Marlowe's Shade

Tuesday, December 21, 2004

Spengler: "Santa Clausewitz"

From the Asian Times

In his latest thought-provoking column, Spengler is at odds with Mark Helprin's view of China which was posted here recently. His main thesis is that the economic relationship between China and the US is so symbiotic that a direct confrontation is unimaginable

Something like a folie a deux unites US neo-conservatives who fear China with America-haters who hope that China will undermine US world influence. Before radical Islam appeared on the radar, the likes of William Kristol and Robert Kagan warned in 1996 of the "emergence of China as a strong, determined, and potentially hostile power". As recently as December 13, Mark Helprin complained in that "China is now powerful and influential enough ... to make American world dominance inconceivable". Nonsense. It is China's success that is inconceivable without US world dominance. If US financial markets were to break up, China would go into a tailspin.

The neo-conservatives take exception to China's political system, which no one will mistake for Anglo-Saxon democracy. By the same token, the anti-imperialists claim that China offers an alternative to the US model, proof that economic success does not depend upon the Anglo-Saxon legal template. Ideology overwhelms reason in both arguments. China's success leans upon US financial markets, which cannot exist without Anglo-Saxon law. The Chinese are willing to take risks in China precisely because they can share local risk with international investors, while keeping their own savings safe in the United States.

The Chinese are famous for caution with respect to core savings, and just as famous for gambling with money they can afford to lose. No nation saves more of its income; if one believes the official numbers, Chinese salt away nearly half their earnings. The United States makes it possible for Chinese to take risks and stay safe at the same time.

China's half-trillion dollars of foreign-exchange reserves, according to the same critics, display China's strength and the United States' weakness. On the contrary: the reserves are there because the government of China knows that the Chinese trust US banks rather than Chinese ones, and wisely keep a hoard of rainy-day savings in US funds. China cannot invest its savings at home until such time as Chinese laws, regulations, and politics give rise to a banking system as strong as America's, that is, until China's legal system looks a lot more Anglo-Saxon.

War and revolution have destroyed the savings of generation after Chinese generation. It may seem disadvantageous for Chinese to sell goods to the US in return for paper assets, but beauty is in the eye of the bondholder. People who just have struggled up from poverty place great value on knowing that their children never will know what it is to be poor. Once they have made themselves secure, Chinese business people take risks on a scale that astonish their counterparts in other countries.

China is successful because Americans are willing to take the risk of letting foreigners break the rice-bowl of its own citizens. Chinese imports have wiped out entire industries in the United States, notably electronics, toys and textiles. The US has imposed upon its own citizens the risk of finding alternative employment. It allows foreign students to compete for places in its top universities on equal terms with natives, and protects foreign businessmen under the same laws.

Spengler makes a great case for the economic realities influencing China. But I'm not convinced. We are dealing with a country that was willing to sacrifice a third of it's troops in the Korean conflict. Helprin pointed out how economics can be a weapon, Spengler sees it as an end in itself. Either could turn out to be correct, and it depends on who is the victor in the internal struggle for the soul of China, the economists, or the ideological founder of Communist China. I'll leave you with some quotes from Chairman Mao.

papijoe 7:06 AM