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Robert Reich writes: "China is eating our lunch. Why? It has a national economic strategy designed to create more and better jobs. We have global corporations designed to make money for shareholders."

Portrait, Robert Reich, 08/16/09. (photo: Perian Flaherty)
Portrait, Robert Reich, 08/16/09. (photo: Perian Flaherty)



The Real Economic Lesson China Could
Teach Us

By Robert Reich, Robert Reich's Blog

20 January 11

 

ighlighting today's summit between Chinese President Hu Jintao and President Obama is China's agreement to buy $45 billion of American exports. The President says this will create more American jobs. That's not exactly right. It will create more profits for American companies but relatively few new jobs.

Nearly half of the deal is for two hundred Boeing aircraft whose parts come from all over the world. The rest involves agricultural commodities that don't require much US labor because American agribusiness is highly automated, and chemical and high-tech goods that are even less labor-intensive.

General Electric and other companies are signing up for deals with China involving energy and aviation manufacturing. But much of this will be done in China. GE's joint venture with Aviation Industries of China, to develop new integrated avionics systems (which presumably will find their way into Boeing planes) will be based in Shanghai.

Here's the real story. China has a national economic strategy designed to make it, and its people, the economic powerhouse of the future. They're intent on learning as much as they can from us and then going beyond us (as they already are in solar and electric-battery technologies). They're pouring money into basic research and education at all levels. In the last 12 years they've built twenty universities, each designed to be the equivalent of MIT.

Their goal is to make China Number one in power and prestige, and in high-wage jobs.

The United States doesn't have a national economic strategy. Instead, we have global corporations that happen to be headquartered here. Their goal is to maximize profits, wherever they can make the most money. They'll make things in America for export to China when that's most profitable; they'll make it in China and give the Chinese their know-how when that's the best way to boost the bottom line. They'll utilize research and development wherever around the world it will deliver the biggest bang for the dollar.

Meanwhile, Republicans and deficit hawks are cutting publicly-supported R&D. And cash-starved states are cutting K-12 education, and slashing the budgets of their great public research universities, such as the one I teach at.

No contest.

And no hyped-up trade deals are going to change this fundamental imbalance.

Some say all we need to do is put our currencies in better balance. But even if the Chinese upped the value of the yuan and the US (courtesy of the Fed) reduced the value of the dollar - so everything they bought from us was cheaper and everything we bought from them, far more expensive - they'd still win. We'd have more jobs than now because our exports would be more attractive in world markets, but those jobs would summon fewer goods from around the world. In other words, we'd be poorer.

Let's get real. We're losing ground. The US labor force is now smaller than it was before the Great Recession began and most American families are worse off. December's unemployment rate dropped to 9.4 percent from 9.8 percent but almost half the improvement was due to 260,000 people dropping out of the labor force.

Average hourly wages grew by three cents in December; weekly wages, by $1.02. And almost all the gains in income occurred at the top. The major assets of rich Americans are financial - whose values have increased as corporate profits have grown. The major assets of the middle-class asset are their homes, whose values continue to drop.

The President now says the answer is to help American business. "We can't succeed unless American businesses succeed," he said recently. "And I'm going to do everything I can to promote their ability to grow and prosper."

But the prosperity of America's big businesses has become disconnected from the prosperity of most Americans.

Republicans say the answer is to reduce the size and scope of government. But without a government that's focused on more and better jobs, we're left with global corporations that don't give a damn.

China is eating our lunch. Why? It has a national economic strategy designed to create more and better jobs. We have global corporations designed to make money for shareholders.


Robert Reich is Professor of Public Policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton. He has written twelve books, including "The Work of Nations," "Locked in the Cabinet," "Supercapitalism" and his latest book, "AFTERSHOCK: The Next Economy and America's Future." His 'Marketplace' commentaries can be found on publicradio.com and iTunes.

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+10 # Dan Carey 2011-01-20 12:06
Exactly right.
 
 
+7 # Lisa D. 2011-01-20 12:43
America, can you say DOOMED???
 
