America? If not, why imply it is?

    jroll, Japan is still a country to worry about? Seriously?

    Brian, You said:

    “Your argument is the logical equivalent of saying “The Chinese Communist party was not quite as disastrous as it could have been if it had continued to do absolutely everything wrong over the past 30 years. Ergo, the Chinese Communist Party is Great!””

    This shows an amazing degree of ignorance as to what’s been going on in China. The country is not just slightly better, it’s vastly freer and richer than under Mao.

    You said:

    “Mutually beneficial to whom? In China’s case the answer is not households or consumers. Its the government and vested interests. So you’re enjoyment of cheap goods from the $1.3b-person slave colony entails negative externalities that the market is not capturing.”

    Maybe you’ve spoken with lots of Chinese, but you obviously haven’t been paying attention or you would not be writing this nonsense. This is what China was like under Mao, not today. China’s consumers are vastly better off than even 20 years ago.

    Thanks LC.

    Harding, Again, China is a threat to Taiwan and some uninhabited atolls. And Taiwan is almost universally regarded as a part of China, indeed even the Taiwanese Constitution says it’s a part of China.

    The idea that Japan was a threat to the US during the 1980s is laughable. (And the Japanese people would indeed laugh at that idea.) It was during the 1940s that Japan was a threat.

  45. Gravatar of Christian List Christian List
    15. August 2018 at 19:04

    Christian, Is that your view of America? If not, why imply it is?

    Scott, it’s obvious that I talked about China. You reading “America” when I write “China” is very telling. It’s all happening in your mind not in mine. You should not go down this road any further, it’s really embarrassing.

    Just look at all your strange TDS posts. This alone might be partly understandable, but at the same time you extremely downplay vicious devious regimes like the one in China. And that’s the point where it’s getting really grotesque and where you lose all credibility.

  46. Gravatar of Todd Kreider Todd Kreider
    16. August 2018 at 08:54

    Scott wrote:

    “The idea that Japan was a threat to the US during the 1980s is laughable. (And the Japanese people would indeed laugh at that idea.) It was during the 1940s that Japan was a threat.”

    Japan was no threat to America in the 1940s either. Its GDP per capita in 1940 was $5,000 whereas America’s GDP per capita was almost $14,000, at the leading edge of science and technology, and with amost twice the population.

  47. Gravatar of ssumner ssumner
    17. August 2018 at 07:56

    Christian, So you don’t think the US is a great power? Or do you simply not know how to write?

    Todd, It was not a threat in the sense of being likely to win WWII, but it was a threat in the sense of being likely to kill lots of Americans during the 1940s. That’s bad! By the 1980s, even that threat had passed.

  48. Gravatar of Todd Kreider Todd Kreider
    17. August 2018 at 18:15

    Scott,

    The Japanese had nothing to threaten America. We bombed them to Kingdom Come in 1945 with 95% of their capital destroyed. They couldn’t have even reached California. Navy battles had a 9 to 1 kill ratio.

  49. Gravatar of Todd Kreider Todd Kreider
    17. August 2018 at 18:21

    One more: This is an interesting post, but I think the unfounded fear of the 1980s into the early 1990s (people seem to forget about the latter years up to 1994 or so) was that Japanese companies were going to do much better in the long run, which was timed with the 1991 U.S. recession.

  50. Gravatar of P Burgos P Burgos
    17. August 2018 at 19:14

    So far, China has not been very aggressive in deploying hard power abroad (nor really has the current regime in Russia been that bad unless you consider Chechnya a foreign country). However both are trying to exercise soft power in favor of autocratic, nationalist regimes as an ideal form of government. The fact that they aren’t wasting too much of their resources on ill advised foreign wars is actually worrisome. I guess I see there being a broader, global curtural conflict between people who believe in liberal democracy and those who want an authoritarian, nationalist government. The regimes in China and Russia clearly support the nationalist authoritarian model (would that be accurately called fascism?) both at home and abroad, and I don’t see anyone fighting back. That is to say, China and Russia are threats to the US, but only because substantial number of people seem to want the US to imitate much of China and Russia’s form of government.

  51. Gravatar of anon/portly anon/portly
    18. August 2018 at 12:57

    ” People were talking about Japan taking over the US (economically). No one talked about Germany taking over the US. Why?”

