The Danger of Adopting a Soft Approach to China
By Peter Morici
884 words
8 July 2005
The Asian Wall Street Journal
A9
English
(c) 2005 Dow Jones & Company, Inc. To see the edition in which this article appeared, click here http://awsj.com.hk/factiva-ns
In 1876, Europeans flocked to the Philadelphia Centennial Exposition and were astonished by American industrial prowess. In two generations, the United States had progressed from a simple agrarian society to a rival of the most advanced European economies. Today, Americans are confronted by China, like a distant image in the mirror of their childhood -- an emerging power, quickly developing the means to alter global events.
This struggle is about whose values will prevail. Americans believe individuals, each building their own lives, best chart the progress of a nation. Governments draw their legitimacy from collective approval, because the people, collectively, are the sovereign. Democracy and markets are as essential to what is America as are words and paper to books. Its political and economic institutions organize competition among individual ideas and initiative that define its civic and material lives.
Democracy and markets are mutually reinforcing. Markets work best when personal freedoms are protected and democracy does the best job of safeguarding those. Free markets give individuals a strong interest in securing democracy. To protect these values and ensure their success, the U.S. has worked with its allies in Europe and elsewhere to build an international system that permits democracies and market economies to flourish. America doesn't always agree about everything with its friends, but that hasn't stopped the development of a human-rights system and global economic institutions that reflect a good measure of these beliefs.
China is not a Western nation as, for example, Japan and Taiwan have become. Nor is China a 19th century America. China has an authoritarian government with no plans or timetable for relinquishing power. By word and deed, the Communist Party assumes parental authority over Chinese citizens, and asserts sovereignty, without consent, over all people within its borders and ethnic Chinese beyond them.
China embraces market reforms only as necessary and seeks to participate in global markets on its own terms. Unless compelled by need, the Chinese government is not about to embrace market reforms that could engender popular sentiment for democratic change. Unlike 19th Century America, China's development is not driven by largely home-grown technologies, skilled labor or abundant resources. In the 19th century, Americans either pioneered or made important contributions to steam power, the railroad, telegraph, and other major technologies. Wages were higher than Europe or Asia, which is why many skilled immigrants came. Americans had the advantage of considerable resource wealth to power development.
In contrast, China is accomplishing growth with other people's technology, on the backs of cheap labor, and desperately dependent on Middle Eastern oil and other imported resources. It is compensating for its shortcomings, and then some, by maintaining an undervalued currency, subsidizing exports, and keeping the living standards of workers artificially low. China is building a middle class but on the backs of factory labor paid less than the value it creates.
During the Cold War, U.S. moderates advocated a policy of engagement toward the Soviet Union believing the Soviet people would see, through our example, the power of individual liberty and compel change from within. Now, those principles are being applied to China, because many believed they worked with the Soviet Union.
This is folly. The Soviet Union collapsed, not because it bought into Jeffersonian ideas, but because its economy failed. China's economy is succeeding. Don't look for its leaders to call for free elections anytime soon. The Chinese government sees itself as redressing hundreds of years of Western humiliation, and boasts that China soon will be making the international rules of the game. To sustain the Communist Party, China has a strong interest in selling its brand of authoritarian capitalism to its neighbors, and making the international rules of the game less supportive of democracy and human rights.
To secure its supply of oil, extend its influence and solidify internal security, the Chinese government is building a blue-water navy and spending massively to modernize its army. Seen in this context, the present policy of engaging China is very unwise.
Pressuring China to change by imposing explicit costs when its actions harm others makes more sense. For industries harmed by subsidized Chinese imports into the U.S. market, direct trade sanctions can redress the situation and better promote trade and employment based on genuine comparative advantages. That means targeted trade sanctions if China does not revalue its yuan, respect intellectual property, exploits worker rights to achieve export advantages, or otherwise break the norms and rules it has embraced by joining the World Trade Organization, International Labor Organization and other international organizations.
Such actions need to be taken in the context of a broader and more realistic view of the challenges China poses. It's time to confront the fact that China, rather than evolving into a democratic society with a market economy, could just as easily morph into a fascist menace with global reach. Not recognizing this challenge and acting to address it means contributing to China's success and supporting its agenda. That is appeasement, and history has taught us the hard way the perils of such a policy.
---
Mr. Morici is a professor of international business at the University of Maryland.
