Fusion Magazine: Don't Fear the Dragon

The U.S. must slay its China-bashing to prosper in the 21st century

By Tyler Grimm

Thirty years ago, China made up a smaller portion of the global economy than Turkey does today. The nation was in abject poverty and hadn’t had much of a hit since it invented gunpowder.

The People’s Republic has since come a long way: It is now the world’s largest exporter, second largest manufacturer, third largest economy, has been growing at roughly 10 percent per year, and produces more than a quarter of all U.S. consumer goods. In Washington, international economic policy is set to become a hot-button issue this year and "What to do about China?" will be the 900-pound panda in the room. As has been the case over the last decade, policymakers will be tempted to act with resentment. After all, with best-case scenario predictions of 3 percent annual growth in the United States over the next 10 years, who wouldn’t be jealous of China’s expected double-digit growth?

A REMEDY WORSE THAN THE DISEASE

In 2009, we bought $300 billion worth of goods from China, and they imported only $70 billion worth of goods from us. The $230 billion trade deficit scares many Americans into believing that we are too dependent on China and they are taking our jobs.

In response, we are likely to hear increased calls for "protectionism"—the act of restricting trade with other countries in an attempt to "protect" our economy from losing jobs to foreign competition. Recent examples of this include tariffs put on tires imported from China and the "Buy American" provision in the stimulus. Such measures are the result of special interest lobbying, not good policymaking.

There is a near-consensus among economists that the benefits of free trade far outweigh the costs. Leave it to Washington to exercise economic illiteracy. In March of this year, New York Sen. Chuck Schumer declared, "We can’t jump-start our economy and pull ourselves out of this recession if we are putting Chinese workers ahead of American workers." Similar pandering sentiments have been echoed by many of his colleagues on Capitol Hill.

From a political standpoint, championing protectionism can be very attractive. If you represent a manufacturing state and constituents’ jobs are being lost because they can be done at a lower cost overseas, it is easy and popular to propose to save jobs by making foreign goods more expensive through tariffs.

In practice, though, things never work out as intended. In 1930, despite the objection of economists, we raised tariffs on more than 20,000 imported goods. This, by many accounts, triggered the Great Depression.

A SECRET ALLIANCE IN THE WAR ON POVERTY

The reality is that if a product can be made cheaper elsewhere it should be made cheaper elsewhere. The producing country benefits from selling the products while the consuming country benefits from access to cheaper goods, which translates to more disposable income. Economists use the term "comparative advantage" to describe this phenomenon.

Adam Smith was making this point as early as 1776: "If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it of them with some part of the produce of our own industry, employed in a way in which we have some advantage."

In 2008, in response to hostility toward trade, two University of Chicago economists released a groundbreaking study that dealt with the question, "Does China Benefit the Poor in America?"

The answer: a resounding "yes." It turns out that from 1994-2005 (the period studied) the widening income gap (i.e. "the rich are getting richer while the poor are getting poorer") was actually completely offset by households buying cheaper products.

Far from hindering U.S. prosperity, China has been a driver of it. The problem is simply that the gains from trade are much harder to see than the losses. Macroeconomic indicators such as import or export levels do little to make the benefits of trade apparent to average Americans. It’s easy to understand that your neighbor’s job is now being done by someone in Asia. It’s incredibly difficult, however, to process that, as a result, the economy is more dynamic and your neighbor will almost certainly find a new job, probably in a new industry that is able to thrive because of efficiency gains. Not to mention that the job going overseas to be done more economically means that you have access to many products that would otherwise be unaffordable.

Over the last 10 years, overall prices in America have risen by 29 percent. At the same time, incomes have only risen by 23 percent. But consider the prices for major imports from China: clothes, audio equipment, televisions, and toys. Clothes prices fell by 8 percent; audio equipment fell by 39 percent; televisions fell by 83 percent; toys fell by 43 percent. This is what renowned 20th century economist Joseph Schumpeter had in mind when he wrote, "The capitalist engine is first and last an engine of mass production which unavoidably means also production for the masses."

Consider this: From the time the first VCR was sold, it took the device 12 years to reach half of American households. Compare this to DVD players: a mere six years after their introduction, 8 out of 10 households had one.

The same trend—faster diffusion rates—can be seen with almost any major technology. When you see a new expensive gadget, isn’t your first thought, "I’ll get one when the price is lower?" Prices are now coming down faster, leading to more widespread ownership.