    To be honest, when I read this, I started wondering whether I was crazy. I was alive during the 1980’s and 1990’s, and although I am routinely oblivious about many things, it’s not like I am completely incapable of noticing the obvious.

    Anyway, I can’t find numbers on the USA’s trade balance with specific countries before 1999 (bea has them for 1999-2017), but the Census Bureau at least has numbers for the USA’s trade balance for goods only.

    All numbers in billions.

    1985

    Japan goods M 69; goods X 23; balance -46.
    Germany goods M 20; goods X 9; balance -11.

    1990

    Japan goods M 90; goods X 49; balance -41.
    Germany goods M 28; goods X 19; balance -9.

    1995

    Japan goods M 123; goods X 64; balance -59.
    Germany goods M 37; goods X 22; balance -14.

    I’m not crazy! Thank goodness. Anyway, in the America I lived in during the 1980’s and 1990’s, it was not German sedans, German pickup trucks and German consumer electronics that people were buying, it was Japanese pickups, sedans, and consumer electronics.

    Yeah, there was Mercedes, VW, Blaupunkt, copies of Kraftwerk’s “Die Mensch-Maschine” and Peter Gabriel’s “Deutsches Album,” and so on and so forth, but these did not amount to a symbol of America’s decline in manufacturing.

    Toyota, Honda, Sony, Pioneer, Japanese specialty vinyl: that’s another story altogether. German imports of goods were only about 30% of Japanese imports of goods.

    Now of course I am entirely in agreement that nothing Japan did was in any sense “bad,” it was all good. Thanks to Japan, we could buy better cars and better stereos, for a given amount of money. That is/was good good good good good!

    But of course we don’t just have an economic system, we have a politico-economic system, and so of course it was in the interest of many USA economic actors – corporations, unions, politicians, etc. – to depict Japan as bad guys. This is not “racism,” in my view. Maybe while concocting their various theories and rationales for why Japan was somehow at fault and was justly the target of various trade measures, some tried to create or exploit possible negative attitudes towards Japanese culture, trying to avoid saying things like “those bastards work too hard” or “those bastards are too smart” (which just make us look bad, of course) and instead say things along the lines of “there’s something wrong with those people.” But it doesn’t seem to me that this effort was too successful – how much negativity did we see or have we seen towards the Japanese, really?

    Mostly the kinds of things I heard that reflected on the Japanese were along the lines of “I can’t decide whether I should buy a Toyota or a Honda” or “you’d have to be an idiot to buy a Ford these days” or “check out my new Pioneer receiver.”

    But like I said I am fairly oblivious to a lot of things, so maybe there’s been a steady stream of racist bile directed at the Japanese that should be more apparent to me. Maybe living on the West Coast, where more Japanese-Americans live, you miss a lot of this stuff. Maybe in my case, where my only real professional mentor was Japanese-American, where two of my close friends lived in Japan several years, where another close friend married a Japanese woman, I’ve been kind of cut off from that stream.

    Anyway, I wrote my comment above before clicking on the Econlog link and reading Noah Smith’s column. In many ways I think Smith’s column is even worse than as revealed by the many excellent Econlog points – I think his last two paragraphs amount to saying “because there’s nothing to prevent Chinese firms from employing their own smart and knowledgeable people, my whole idea is a non-starter, but my hope is that by throwing in a few hand-wavey points about discrimination, and the like, readers won’t notice this.”

    Hey, who said this: “Here we are in 2018 and there are lots and lots of left-wing and right-wing politicians, intellectuals, blog-commenters and other assorted dirt-bags and lowlifes who fervently believe that we should be modeling our economy on some sort of ‘East German’ model.” It was me! And I hadn’t even read Smith’s column!

    Now, one might quibble with how “East-Germany”-like Smith’s idea really is, I get that people like him (and Trump, and Trump fans, and most left-wingers, and most right-wingers, and most people in general) think that some sort of top-down industrial policy, in which some things are “open” and other things are “closed,” is behind the success of the East Asian countries. Even though it’s obvious that what one East Asian country can do, another can do just as well, in the long-run, and nothing is really “closed,” there’s just more productive workers and firms, and less productive ones. Oh well!

    Anyway anyway, why is Noah Smith coming up with this pap? I think it has a lot to do with the current enthusiasm of left-leaning economists for exhuming all the old bad ideas they used to reject, like the minimum wage, or “socialism,” or fiscal stimulus, because although they know these things are mostly useless or pointless, these ideas are nonetheless popular with many other left-leaning intellectuals and ideally many voters as well….

