Re: [PEN-L] PK on China Challenge
I too was surprised about this angle, and I appreciate Jim's posting this important article, which caught my eye when copied into the International Herald Tribune which I get in London. There it was printed above another article also copied from the NYTimes, by Nicholas Kristof, who doesn't strike me as being particularly left-wing, entitled Playing into China's hands [June 28 edn] This starts The biggest risk we Americans face to our way of life and our place in the world probably doesn't come from Al Qaeda or the Iraq war. Rather, the biggest risk may come from this administration's fiscal recklessness and the way this is putting us in hock to China. My impression from a distance is that various voices are trying to create a liberal consensus, mainly by opportunist shifts of course, that will leave Bush relatively isolated and weak by the midterm elections. This could include appeals to selfish national factors, and even racism. I find Krugman's article more interesting for the details and the picture of how China is moving, almost amoeba-like now, to penetrate, and incorporate the USA into a world system open as much as possible to its influence. Remember China has a culture of continuous highly complex social consciousness, well before any claims to socialism (debatable though that is). It knows its massive inertia and momentum, and is relaxed enough to view its position in the world strategically. Among its cultural strengths is a sophisticated theory of managing conflict. It may use sudden dramatic confrontation or humiliation, as when they dismantled the high technology spy plane screw by screw soon after the start of Bush's first term and the neo-con suggestion that China was the US's main strategic opponent. But there is much in Chinese tradition about the merits of managing relations with significant others without direct confrontation but by careful manoeuvre. Reading Krugman's article it is possible to see the reasonable argument that China now owns so many US treasury bonds that it has successfully ensured itself against anti-Yuan speculation. Unless it is to stop balancing the payments exchanges by continued capital inflow, it must start turning to stocks. And the US would not like China to stop supporting the balance of payments all of a sudden would it?? ... And being Chinese they may think rather carefully about which stocks to buy and they may take the long term view . Including in a world in which there will be pressure on natural resources ... There are also interesting echoes in this article updating to my mind some of the arguments Lenin rehearsed in Imperialism - yes it is of great strategic importance in the era of finance capital still to secure access to resources and markets. But compared to 100 years ago it is cheaper and easier to do this through finance capitalist companies, than by warfare between states. Especially if Chinese culture anyway fosters a degree of collective cohesion and subtle centralised direction between these companies. China has two millennia of continuous culture without needing to build bourgeois civil society from scratch for purposes of social coherence. This enormous social value would be called by some today social capital. This, coupled with the massively growing accumulation of *finance capital* by the Chinese, is shifting the balance of forces in the world insidiously more dramatically than any dramatic shift of the tectonic plates can move a continent a few centimeters. And this is happening under the surface, while Bush and Blair posture for the moral ideological high ground over Africa and the environment, These issues are the ideological drapery for the enthronement of some sort of new world government. But who will have control of the money? Chris Burford PS CARTOON The accompanying cartoon in the IHT was particularly apposite, by Danziger. One letter change between Khruschev and Hu Jin Tao - BURY vs BUY Khruschev pounding his shoe at the UN shouting We will BURY you!! Hu Jin Tao, smiling like a young smart sales rep with his hands innocently behind his back, in front of a sign Red China - We will BUY you!! One letter difference, but if the Soviet Union had found a path to economic growth which did indeed overtake the west, and the Soviet Bloc had not collapsed, then we might well have faced this new phase of financial interdigitation by that route. (Of course the compromises the Chinese have made to reach the present remarkable situation are another matter And it has taken almost 50 years. But what is that in the lifetime of the human race? CB - Original Message - From: Michael Perelman [EMAIL PROTECTED] To: PEN-L@SUS.CSUCHICO.EDU Sent: Monday, June 27, 2005 4:35 PM Subject: Re: [PEN-L] PK on China Challenge The part that surprised me in Krugman's article was the final paragraph in which he revealed his preference for blocking China. In his pre-leftish phase, wasn't Krugman angry
[PEN-L] PK on China Challenge
