The State of the Union is Strong… and pretty nervous about China

China, catching up. Scary, huh?

In last night’s State of the Union address, the President seemed more nationalistic and zero-sum than usual:

The rules have changed. In a single generation, revolutions in technology have transformed the way we live, work and do business. Steel mills that once needed 1,000 workers can now do the same work with 100. Today, just about any company can set up shop, hire workers, and sell their products wherever there’s an internet connection.

Meanwhile, nations like China and India realized that with some changes of their own, they could compete in this new world. And so they started educating their children earlier and longer, with greater emphasis on math and science. They’re investing in research and new technologies. Just recently, China became home to the world’s largest private solar research facility, and the world’s fastest computer.

So yes, the world has changed. The competition for jobs is real. But this shouldn’t discourage us. It should challenge us. Remember – for all the hits we’ve taken these last few years, for all the naysayers predicting our decline, America still has the largest, most prosperous economy in the world. No workers are more productive than ours. No country has more successful companies, or grants more patents to inventors and entrepreneurs. We are home to the world’s best colleges and universities, where more students come to study than any other place on Earth.

In a way, the competition for jobs is real, in the sense that some things that used to be manufactured here in the US are now made in China. But on net, can it be argued that we haven’t gained from China’s rise? China making solar panels or supercomputers doesn’t hurt us, and their devaluing their currency probably helps us by giving us plentiful and cheap consumer items. Obama is fighting against the notion that we can have positive-sum trade with China, and that kind of nationalism isn’t just false, it’s also a little dangerous. If we frame our relationship with the world as a race in which we’ll outcompete any contender, we’re bound to consider their “beating” us – which, in terms of China being the world’s becoming the world’s largest economy, seems inevitable – with hostility. This is hardly the kind of relationship you want to set up going into a new world of power dynamics.

And at the same time, not only is this a narrow way to look at progress around the world, it’s also a singularly amoral one. As Ezra Klein said, China is a much larger country than the US and so to wish that the US continue to have the largest economy in the world is necessarily to wish that citizens in China (as well as India and Indonesia) live in comparative poverty. Having the US as the sole superpower was probably among the best international power dynamics in world history, but it occurred in the context of total European destruction, Asian ruin and poverty, and the economic irrelevance of Africa and most of South America. In the new world of catch-up growth, we may be seeing the seemingly paradoxical relative decline of freer governments while also seeing an explosion in human welfare. How the OECD deals with this transition to a world in which, to use Bud Selig’s term, every citizen has “hope and faith” that their country can rise relentlessly, is the real question facing Americans, and the world.

Picture: My photo, available with CC license.

This entry was posted in Economics, Politics. Bookmark the permalink.

One Response to The State of the Union is Strong… and pretty nervous about China

  1. Doron says:

    Wisdom in its purest form.

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