 
+6 # O. Gail Poole 2011-01-20 13:05
You are so correct Robert! I tend to believe that China will become number one in the world of economics and overall power due to their political system with it's ability to make sharp turns whenever needed to keep their eye on the prize. But then again I don't know that we will suffer from not being THE superpower of the world. Other nations have survived in grand style, even those far down the list. Perhaps we'll be better off not being the police of the planet and the corporate protectors. Let China deal with the global terrorists.
 
 
+1 # zwqonline 2011-01-24 01:05
Quoting O. Gail Poole:
You are so correct Robert! I tend to believe that China will become number one in the world of economics and overall power due to their political system with it's ability to make sharp turns whenever needed to keep their eye on the prize. But then again I don't know that we will suffer from not being THE superpower of the world. Other nations have survived in grand style, even those far down the list. Perhaps we'll be better off not being the police of the planet and the corporate protectors. Let China deal with the global terrorists.


Gail, China will not become No.1 in the world because you don't really know it. There are almost 1.4 billion people in China with approx. 40% of them still live in poverty. And 4 of 10 young people are not able to establish their homes due to the unbelievable high real estate price. There are still lots of works need to be done in China. So, from a Chinese citizen's opinion, it is not the best idea for China to seek for No.1 place instead of improving its people's living conditions.
Cheers. ^^
 
 
+12 # jlohman 2011-01-20 13:20
Wait a minute. China has wage costs 1/10th ours and the US has politicians willing to pass laws that permit their corporate contributors to outsource jobs (in which the politicians share in the booty via campaign bribes). We have a corrupt political system and NOTHING is going to change until we have public funding of campaigns. See http://fairelectionsnow.org/about-bill

Jack Lohman ...
http://MoneyedPoliticians.net
 
 
+15 # DB 2011-01-20 13:22
But Uh-murcans like to be ignorant, poor, unemployed, violent and sick. And they want the same for their kids. The USA is a paranoia driven hate based, gun toting, violence loving society gone mental that's ready for history's garbage collector of civilizations that are incapable of adaptation and change. USA is obsolete and ready for extinction. Hello toast.
 
 
+4 # Allan Taylor 2011-01-20 13:54
Couldn't agree more. Nothing will change--the slide will continue--until we come to our senses. For that, we need leaders. I don't see any of them, they are all too concerned about ensuring their own miserable futures. Only after a cosmic crash might any kind of rationality return.
 
 
+1 # rf 2011-01-21 07:43
They'll change when they are living in a company town, shopping at a company store and getting further and further in debt to the company. When we are hungry and back in 1929 Americans will wake the hell up and it appears not before. We needed a Bank bailout or we would have gotten to where the morons need to be quicker...no other reason...I don't own any bank stocks!
 
 
+7 # Joanne M. 2011-01-20 13:33
Robert Reich, come back to government service! You are always SO on target!
 
 
+2 # john rusnak 2011-01-20 13:47
what is the ave.pay for a worker in China? Probably not much more than one or two hours at union scale.
What does a Chinese business pay for environmental safeguards? I'm guessing not much.How many children work,if nothing more,at the jobs around the house because both parents are forced to work at factories?
One thing is for sure if your military is large enough you don't get much dissent!
There are two choices for China..total subjugation ala N.Korea,which dooms them or embrace individual enterprise which will increase prices.
It is completely unfair to compare a communist totalitarianism with free enterprise.
And I disagree with the idea that China invents anything,they are leeches stealing any original idea free men make.The company I work for will not send or buy anything from them because we will see knockoffs in a year or the "stuff"we need from them will be falsely labeled as compliant with U.S. standards.
Do not be taken in by their obfuscations.
Made in China is still junk.
 
 
+2 # AML 2011-01-20 14:09
Junk it may be, but it sells in the US and countries such as Mexico, who imports on a par with us. now people have to buy on the "cheap" since their choices are limited by budget. It's a syndrome now.
 