It took 28 years for radios to reach half of American households. The iPod, which is made in China, has only been on the market since 2001 and already 40 percent of Americans own a portable mp3 player.

But what effect does trade have on China?

GROWTH, A BETTER ALTERNATIVE

Some bemoan trade with China not because it hurts America’s economy, but because of concerns about unfair labor practices. While bad working conditions are a serious and sad reality, citing them as a reason to stop trade is narrow-minded and would have the opposite of the intended effect.

China has only been engaged in global trade since 1978, when Chairman Deng Xiaoping gradually began freeing the economy from the paralyzing constraints of Communism. According to trade analyst Johan Norberg, "in 20 years, China’s economy went from equaling Germany’s to exceeding the German, French, Italian, and Nordic economies combined." The World Bank described the effect of China’s semi-liberalization as the "biggest and fastest poverty reduction in history."

Chinese workers are not forced to work for foreign companies. On the contrary, they prefer it. A poll conducted by Manpower Inc. found 75 percent of Chinese workers preferred to work for a wholly foreign-owned employer, rather than a Chinese company or joint venture.

AT LEAST SOMEBODY WANTS IT

Job losses and human rights concerns haven’t been the only driver of economic paranoia about China. The country’s status as the largest foreign holder of U.S. government debt has aroused deep uneasiness and a fear that we are financially at their mercy. The statistics alone are surely alarming: In 1970, foreigners held only 4 percent of our debt; now they hold almost half of it. China alone owns roughly $900 billion worth.

The obvious, and most preferable, solution would be that America stop accumulating somuch debt. But, considering that we’re not going to pay off our $12 trillion tab anytime soon, we should be thankful China is still willing to finance it.

In March 2007, Sen. Hillary Clinton sent a letter to then-Treasury Secretary Hank Paulson, complaining about China’s U.S. debt holdings. She wrote, "It is undeniable that the exponential growth of foreign debt in the last six years has undermined our economic standing. We have to curb these deficits and ensure foreign governments don’t own too much of our public debt and take steps to ensure that our economic well being is soundly in our own hands."

She talked a good game as a senator with presidential ambitions, but two years later Secretary of State Hillary Clinton—not having to engage in populist pandering—was playing a different tune. On a trip to China in February 2009, she praised the two countries’ "positive cooperation" and even thanked China for "continued confidence in U.S. treasuries."

The fact of the matter is that foreigners’ desire to hold our debt is a positive thing—the larger the demand for our debt, the lower the interest rate we pay on it. It’s when they’re not willing to hold our debt that we have a problem. Interest is paid with tax dollars (the federal government doesn’t earn money, it only redistributes it) and higher interest rates on the debt mean higher taxes for Americans. By 2019, interest payments are already slated to be the third biggest budget item (after Social Security and Medicare). Causing this expense to go up would have serious impact on Americans’ wallets.

At present, fortunately, China doesn’t have much of an option but to hold on to U.S. debt. The dollar remains the world’s most reliable currency and is therefore China’s best choice for stocking its foreign exchange reserve.

NOT NUMBER YUAN

China’s economy has made leaps and bounds since discovering the fruits of capitalism, but perception of the country’s economic might is far greater than reality.

According to a 2009 Pew CharitableTrust poll, when asked to pick the "world’s leading economic power" 44 percent of the public chose China, compared with only 27 percent for the United States.

China is growing rapidly, but the threat of it replacing the United States as the foremost economic superpower anytime soon is exaggerated. China’s population is more than four times the size of America’s, yet its economy is equivalent to the size of only four U.S. states. Most notably, after adjusting for purchasing power, China’s GDP per capita is $6,500, compared to $46,400 in the United States.

Even if China’s economy were to grow larger than that of the United States, the earliest this would happen is 2025. And "grow larger" does not mean the average Chinese citizen would be more wealthy than the average American, it simply means that more economic activity would take place in China than in the United States. We would, by almost any measure, remain the world’s strongest nation.

Further, despite its embrace of markets, China still self-identifies as Communist and, by and large, is still a very "unfree" and unstable nation. The joint Heritage Foundation/Wall Street Journal Index of Economic Freedom ranked China 140 out of 179 countries (1 being the most free). According to the report, China "remains a one-party state in which the Communist Party maintains tight control of political expression, speech, religion, and assembly. Any social group that can organize on a large scale is deemed a threat, as are many individual dissidents."

