What is the United States?
By David Henderson
In “Can anything hold back China’s economy?” Larry Summers makes a number of good points. By the way, his implicit answer to the question he raises in the title seems to be “No.”
Along the way, though, he writes as if the United States has one mind rather than over 300 million minds.
Good point #1:
At the heart of the problem in defining an economic strategy toward China is the following awkward fact: Suppose China had been fully compliant with every trade and investment rule and had been as open to the world as the most open countries at its income level. China might have grown faster because it reformed more rapidly, or it might have grown more slowly because of reduced subsidies or more foreign competition. But it is highly unlikely that its growth rate would have been altered by as much as 1 percent.
By the way, when he writes 1 percent, he clearly means 1 percentage point. It is very easy to imagine China’s growth rate being altered by 1 percent, which is trivial.
Good point #2:
Equally, while some U.S. companies might earn more profits operating in China, and some job displacement in American manufacturing because of Chinese state subsidies may have occurred, it cannot be argued seriously that unfair Chinese trade practices have affected U.S. growth by even 0.1 percent a year.
Here it’s also clear that by “0.1 percent” Larry means 0.1 percentage point.
The United States as one mind:
Can the United States imagine a viable global economic system in 2050 in which its economy is half the size of the world’s largest? Could a political leader acknowledge that reality in a way that permits negotiation over what such a world would look like? While it might be unacceptable to the United States to be so greatly surpassed in economic scale, does it have the means to stop it? Can China be held down without inviting conflict?
Let’s break down the above quote and consider each sentence or clause.
Can the United States imagine a viable global economic system in 2050 in which its economy is half the size of the world’s largest?
What is the United States? It’s a land mass with over 325 million people living on it. The odds are that most readers of this are among that 325 million. Can you imagine it? I can.
The rest of the paragraph raises good questions and I sense that Larry and I have the same answers.
Could a political leader acknowledge that reality in a way that permits negotiation over what such a world would look like?
He could. Would he, or she? I don’t know. Would it matter? If Larry’s right, it will happen anyway. And I bet he’s right.
While it might be unacceptable to the United States to be so greatly surpassed in economic scale,
There’s that “United States” thing again.
I bet it’s acceptable to lots of Americans. I gave a talk on globalization in Maryland to the 55 newly chosen U.S. Navy Admirals in 2010. It was kind of their one-week boot camp. I said to them that I don’t care if China’s wealth quadruples as long as our wealth doubles. Many of them resisted but, except for their concerns about increasing Chinese dominance in the world, had no other argument. And even on the dominance issue, the main Admiral who argued quickly admitted that his concern was Chinese dominance in China’s part of the world. I pointed out that we had this great barrier that would make it hard for the Chinese to invade us, namely the Pacific Ocean. None of them argued against that. Their argument came down to their desire for the United States government to dominate the world.
does it have the means to stop it?
Probably not. I think Larry and I agree on this.
Can China be held down without inviting conflict?
Probably not. Larry seems to think so too.
When I read people talking about what “United States” thinks, I remember an old Bastiat quote, but when I Google it, I find that I’m the only one who used it. So either it’s Bastiat’s, or it’s my mentor Clancy Smith’s, or it’s someone else’s, or it’s mine. Here’s the quote:
Bring society to lunch and we’ll talk about it.
In this context:
Bring the United States to lunch and we’ll talk about it.
HT2 Mark Thoma.