James F. Elliott disapproves of the magnitude of our $1.53 trillion debt to China. I have to disagree: I'm not that worried about China. (Nor am I particularly worried about bin Laden or Islamic terrorism; I'm at less risk of dying in a terrorist incident than I am of drowning in a toilet.)
$1.53 trillion dollars is about 15% of our annual GDP. High? I don't know. Many people, especially homeowners, have debt which exceeds their annual income, sometimes by an order of magnitude.
Trade and mutual ownership creates interdependence. Interdependence creates trust far more effectively than mutual independence: Independence facilitates the ability to act unilaterally, the sine qua non of untrustworthy behavior.
Keep in mind that China's ownership of our debt does not permit them to act unilaterally: If they were to "eviscerate the dollar", the value of their debt would be equally eviscerated. This ownership gives them a degree of power, but as Thucydides put it: "[R]ight, as the world goes, is only in question between equals in power."
By employing specifically economic tools, China is attempting to establish equality with the United States, to secure her rights.
Of course, I'm not entirely happy about having an entirely undemocratic, totalitarian state as an international equal.
Still and all, I am not Chinese. The chief criticism of totalitarianism is that it doesn't work: It does not further the happiness or interests of the population. But this criticism is empirical and pragmatic, not foundational. If the Chinese can remain relatively happy and productive under totalitarianism, who am I to demand that they sacrifice their happiness to adopt my values?
We have to get used to not being the biggest kid on the block. Sure, the United States has used its enormous power for good, but as Lord Acton notes, "Power corrupts; absolute power corrupts absolutely." It took one attack to turn a relatively benignly arrogant superpower into a monstrous nightmare of creeping authoritarianism and casual evil. The United States is not in any way supernaturally special; we are not divinely protected from the corruption of power.
If that means we have to deal with countries that don't share our core* values of democracy and individual liberty, well, that's what national boundaries are for. If the Chinese people truly want democracy, they will have to fight for it themselves. We can help, if they want and need it, but we are no more entitled to unilaterally impose "democracy" on anyone than we are, as the lovely Ms. Coulter advocates, to unilaterally "invade their countries, kill their leaders and convert them to Christianity."
*Well, they used to be our core values, at least as far as lip service goes.
Thursday, January 17, 2008
4 comments:
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This reminds me of an article I read long ago about Donald Trump, back when he was teetering on huge losses and bankruptcy (or something bad like that) and he owed millions upon millions to various banks - the connection here is that even though it would seem to be Trump who was at the mercy of the banks, the situation was that it was the banks who were at the mercy of Trump - because the amount of money was so large that they were forced to help him out and go out on a limb for him if they were to have a prayer of getting their money back.
ReplyDeleteThe whole point of the article was to illustrate that when someone lends a very large sum of money, they in a sense become very dependent on the debtor, which is the opposite of what ordinary people experience (where they are thrown to the wolves for being late for paying a $2000 debt).
So as you point out, China having all of this debt on our behalf makes China very dependent on our well-being and the well-being of our currency.
A number of much smarter economists than I agree with you, Larry. Any deliberate disruption to our finances by China, they say, is likely to have dire repurcussions for their own economy.
ReplyDeleteI was going to write a faux-snarky comment about how you completely misinterpreted what I read and clearly did so deliberately because you're a doody-head, but I don't have the energy.
ReplyDeleteWell, thank goodness you ran out of coffee, James! :p
ReplyDelete