China and America

Events seem to be jostling this week. First, there was the inevitable shake-out on Wall Street as the market tried to find a mean before (we hope) continuing its upward march in what looks more and more like a recovery in the making. But, commodities fell on the strength of the US Dollar and on news from China that its economy is overheating and inflations is rising. While a mature economy like that in the United States can ride out minor inflationary blips, in a developing economy like China’s, where food and energy costs still make up the bulk of a family’s budget, even small inflationary rises in the cost of basics can cause anger and unrest directed at political leaders.

And that brings me to the most distressing event of all this week - the state visit of Chinese Premier Hu to America. I’m not against his visit, but I am completely opposed to the constant stream of “newspeak” and lies that accompany Mr. Hu wherever he goes.

First, America is not a declining power, as we are told ceaselessly in the American and international press. America is on the way to recovery from a very harsh economic recession, perhaps a depression except that the word is now banned. But, we are recovering. We need to get our fiscal problems in order as fast as we can so that our currency and our market can continue to drive the world’s prosperity. But, we will do this and nothing China can do in the next 100 years will match it.

China managed to avoid most of the troubles felt by the rest of the world since 2008 because her economy thrives on government management of all goods and services, and of the money that makes them work. China is loosening its economy to try to take on free market concepts, but it is still a centrally controlled economy in every sense, and controlled economies are dangerously fragile to outside shocks. Just ask the Soviet Union.

China also thrives because of cheap exports made by grossly underpaid workers and on cheap goods bought by its 800 million peasants.

Yes, 800 million peasants - who live in grossly substandard housing, have a minimum caloric intake per day, and have no prospect of improving their lot. China’s development is in the public facades of its big cities, in the growth of its export manufacturing capacity, and in the demand of its newly rich middle and upper classes for foreign “luxuries”, commonly called western goods, goods that China can produce herself only by “borrowing” the patents and protected know-how required to produce them.

If China fails to control its booming economic growth and the inflation that accompanies such growth, she will have the 800 million poor Chinese on the streets demanding money to pay for their meager food and other basic needs. China knows this and is trying to deal with it, but central control makes the job a lot harder than it would be for a free market economy. In fact, history teaches us that centrally controlled economies almost always fail to achieve greatness.

Add to this the fact that China’s one-child policy is rapidly making it a graying society. There are not enough children being born to grow up and work to feed the seniors. That could also spell a decline in its workforce capability and become another reason for social unrest. It will also mean that China will have to divert large sums of money just to care for its elderly population, money that otherwise would have gone into economic development.

And, lest we forget, China is an authoritarian state. Its political leaders control everything. Everyone who is opposed to their rule is silenced permanently or jailed.

In one of her recent speeches, Secretary of state Hillary Clinton noted that the 2010 Nobel Peace Prize winner, Liu Xiaobo is still imprisoned and said, "those who advocate peacefully for reform within the constitution . . . should not be harassed or prosecuted."

Meanwhile all the US President, himself the 2009 Nobel Peace Prize winner, could say during Mr. Hu’s visit was, "China is a developing country with a huge population and also a developing country in a crucial stage of reform....In this context, China still faces many challenges in economic and social development, and a lot still needs to be done in China in terms of human rights."

At least Mrs. Clinton got it right, and was almost matched by Premier Hu, who answered a White House press corps question on China’s human rights record by saying that China has a lot more work to do.

So, a developing country with 800 million peasants, a government-controlled central economy and an aging population is going to take over the United States in the next 25 years.

Believe that and you’ll also undoubtedly believe it when I say that I have a bridge in Brooklyn that I could sell cheap, if you’re interested.
But, there is another China. It is young, educated, well paid and interested in the world outside its borders. These young people are the future of China. They are on the internet and traveling as never before. They are not afraid to speak out about China's political system, softly to be sure, but China's leaders must be wary of the power of this younger generation. We should help them, reach out to them and make them aware that America and the West are eager for them to succeed, because the more they succeed, the more we will see the changes in China that we all hope for - freedom of speech, a more democratic political system and the economic growth that will assist all of Asia to grow, too. 
We should not be afraid of China's next generation, but rather help them to become the partner for good that the world wants to see.