American Narcissism and China
Dear PJ Media Readers:
I have a bone to pick with you.
I notice that my July 16 post, "President Trump is Magnificently Right -- This Time About Russia," drew over 650 comments. My July 19 post, "A Letter to Larry Kudlow: You Need a Different China Strategy," drew 9 comments. It ought to be the other way around. Russia has an economy the size of Italy; Putin has managed his slender resources cleverly and made himself something of a pain in the neck, but Russia's diminished position in the world makes any problem with Russia soluble in principle. China has four times our population and an economy that is already larger than ours on a purchasing power parity basis, and it represents a formidable challenge to American preeminence.
The U.S. elites didn't anticipate the rise of China because they couldn't believe that a country so different from ours with a repugnant political system could succeed. Gordon Chang first published his book The Coming Collapse of China in 2001 -- since when, China's economy has quintupled in size. China succeeded, and kept succeeding. Yet we continue to hear (for example from Steve Bannon on CNBC yesterday) that China's currency and economy will collapse if we give them a swift kick. Steve is a friend, but in this case he's catastrophically wrong.
President Trump clearly believes something of the same sort. China's "currency is dropping like a rock!," he declared this morning on CNBC. Not quite: China manages its currency against a basket of world currencies, and the exchange rate against the euro is exactly where it was in April. China, however, has responded to the U.S. tariff threat by easing monetary policy, to stimulate domestic demand in case foreign demand falls. Easier monetary policy means a weaker currency. There are no capital outflows out of China; this is a deliberate preemptive response by the Chinese authorities.
This is the same kind of narcissism that led us to waste $7 trillion in sand castles in the Middle East. We believed that our political system was a universal solution to all human problems, and if we imposed it on other people, they would act like us. In the case of China, we believe that a radically different culture and political system is ready to collapse.
That is a dangerous delusion.
When Ronald Reagan took office in 1981, Russia and its satellites had a population of 375 million, vs. 225 million for the United States. Although Russia's economy was rotten--as Reagan and his team insisted against the prevailing consensus--its military power threatened to make Western Europe a Soviet economic colony. Reagan beat Russia in the Cold War and broke up the Soviet empire. Russia now has 146 million people, less than half of America's 300 million. Game over. The problem at present is managing a rancorous spoiler rather than a competing superpower.