America’s decline, and how nobody seems to really care
It’s with a sense of frustration that I watch America descend from its perch atop the global order. For as long as I’ve been alive, the United States has been the “shining city on a hill”, even though us Canadians are loathe to admit it. I’m probably more pro-American than my fellow Canadians and have always had great respect for its ability to innovate, its institutions, its soft cultural power, and its pro-business approach.
But my, how things have changed. That America is declining isn’t really surprising, considering the awful mess it has found itself in. More importantly though, nobody seems to be seriously acknowledging the decline or doing anything about it. I’ve been harbouring these thoughts for sometime, but they were triggered again today when our daily news summary, the document outlining any news stories relevant to our company, was circulated around the office. Because it’s a locally-produced summary I have no link. But here it is:
During talks on the eve of the annual Asia-Pacific Economic Cooperation summit in Hawaii, Chinese President Hu Jintao told US President Barack Obama that even if the RMB rises substantially it will not solve the US’ problems. Hu noted the American trade deficit and unemployment are not caused by China’s exchange rate, which he called “responsible”, adding that Beijing will continue to push currency reforms steadily forward.
In a nod to spooked global markets, Hu said it is all the more important that the US and China increase their communication and cooperation. The US has accused Beijing of deliberately keeping the RMB undervalued, despite some appreciation this year. China defends its exchange-rate regime saying it is moving gradually to make the RMB more flexible. Obama has laid the American position on the line for Hu in language that betrays rising concern over the RMB. He “made it very clear that the American people and the American business community were growing increasingly impatient and frustrated with the state of change in China’s economic policy and the evolution of the US-China economic relationship,” said Michael Froman, a US deputy national security adviser. The meeting took place amid more domestic pressure on Obama over China, voiced again by Republicans on Saturday as the 2012 presidential election campaign gathers pace.
A few things spring to mind:
- It is sad to see America, a once great power, practically begging China to do something with regard to the RMB. I can’t help but picture Uncle Sam in a huge headlock, struggling and whining and yelling “Uncle!” Obama may have “made it clear” that America is becoming “impatient”, but I doubt China is quaking in its proverbial boots.
- China is acting like a true superpower: it doesn’t matter what the rest of the world wants, China will – and can – do what is in its own best interest. America used to behave in the same fashion. Quite simply, China doesn’t need to allow the RMB to appreciate any faster than it’s doing now, and in fact, could stop or reverse the appreciation if it felt like it.
- Hu is correct in that the RMB is not the cause of America’s high unemployment or the trade imbalance. Since 2005, the RMB has risen by 28% against the US dollar. That should have gone a long way to fixing the trade imbalance, right? Not really. The trade imbalance between China and the US stood at $252 billion in 2010, down ever-so-slightly from 2009. The argument that an appreciating RMB helps reduce the trade imbalance doesn’t hold any water.
- The quote that “the American business community” are “growing increasingly impatient and frustrated” strikes me as strange. Many Fortune 500 companies are doing business in China and benefiting from the exchange rate, and even smaller companies are moving in to do the same. If the RMB were to appreciate, they would be the ones who would feel the pinch. I’m not entirely convinced companies are as eager to see a revaluation of the RMB as the US administration claims.
- Finally, an appreciating RMB would only drive American manufacturers to other low-cost manufacturing centres, such as Vietnam, Bangladesh and Thailand. The US trade imbalance would just shift to another nation and American consumers could continue buying cheap foreign-made goods on credit while seeing their deficits pile up. So China would do this, at great cost to itself, why?
What’s most depressing about all of this is that none of the GOP candidates seem to have any answers. In fact, nobody, at any level, seems to even understand how dire the situation has become. Instead, we focus on Rick Perry’s “oops”, whether Hermain Cain has an extra-marital sex life, the inoculation of 12-year old girls for HPV, and Mitt Romney’s “authenticity”.
In the meantime, America has lost its moral authority (Abu Ghraib, Guantanamo Bay) and is currently losing its economic and military advantages too. I love America, but part of me wants to say “a pox” and be done with it. If Americans don’t care enough about turning their country around, why should I?