Document AWSJ000020050707e1780002a
More Like This
By Peter Morici
884 words
8 July 2005
The Asian Wall Street Journal
A9
English
(c) 2005 Dow Jones & Company, Inc. To see the edition in which this article appeared, click here http://awsj.com.hk/factiva-ns
In 1876, Europeans flocked to the Philadelphia Centennial Exposition and were astonished by American industrial prowess. In two generations, the United States had progressed from a simple agrarian society to a rival of the most advanced European economies. Today, Americans are confronted by China, like a distant image in the mirror of their childhood -- an emerging power, quickly developing the means to alter global events.
This struggle is about whose values will prevail. Americans believe individuals, each building their own lives, best chart the progress of a nation. Governments draw their legitimacy from collective approval, because the people, collectively, are the sovereign. Democracy and markets are as essential to what is America as are words and paper to books. Its political and economic institutions organize competition among individual ideas and initiative that define its civic and material lives.
Democracy and markets are mutually reinforcing. Markets work best when personal freedoms are protected and democracy does the best job of safeguarding those. Free markets give individuals a strong interest in securing democracy. To protect these values and ensure their success, the U.S. has worked with its allies in Europe and elsewhere to build an international system that permits democracies and market economies to flourish. America doesn't always agree about everything with its friends, but that hasn't stopped the development of a human-rights system and global economic institutions that reflect a good measure of these beliefs.
China is not a Western nation as, for example, Japan and Taiwan have become. Nor is China a 19th century America. China has an authoritarian government with no plans or timetable for relinquishing power. By word and deed, the Communist Party assumes parental authority over Chinese citizens, and asserts sovereignty, without consent, over all people within its borders and ethnic Chinese beyond them.
China embraces market reforms only as necessary and seeks to participate in global markets on its own terms. Unless compelled by need, the Chinese government is not about to embrace market reforms that could engender popular sentiment for democratic change. Unlike 19th Century America, China's development is not driven by largely home-grown technologies, skilled labor or abundant resources. In the 19th century, Americans either pioneered or made important contributions to steam power, the railroad, telegraph, and other major technologies. Wages were higher than Europe or Asia, which is why many skilled immigrants came. Americans had the advantage of considerable resource wealth to power development.
In contrast, China is accomplishing growth with other people's technology, on the backs of cheap labor, and desperately dependent on Middle Eastern oil and other imported resources. It is compensating for its shortcomings, and then some, by maintaining an undervalued currency, subsidizing exports, and keeping the living standards of workers artificially low. China is building a middle class but on the backs of factory labor paid less than the value it creates.
During the Cold War, U.S. moderates advocated a policy of engagement toward the Soviet Union believing the Soviet people would see, through our example, the power of individual liberty and compel change from within. Now, those principles are being applied to China, because many believed they worked with the Soviet Union.
This is folly. The Soviet Union collapsed, not because it bought into Jeffersonian ideas, but because its economy failed. China's economy is succeeding. Don't look for its leaders to call for free elections anytime soon. The Chinese government sees itself as redressing hundreds of years of Western humiliation, and boasts that China soon will be making the international rules of the game. To sustain the Communist Party, China has a strong interest in selling its brand of authoritarian capitalism to its neighbors, and making the international rules of the game less supportive of democracy and human rights.
To secure its supply of oil, extend its influence and solidify internal security, the Chinese government is building a blue-water navy and spending massively to modernize its army. Seen in this context, the present policy of engaging China is very unwise.
Pressuring China to change by imposing explicit costs when its actions harm others makes more sense. For industries harmed by subsidized Chinese imports into the U.S. market, direct trade sanctions can redress the situation and better promote trade and employment based on genuine comparative advantages. That means targeted trade sanctions if China does not revalue its yuan, respect intellectual property, exploits worker rights to achieve export advantages, or otherwise break the norms and rules it has embraced by joining the World Trade Organization, International Labor Organization and other international organizations.
Such actions need to be taken in the context of a broader and more realistic view of the challenges China poses. It's time to confront the fact that China, rather than evolving into a democratic society with a market economy, could just as easily morph into a fascist menace with global reach. Not recognizing this challenge and acting to address it means contributing to China's success and supporting its agenda. That is appeasement, and history has taught us the hard way the perils of such a policy.
---
Mr. Morici is a professor of international business at the University of Maryland.
Document AWSJ000020050707e1780002a
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