 
+3 # propsguy 2011-01-20 19:20
how about just not buying? anything you buy that is made in china you probably didn't need. it's all future landfill. save all your money- spend it on good (safe, healthy, non-industrial food) and rent. your clothes will last a few years, especially if you eat better and don't gain weight. you really don't need a new television (or any television for that matter)
if you have a yard, grow some food in it, instead of spending money for lawn fertilizer.
 
 
+3 # AML 2011-01-20 22:12
Amen to that. I try to boycott Chinese goods and keep a small carbon footprint. If everyone made just a few small changes, we would see a difference. And not just to boycott, but to look at life differently. The consumer society is a miserable development.
 
 
+8 # DMS 2011-01-20 14:36
"It is completely unfair to compare a communist totalitarianism with free enterprise." John, I have to disagree. You're quite right that we're not comparing apples of the same species, but I propose we ARE comparing two vastly different models of the same thing: how a country values its workforce and implements its economic policy. China has no worker protection to speak of, no health care insurance, no labor unions, no unemployment insurance. There is little emphasis put on the value of the individual in that culture, even though it is true that there is movement toward "free enterprise" and creation of a moneyed class. We, on the other hand, are far down the road toward a plutocracy/corp oratocracy... in which the value of the individual is increasingly deemphasized, worker protections are being crippled and defunded, and don't even get me started on the corporatization of health care. I'm not feeling very sanguine about our collective ability to turn the vehicle of state around and find our way back to the crossroads we left behind us. It seems we're becoming more like China, but in all the wrong ways. Until WE make some fundamental changes in our culture, our greatest export will continue to be our technology and our jobs. It will be interesting to see how this all plays out, as the two giants take on one another's worst traits... interesting times in which we live, indeed.
 
 
+4 # Wade 2011-01-20 19:56
Quoting john rusnak:
...
Made in China is still junk.


The same thing was said about Japan a few decades back. Now people drive Lexus and Toyota, photograph with Nikons and Canons, and Sony owns the entertainment business. Population of Japan is about 127M. China is about ten times that size, at 1.3B.

You can poke holes in any argument and bury your head in the sand; that and a few inflated dollars will buy you a cup of coffee.

Oh, and I've spent time in China. Their communist totalitarianism , as you call it, isn't substantively a whole lot different than our capitalistic one. They’re just the buzz-wordy names we give these so-called ideologies. Same with free; and what exactly is “free” any more? China has their share of problems, but that’s no reason to ignore the warnings.
 
 
0 # rf 2011-01-21 07:44
Don't know many native Chinese, do yuh?
 
 
+1 # Susan C 2011-01-20 14:27
Thank you for being the one to put it all into perspective. How do we best overcome this problem? Will the Yuan become the world's currency and destroy America's growth? Corporations and the rich need to know they are destroying our country and our leadership can't pander to Corporations any longer, but must consider our future and those of the working class (and unemployed). How much profit is too much?
 
 
0 # jmielkeyost 2011-01-20 22:51
Quoting Susan C:
How much profit is too much?


It is kind of like the saying about being too rich or too thin. There is no such thing as too much profit. That is why we (used to) have a redistributive taxation system. NB: past tense.
 
 
+8 # m 2011-01-20 15:08
I would ask.. even plead with Tea Pert people to wake up and smell the Hoodwinking and then go look in the mirror to see what a Global Corporate Media HOODWINKEE looks like... And then, shake off the nonsense and decide that 97-98% of Americans are far more your friend and ally and that we are all in this National-Declin e moment together far more than you have been led to believe by the 2% Global Corporate Wealthy Class that is manipulating and using you and everyone, using Our Democratic Republic System and using the American Media they now own for themselves in order to plunder your life and the lives of every other American right along with our National Treasure in their pursuit of Money, Greater Size, Greater Power in an America they spend a fortune on in Lobby Money and Election Donations and Media efforts to deregulate and de-tax OUR Collective Power out from under us and they divide us apart, pit us against each other in their effort to reduce our power and render OUR Government completely Impotent when it comes to Corporate Regulation, Taxation and Judicial Sanction--- simply because that is the easiest way for them to pursue and maintain a better Corporate bottomline for their SHAREHOLDERS..! ... GLOABL SHAREHOLDERS..!

