Sunday, July 31, 2005

At Last some good sense on China and International Trade!

Contrary to the distant paranoia from protectionists, closet and open, we get some good sense from Ben Stein, a lawyer, an actor and an economist, in today's New York Times. How refreshing to read Adam Smith's point about no country being harmed by the prosperity of a trading partner or (in today's global economy) a neighbour.

In Smith's day the paranoia was directed at France. He was scathing about the sillyness of such a proposition. We should be too with the modern version about China. Stein's article gives loads of facts about the relative size of the Chinese and the US economies. There is no contest between them. The so-called problems are minor. The fact the protectionist nonsense almost triumphed on the tiny case of CAFTA - its annual trade a mere fraction of China's - is a warning to the complacent. If you allow them, the protectionists will spiral the world into recession in pursuit of mere fractions of disputed trade gains and losses, which overall will be remedied by much greater gains once the economies make the necessary adjustments.

Read Ben's article in the New York Times (not a paper with which I always agree). Google NYT and go to today's paper 31 July, in the Business Section.

"Don’t Worry About China. Learn from it.
NYT 31 July 2005
Ben Stein (lawyer, actor, economist)

If we used the more conservative, non-C.I.A. estimates of where Chinese per capita G.D.P. is now, in 25 years it would be about $17,500- and this assumes the continuation of China's recent sizzling growth rates. That would put China's per capita income in 2030 at roughly one-sixth of our level.

In other words, it will be a long time before Chinese per capita G.D.P. matches ours. And for that to happen, it will take a previously unheard-of growth rate for an unheard-of length of time. This is a big series of ifs, especially for a country with a rapidly aging labor force and an inherent contradiction between dictatorship and free markets.

But suppose that it does happen. Suppose that China becomes a larger economic power than the United States. Suppose, in our great-great-grandchildren's day, that the average Chinese citizen is about as rich as the average American. How would it hurt us? Why would we be worse off? If the Chinese were richer, they could buy more from us and employ more of our workers. They could buy more of our stocks. They could tour our beautiful nation more.

The fact that our neighbors are worse off does not make us richer, and the fact that they are better off does not make us poorer.

But another factor is even more important: personal responsibility. Americans who want to make sure they stay well off accomplish nothing by worrying about China. But we can certainly learn something from China. Individuals and nations become rich by investing in human capital - getting a good education, learning good work habits, saving and investing prudently and living healthy lives. Any young Americans who want to keep up with the Chinese can get a good education, work hard, save as much as possible, invest prudently - and they will be just fine now, in 25 years and in 50 years. " (Copyright The New York Times)


Post a Comment

<< Home