  52. Gravatar of ssumner ssumner
    18. August 2018 at 19:31

    Todd, I think you missed my point. I agreed that they could not conquer the US. But they could certainly kill lots of Americans, and indeed did so—starting with Pearl Harbor, which is part of America. You can’t say that’s a zero threat.

    Burgos, You said:

    “So far, China has not been very aggressive in deploying hard power abroad (nor really has the current regime in Russia been that bad unless you consider Chechnya a foreign country).”

    I don’t, but did you miss the Russian invasion of Ukraine, including annexing part of the country?

    Russia is obviously trying to promote that model, I don’t see the Chinese doing that. Did they spend money on Brexit, electing Trump, promoting populist authoritarians in Eastern Europe?

    Sure, China does business with bad countries, but they do business with good countries too. I don’t see them promoting the nationalist model, as that model would hurt China if adopted widely.

    anon/portly. Those figures are for bilateral trade balances, which are meaningless. Germany has a larger overall current account surplus than Japan, and had a larger one at various points in the past. (Not always)

    I recall in the days of Japan hysteria someone pointed out that the Netherlands had bought up more of the US than Japan.

  53. Gravatar of jroll jroll
    19. August 2018 at 10:54

    Scott, your point about current account vs bilateral trade would be more persuasive if the US had a balanced current account, but would still need elaborating, i.e. Germany had a large surplus with Japan or something. Else it was Japanese products Americans were competing with. It’s less obvious why Americans would care if the Germans had a surplus with Greece or somewhere (not that there hasn’t been criticism of Germany’s EU surpluses).

    But your point was that they were not just wrong but racist. 4x more Japanese goods, 7x the deficit, twice the population with better test scores, is rational, if wrong.

    And yes Japan is still an economic and cultural competitor to the US. Less important currently than China (or East Asia more broadly) or possibly the EU (and Russia?), but I don’t count them out.

  54. Gravatar of P Burgos P Burgos
    19. August 2018 at 14:08

    I consider the frozen conflicts and annexation of Crimea as relatively small bore, especially compared to what Russia was up to during Soviet times. Also, I may be entirely mistaken, but I thought that China was working behind the scenes supporting other authoritarian governments such as Egypt or Iran, sharing expertise on how to manage internet usage and how to manage public discontent. However, I don’t remember where I read that, and I haven’t been able to find a citation with a quick Google search, so I might be misremembering something. However, I think that China does see itself as having substantial common interest with other authoritarian countries, especially regarding the internet, the press, movies, privacy, human rights, global institutions, and questions about when other nations can intervene in another nations civil war. China would rather have allies that won’t intervene in civil wars or to protect civilians in another country, nor does it want to see a world in the which all the powerful nations agree that governments should respect human rights. Chinese leaders seem to be very pragmatic and cautious about exercising their power, so there isn’t much to point to regarding their support of other autocratic regimes. Still, I would be very surprised if they weren’t doing some low key and relatively low risk and low cost things to help other autocracies.

  55. Gravatar of anon/portly anon/portly
    20. August 2018 at 11:12

    SS:

    “anon/portly. Those figures are for bilateral trade balances, which are meaningless. Germany has a larger overall current account surplus than Japan, and had a larger one at various points in the past. (Not always)”

    jroll:

    “But your point was that they were not just wrong but racist. 4x more Japanese goods, 7x the deficit, twice the population with better test scores, is rational, if wrong.”

    When you say that bilateral trade balances are “meaningless,” I think you mean this in terms of a correct understanding of international trade issues. But what does this point have to do with anti-Japanese rhetoric in the 80’s and 90’s?

    Suppose instead of these real 1985 numbers…

    Japan goods M 69; goods X 23; balance -46.
    Germany goods M 20; goods X 9; balance -11.

    …the numbers looked like this instead:

    Japan goods M 69; goods X 23; balance -46.
    Germany goods M 0; goods X 9; balance 9.

    I take the “Sumner Position on Effective Populist/Demagogic Trade Rhetoric” to be that even if we weren’t importing *anything* from Germany, our politicians, business executives and union officials should have been complaining loudly about the Germans, if they were going to complain about anybody, just because their current account deficit was higher than Japan’s! Have I got that right?