June 27, 2005/New York TIMES. The Chinese Challenge By PAUL KRUGMAN Fifteen years ago, when Japanese companies were busily buying up chunks of corporate America, I was one of those urging Americans not to panic. You might therefore expect me to offer similar soothing words now that the Chinese are doing the same thing. But the Chinese challenge - highlighted by the bids for Maytag and Unocal - looks a lot more serious than the Japanese challenge ever did. There's nothing shocking per se about the fact that Chinese buyers are now seeking control over some American companies. After all, there's no natural law that says Americans will always be in charge. Power usually ends up in the hands of those who hold the purse strings. America, which imports far more than it exports, has been living for years on borrowed funds, and lately China has been buying many of our I.O.U.'s. Until now, the Chinese have mainly invested in U.S. government bonds. But bonds yield neither a high rate of return nor control over how the money is spent. The only reason for China to acquire lots of U.S. bonds is for protection against currency speculators - and at this point China's reserves of dollars are so large that a speculative attack on the dollar looks far more likely than a speculative attack on the yuan. So it was predictable that, sooner or later, the Chinese would stop buying so many dollar bonds. Either they would stop buying American I.O.U.'s altogether, causing a plunge in the dollar, or they would stop being satisfied with the role of passive financiers, and demand the power that comes with ownership. And we should be relieved that at least for now the Chinese aren't dumping their dollars; they're using them to buy American companies. Yet there are two reasons that Chinese investment in America seems different from Japanese investment 15 years ago. One difference is that, judging from early indications, the Chinese won't squander their money as badly as the Japanese did. The Japanese, back in the day, tended to go for prestige investments - Rockefeller Center, movie studios - that transferred lots of money to the American sellers, but never generated much return for the buyers. The result was, in effect, a subsidy to the United States. The Chinese seem shrewder than that. Although Maytag is a piece of American business history, it isn't a prestige buy for Haier, the Chinese appliance manufacturer. Instead, it's a reasonable way to acquire a brand name and a distribution network to serve Haier's growing manufacturing capability. That doesn't mean that America will lose from the deal. Maytag's stockholders will gain, and the company will probably shed fewer American workers under Chinese ownership than it would have otherwise. Still, the deal won't be as one-sided as the deals with the Japanese often were. [This is where I was confused in a recent message (that I later retracted). I was thinking too much in terms of a Japan 1980s/China 2000s analogy. Japan had a high Yen in the late 1990s and was able to buy US assets at bargain-basement prices -- and thus was more likely to squander their advantage. China does _not_ have a high Yuan (though it does have a lot of dollar-denominated assets to spend) and must be more economical.] The more important difference from Japan's investment is that China, unlike Japan, really does seem to be emerging as America's strategic rival and a competitor for scarce resources - which makes last week's other big Chinese offer more than just a business proposition. The China National Offshore Oil Corporation, a company that is 70 percent owned by the Chinese government, is seeking to acquire control of Unocal, an energy company with global reach. In particular, Unocal has a history - oddly ignored in much reporting on the Chinese offer - of doing business with problematic regimes in difficult places, including the Burmese junta and the Taliban. One indication of Unocal's reach: Zalmay Khalilzad, who was U.S. ambassador to Afghanistan for 18 months and was just confirmed as ambassador to Iraq, was a Unocal consultant. Unocal sounds, in other words, like exactly the kind of company the Chinese government might want to control if it envisions a sort of great game in which major economic powers scramble for access to far-flung oil and natural gas reserves. (Buying a company is a lot cheaper, in lives and money, than invading an oil-producing country.) So the Unocal story gains extra resonance from the latest surge in oil prices. [It remains to be seen how serious the China/US rivalry will be.] If it were up to me, I'd block the Chinese bid for Unocal. But it would be a lot easier to take that position if the United States weren't so dependent on China right now, not just to buy our I.O.U.'s, but to help us deal with North Korea now that our military is bogged down in Iraq. E-mail: [EMAIL PROTECTED] -- Jim Devine Segui il tuo corso, e lascia dir le genti. (Go your own way and let
Re: [PEN-L] PK on China Challenge
The part that surprised me in Krugman's article was the final paragraph in which he revealed his preference for blocking China. In his pre-leftish phase, wasn't Krugman angry with people like Laura Tyson who wanted to manage trade? -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail michael at ecst.csuchico.edu
Re: [PEN-L] PK on China Challenge
A foolish consistence is the hobgoblin of little minds, right? he does argue that Japan China are different case. He doesn't seem to be advocating blocking China as part of industrial policy (which is the kind of thing that Tyson advocated). On 6/27/05, Michael Perelman [EMAIL PROTECTED] wrote: The part that surprised me in Krugman's article was the final paragraph in which he revealed his preference for blocking China. In his pre-leftish phase, wasn't Krugman angry with people like Laura Tyson who wanted to manage trade? -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail michael at ecst.csuchico.edu -- Jim Devine Segui il tuo corso, e lascia dir le genti. (Go your own way and let people talk.) -- Karl, paraphrasing Dante.