An added benefit of trade is that it ensures our ideological differences continue to be non-violent. Countries that are economically dependent on each other have never gone to war. As French philosopher Frederic Bastiat once observed, "When goods cross borders, armies don’t." The academic literature calls this phenomenon "peace through commerce."

WITHOUT AN ECONOMIC FORTUNE COOKIE

In March, President Obama suggested that the Democrats’ once-pro-tectionist position on trade was changing: "Those who once would oppose any trade agreement now understand that there are new markets and new sectors out there that we need to break into if we want our workers to get ahead."

Policy actions taken since the start of his administration, however, seem to indicate otherwise. The "Buy American" provision, tariffs on tires, coated-paper and steel piping, and animosity toward Chinese monetary policy have all been setbacks to a relationship the president himself says will "shape the 21st century."

On the other side of the world, Chinese leaders seem to get it. Earlier this year, Premier Wen Jiabao exclaimed, "free trade not only promotes growth of the world economy... it promotes harmony in the world and changes and improves people’s lives." He reiterated it on March 13 when he promised China would "unswervingly implement its opening-up policy." At the same time, the Red nation is continuing to slowly liberalize markets, which is fueling growth.

The big question is: What does the future hold for China’s economy?

One predictor may be the size of government. China’s government now makes up less than 20 percent of its economy. This was the same as the post-war average of the U.S. federal government’s size. Recently, however, Uncle Sam has swollen to 25 percent. Think about that. The size of government in China is shrinking to the size of the U.S. government when our country was its most prosperous.

Not to mention that, while we’re going through the worst economic downturn in a generation, China escaped the global financial crisis smelling like flowers—it is enjoying significant expansion with no sign of a slow-down. This has led many to compare China to Japan in the 1980s, when it appeared to be booming and predicted to overtake the United States.

Japan’s raging growth was short-lived as it was proven to be the result of a bubble. This resulted in a "lost decade" of Japan’s government trying hopelessly to resuscitate its economy through multiple stimulus packages. It has still not fully recovered. This time, it could be the United States, not its Asian rival, that experiences a decade of malaise from too much economic intervention.

America has everything to lose and nothing to gain by going off the tried and true path for economic growth. The United States is and will remain exceptional. This, however, doesn’t change the fact that anti-growth policies that cut off our economy from the rest of the world’s resources can affect how exceptionally we grow and prosper.



<< Return to the May 2010 Index of Fusion

Shortly after appearing on "The Glenn Beck Radio Program" last Thursday, Los Angeles-based emergency medicine specialist Dr. Simone Gold got a call saying she was fired for speaking out about the efficacy of hydroxychloroquine in a now-banned viral video.

Dr. Gold returned to the radio program Monday to detail exactly what happened, the reason the hospitals gave for her firing, and how they threatened to fire her colleagues as well if she "didn't go quietly."

"Most emergency physicians work at more than one [hospital], as I do, and I've actually been fired from both," she told Glenn. "They told me that I appeared in an embarrassing video, and therefore, I would no longer be welcome to work there ... then they said, if I didn't go quietly and I made a fuss, they would have all the doctors in the group, you know, they'd have to go and they'll get a whole new doctor group."

Dr. Gold said she does not regret speaking out about hydroxychloroquine during the controversial "White Coat Summit" news conference held in Washington, D.C., last week. A video of the news conference quickly went viral on social media before being removed by Facebook, Twitter, YouTube, and others for allegedly making false claims related to COVID-19.

"Bring it on," she said. "I want to continue to live in America. I want my children to continue to live in America. I don't want them to grow up in a place like China. When you get to a point where, not only can I not speak as a scientist, as a doctor, for what I know to be absolutely true, but you then want to cancel me and my colleagues, this is not okay. I would much rather fight than not fight ... and I want everybody to know that there are literally millions and millions of Americans who are on our side. Millions. I believe it's the majority."

Glenn then asked Dr. Gold to weigh in on the Centers for Disease Control and Prevention's new guidelines encouraging schools to reopen in the fall and the left's relentless drive to keep them closed.

"There's no actual scientific debate whatsoever if schools should open. None. There's no scientific debate. There's no serious person who thinks schools shouldn't open. Now, [through] some governors and policy makers, there's pressure being brought to bear on school districts, but there's no actual scientific debate. So it's going to come down to parents pressuring their local school districts to act in a responsible fashion."