    Back in the real world, the one where Public Choice Theory has at least something to say about something, they of course complained about the Japanese, and not ineffectively, right?

    https://en.wikipedia.org/wiki/Voluntary_export_restraint

    And by the way, back in the real world again, this time not the 80’s and 90’s, but in the 2010’s, our most racist Racist-In-Chief doesn’t just complain about China and Japan, he complains about Germany also.

    I happened to catch the tail end of HBO’s John Oliver show yesterday, and Oliver was semi-coherently critiquing and mocking Trump’s trade policies. At one point he showed Trump giving a speech in South Carolina, and going on in that familiar droning fashion about how he was going to stick it to BMW – apparently not realizing that South Carolina contains the largest BMW plant in the world. TWS discusses this here:

    https://www.weeklystandard.com/michael-warren/what-trump-doesnt-understand-about-south-carolina-and-bmw

    Later, Oliver spent an amazing amount of time mocking and denigrating Peter Navarro specifically – they even showed bits of Navarro’s bizarre anti-China documentary and then came up with a mock “anti-stupid” documentary using similar imagery.

    Anyway, suppose Donald Trump fired Peter Navarro and hired me, Anon/Portly, to be his new “economics policy guy.” Maybe also at the same time I am supposed to replace Steve Bannon as his “Buchananite sounding board.” Then suppose Don asked me whether or not it would be smarter (or more “rational,” as jroll says above) in the next campaign to complain about China and our large negative trade balance with China, or instead complain about the Nordic countries and their large current account deficits?

    Hmmm. When voters go to Wal-Mart, how often do they see “made in Norway?” How often do they see “made in China.” To the extent that voters have been instructed, as it were, in “trade theory” over the last 30 or 40 years, what trade theory have they been taught? Have they been taught Navarro’s “factories moving overseas to exploit cheap labor causes unemployment” trade theory or have they been taught some other theory?

    It is at this point that I do understand why “racism” is a concern – to me the racism angle with the Japanese in the 80’s and 90’s was obviously attenuated by the high regard in which Japanese products were held. To some extent maybe you could find ways to characterize the Japanese as kooky and nerdy, but really it’s hard to characterize them as inferior. But now with China (and Mexico) we’re not talking about cool cars and stereos, it’s more tennis shoes and spatulas. And of course with China and Mexico the economics demagoguery and the immigration demagoguery and the generalized fear-mongering demagoguery mesh kind of nicely.

  56. Gravatar of ssumner ssumner
    20. August 2018 at 15:05

    anon/portly. People keep shifting the goalposts, so I have trouble keeping up. Was the problem imports from Japan? We import more than twice as much from Canada. Was it Japan buying up America? Then why no fear of the Netherlands?

    I hardly think the average blue collar worker even knows what a “bi-lateral trade deficit” is.

    I mentioned overall current account surpluses because that number actually describes a country’s ability to buy foreign assets.

  57. Gravatar of jroll jroll
    20. August 2018 at 20:32

    Scott, do you have a source for the claim about the Netherlands buying up the US in the 80s?

    From what I can tell, for 2017, “foreign direct investment position” Japan is larger than Netherlands, while the US has significantly more invested in the Netherlands than they have in us, while the reverse is true of Japan.

    “bi-lateral trade deficit”

    Blue collar worker doesn’t understand imports vs. exports?

    “twice as much”

    U.S. trade in goods with Canada
    TOTAL 1989 78,808.9 87,953.0 -9,144.1
    TOTAL 2017 282,265.1 299,319.4 -17,054.3

    U.S. trade in goods with Japan
    TOTAL 1989 44,493.7 93,552.5 -49,058.8
    TOTAL 2017 67,605.1 136,480.8 -68,875.7

    U.S. trade in goods with China
    TOTAL 1989 5,755.4 11,989.7 -6,234.3
    TOTAL 2017 129,893.6 505,470.0 -375,576.4

    Not true then, true enough today but swamped by China.

    You may also note opposition to NAFTA and Canadian protectionism (tariffs, currency, etc.).

  58. Gravatar of Becky Hargrove Becky Hargrove
    21. August 2018 at 06:03

    I just came across a book about China’s currency you might be interested in, and I also have a question:

    https://cup.columbia.edu/book/the-peoples-money/9780231173469

    How might China’s reluctance to create a more dominant international currency, impact the (potential) dimensions of its service sector capacity, which – as far as I can tell – in part would depend on such dominance?

