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Tuesday, August 9, 2011

The USA & China

"If the USA, Europe and other advanced economies fail to shoulder their responsibility and continue their incessant messing around over selfish interests, this will impede stable development of the global economy," the People's Daily, the official Communist party newspaper, warned in a commentary.  This was reported in The Guardian Newspaper today, the 9th of August 2011.

Triumphalism is perhaps the greatest impediment to any nation’s vigor and it is not restricted to superpower states which just fail with greater consequences for the world order. China should lecture the USA less in case its calls for greater responsibility are heeded.

Historically China has been better at exploiting the West than the West has been at exploiting China.  The Opium Wars of the 19th Century were an early attempt at regaining the financial initiative from China.

Unlike China, America does not need greater domestic spending. However the USA does have some 200 foreign bases that it pays for – some, like the Philippines, cost billions of dollars every year to maintain them and even more billions of dollars in rent that is paid into The Philippines government coffers.  It is the calculation that Israel’s critics never fail to forget to make when criticizing the State of Israel for the aid as opposed to the loans that it receives but must spend in the USA.

If the USA withdrew from some of its foreign bases the benefit to its economy would be not insignificant while the commensurate loss to many of those nations would be potentially catastrophic for their local economies.  China has the current cash reserves to step in and the Arab world may exploit its oil revenues for interference but superpower commitment has its price and it is rarely in virtue paid and even more rarely in gratitude repaid.

The USA could begin by encouraging investment in its own economy and not just in infrastructure but crucially in jobs. Every job gained will be a job that China will almost certainly lose and that $3.2 trillion dollars worth of foreign reserves China currently holds may finally begin to be depleted.

The solution is simple. Bring the jobs home and eliminate the tax on companies that do this.  The saving in unemployment benefits alone will more than make up for the loss of taxation income to the government and the social benefit will be qualitatively measurable.

America must look inward to salvation not just ethically but economically. The era of massive profits and obscene wages have fueled false hopes and illogical expectations for almost perpetual growth. Fiscal responsibility in government means managing the public and that in turn means the perception within society at the top has to change. Modesty does not mean that we cannot strive or seek to excel above all others. But while a caring society cannot justify the pain it causes to others the demonstration of this care begins, like charity, at home.

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