WE ARE BEING '''SMALLER GOVERNMENT''' and Socially Divided to death--- DELIBERATELY..!
 
 
+8 # heraldmage 2011-01-20 15:38
How far down does American have to fall before the people finally realize its time to take our government out of the hands of the privileged few & their corporate identities?
Since the USA's inception the privileged have used its treasury as their personal bank; providing grants for business expansion, bribing foreign officials or funding regime change to obtain natural resources & security for foreign assets.
Why should the people except crumbs trickled down from profits derived from our taxes & natural resources when we could have it all?
Why should our money be used to support the lifestyle & growth of personal wealth of 1% of the population while the number of jobless, homeless, hungry people without healthcare grows daily?
When are we going to wake up & realize that Cold War scare tactics were propaganda meant to keep them in power?
Its time to replace both political parties & eliminate private funding of political campaigns. To prevent PACs & lobbyist from influencing legislation by eliminating private meetings, gifts & donations.
The only way to have a true democracy is to eliminate money from the election & legislative process. Our government & its treasury should be used to benefit the people & the nation not the privileged & their corporate identity
 
 
+5 # Wade 2011-01-20 20:01
Twenty new universities in twelve years! I think this one scares me the most. Our politicians keep reducing this kind of investment in the US. Just extrapolate those two trends for a while!
 
 
+1 # jmielkeyost 2011-01-20 22:55
If this is news to anyone, you were obviously sleeping during Intro to Business and Accounting 101. This is what capitalism IS. There are alternative economic systems, of course. We just happen to villify their names.
 
 
+2 # Ian Day 2011-01-21 06:02
As Agrippa didn't say to St Paul - "Almost, thou persuadest me to be a communist."
In the US & UK much cost, effort & union activity resulted in health & safety at work.
Health & safety costs money & puts up prices - so we buy foreign goods made where standards & expectations are low, & destroy our own industries.
The multinational still make their money.
The rich get richer & the poor get poorer.
We need constructive solutions & we're running out of time.
 
 
0 # Uppity Woman 2011-01-22 13:16
We DO possess solutions, and have for a while now. You know, all of us disdained, granola eating, tree hugging hippie types have been telling you all this was coming for nigh unto 40 years now, but all "mainstream" americans could do is make fun of us and our quite adorable ideological descendants. Wake up and read the tons of literature about collective businesses, sustainable lifestyle, the co-op movement, and much, much more that provide good, researched, we tried this and already made the mistakes information that can be used as models to escape the corporate tyranny and take hold of a better future for our children. You don't have to look like a hippie to learn from us, and we welcome mainstream types to join us, for there is room at our table for everyone. You just have to quit floundering around looking for acceptable "leaders" to make it easy for us, because that just isn't going to happen. That day is over. We are ALL leaders now, and must make our tomorrow with the same strength of purpose and power of intent as the captains of industry, and we must make it our mission to wake each day believing that we can change the world by our efforts. In this way we will secure that better world for our children.
 
 
+2 # zwqonline 2011-01-24 01:01
I'm from China and I wanna be objective about the economical situation in China right now. GDP is rising, PMI is rising, and both FDI and FII is rising as well. And seems like China has defeated Japan and became the largest trade comrade with US. But figures are still figures, the truth is still confusing and worth worrying. Home price and CPI have kept booming even goverment has issued multiple policies. People's salaries haven't grow for years.. These are the realistic problems we are now facing. However, Chinese people currently are more calm about the surface figures. That's why we believe we should look into China's economical situation in a humble way. That is also why I always tell those around me not to compare the economics of China with US. There is still a long, long way to go.

p.s. THINK CLEARLY before you decide to purchase real estate in China.. That will cost you an arm and a leg! (except hot money investors, which I hate very much) ^^
 

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