Watch the video below to catch more of the conversation:


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Fox News host Greg Gutfeld joined Glenn on "The Glenn Beck Podcast" this week to talk about his new book, "The Plus: Self-Help for People Who Hate Self-Help."

Greg admits he is probably the last person who should write a self-help book. Nevertheless, he offers his offbeat advice on how to save America during what has become one of the most tumultuous times in history, as well as drinking while tweeting (spoiler: don't do it).

He also shares his "evolution" on President Donald Trump, his prediction for the election, and what it means to be an agnostic-atheist.

In this clip, Greg shares what he calls his "first great epiphany" on how dangerous cancel culture has become.

"I believe that cancel culture is the first successful work-around of the First Amendment," he said. "Because freedom of speech doesn't protect me from my career being ruined, my livelihood being destroyed, or me getting so depressed I commit suicide. Cancel culture is the first successful work-around of freedom of speech. It can oppress your speech with the scepter of destruction. We don't have freedom of speech anymore."

Watch the video clip below or find the full Glenn Beck Podcast with Greg Gutfeld here.

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Dr. Simone Gold joined Glenn Beck on the radio program Thursday to set the record straight about hydroxychloroquine -- what it is, how it works, and the real reason for all the current controversy surrounding a centuries-old medication.

Dr. Gold is a board certified emergency physician. She graduated from Chicago Medical School before attending Stanford University Law School. She completed her residency in emergency medicine at Stony Brook University Hospital in New York, and worked in Washington D.C. for the Surgeon General, as well for the chairman of the Committee on Labor and Human Resources. She works as an emergency physician on the front lines, whether or not there is a pandemic, and her clinical work serves all Americans from urban inner city to suburban and the Native American population. Her legal practice focuses on policy issues relating to law and medicine.

She is also the founder of America's frontline doctors, a group of doctors who have been under attack this week for speaking out about hydroxychloroquine during a news conference held outside the U.S. Supreme Court in Washington D.C.

On the program, Dr. Gold emphasized that the controversy over hydroxychloroquine is a "complete myth."

"Hydroxychloroquine is an analogue or a derivative of quinine, which is found in tree bark. It's the most noncontroversial of medications that there is," she explained.

"It's been around for centuries and it's been FDA-approved in the modern version, called hydroxychloroquine, for 65 years. In all of that time, [doctors] used it for breast-feeding women, pregnant women, elderly, children, and immune compromised. The typical use is for years or even decades because we give it mostly to RA, rheumatoid arthritis patients and lupus patients who need to be on it, essentially, all of their life. So, we have extensive experience with it ... it's one of the most commonly used medications throughout the world."

Dr. Gold told Glenn she was surprised when the media suddenly "vomited all over hydroxychloroquine", but initially chalked it up to the left's predictable hatred for anything President Donald Trump endorses. However, when the media gave the drug Remdesivir glowing reviews, despite disappointing clinical trial results, she decided to do some research.

"[Remdesivir] certainly wasn't a fabulous drug, but the media coverage was all about how fabulous it was. At that moment, I thought that was really weird. Because it's one thing to hate hydroxychloroquine because the president [endorsed] it. But it's another thing to give a free pass to another medicine that doesn't seem that great. I thought that was really weird, so I started looking into it. And let me tell you, what I discovered was absolutely shocking," she said.

Watch the video below for more details:


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According to the mainstream media's COVID-19 narrative, the president is "ignoring" the crisis.

On tonight's "Glenn TV" special, Glenn Beck exposes the media's last four months of political theater that has helped shape America's confusion and fear over coronavirus. And now, with a new school year looming on the horizon, the ongoing hysteria has enormous ramifications for our children, but the media is working overtime to paint the Trump administration as anti-science Neanderthals who want to send children and teachers off to die by reopening schools.

Glenn fights back with the facts and interviews the medical doctor Big Tech fears the most. Dr. Simone Gold, founder of America's Frontline Doctors, stands up to the media's smear campaign and explains why she could no longer stay silent in her fight against coronavirus fear.

Watch a preview below:


In order to watch tonight's episode, you must be a BlazeTV subscriber. Join today to get a 30-day free trial, and get $20 off a one-year subscription with code UNMASKED.

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