  59. Gravatar of anon/portly anon/portly
    21. August 2018 at 11:16

    “Was the problem imports from Japan? We import more than twice as much from Canada.”

    Haven’t there been many, many instances in which domestic (USA) producers have complained about Canadian imports, or Canadian protectionism? I would hazard a guess that the number of times the words “dumping” and “Canada” have appeared in the same sentence at a Congressional hearing, over the last 50 years, is greater than for “dumping” and “Japan.”

    And of course Trump, despite the lack of a good racial angle, has been diligent in going after the Canadians:

    https://www.forbes.com/sites/francescoppola/2017/04/25/president-trumps-tariff-on-canadian-softwood-lumber-imports-will-hurt-america-most/#3212281c2232

    Obviously the ongoing acrimony between Canada and the US vis-à-vis timber is always a big issue in the PNW but not so much in the rest of the US, but I’m sure there are many other examples. To me the suggestion that Canadian imports have not been a problem, in the same sense that Japanese have been a problem, is simply false. (And of course not so much a real problem as a phony “problem,” to be sure).

    Now the question could be asked (by some random person, say) as follows. “Sure, Canadian imports have been a problem, in exactly the same kind of ways that Japanese imports have been a problem, I get that, but why haven’t they have been *as much* of a problem? Why (for a time) was Japan singled out?”

    To me the answer is obvious – competition from Canada has been mostly sort of burbling along, not too obvious. Canadian products have never had the specific type of impact on American-made products that happened with Japanese products.

    What if Canada had come up with a new strain of Douglas Fir, let’s call it “Pseudotsuga Menziesii cv. ‘Shatnerii’,” perhaps, and decimated the US timber industry? This might be similar to what happened with steel. Tyler Cowen recently linked to this fascinating piece from Bloomberg:

    https://www.bloomberg.com/view/articles/2018-03-05/steel-history-shows-how-america-lost-ground-to-europe

    When US steel producers were complaining about Japanese and Korean imports, was that motivated partly by racism? Or entirely by profits? The Sumner Position seems to be that a nuanced understanding of Trade Theory suggests that racism must have been a significant factor in the response of US Steel producers. My position is that a non-nuanced understanding of Public Choice Theory suggests that the difference between “motivated entirely by self-interest” and “motivated by self-interest and racism” are impossible to tell apart, because self-interest seems to explain their response so well.

    I think that in my timber example we would have seen US timber producers seek relief from Canadian imports in exactly the same ways, using exactly the same methods, as US steel producers.

    Now I get to a problem. I want to say, what if (something like) Honda and Toyota and Pioneer and Sony been *Canadian* companies? But this thought-example is just too weird, or discordant, I can’t go there. It’s like asking if what if a great rock artist like Neil Young had been Canadian? The mind boggles.

    So instead I’ll say, what if we switch Japan and Germany? Let’s say Toyota was like Mercedes, making well-known luxury cars for a long time, and Honda was like Volkswagen, making well-known wacky cars for a long time. Then Mercedes and Volkswagen can be like Honda and Toyota, making a few small and insignificant inroads at first in the “cheap compact” market and then within a few years making superior sedans and pick-ups, importing massive numbers of cars. Give Germany Sony and Pioneer and Panasonic too, instead of buying Magnavox and RCA suddenly TV’s and stereos are all made in Germany.

    Do I think the same level of abuse and so on would have been aimed at Germany that in the actual case was aimed at Japan? Yes, I do. Maybe even more, if only because Germany was really the greater WW2 villain. (Who makes better movie villains, Germans or Japanese? It’s not even close).

    One final caveat: is it possible that racist attitudes on the part of some participants in the protectionist process can make the protectionist soil, as it were, a bit more fertile?

    But once again, the principal argument here seems to be that since “Peter Navarro type” ideas are stupid and false, they must not be prevalent or influential, thus anti-Japan sentiment must have been motivated by racism. I just don’t see it.

  60. Gravatar of anon/portly anon/portly
    21. August 2018 at 11:21

    My penultimate paragraph should have read:

    “One final caveat: is it possible that racist attitudes on the part of some participants in the protectionist process can make the protectionist soil, as it were, a bit more fertile? Certainly.”

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