Arthur Kroeber: evaluation

Transcript context

…First question: what really is the problem if China becomes as wealthy as America, or if its economy grows as big, or even bigger than America’s? I know it may not be your perspective to be a China hawk, but I’ve never really understood why this is a problem in the first place. It's a very good question. There’s a lot of criticism that China is trying to get rich on the backs of everyone else in the world by running this gigantic manufacturing export machine. It seems like the Chinese ambition is to produce all the manufactured goods in the world, run an enormous trade surplus, which means they are depending on the rest of the world’s buying power to support them. People say this model is not fair, not sustainable, and not a stable way to participate in the global economy. The real question isn’t just if China gets rich, but how it gets rich. Does it get rich by operating under the same rules as everyone else and having a market other people can participate in? Or does it get rich by making it impossible for anyone else in the world to have the kind of production structure that they want to have, and relying entirely on these ever-growing trade surpluses? In principle, from a welfare standpoint, I think it would be great if China became as rich as America. But that’s likely to have difficult and destabilizing political consequences, because the Chinese political system is vastly different from that of the US and other major industrialized countries. On the trade surplus point, to the extent that it is made possible by the government involvement in industry… It’s actually not even clear to me that that's the case. If you have high savings and not enough investment domestically, the accounting identities are such that you will have a trade surplus. But suppose that's even the case. On paper, it just seems like what is happening is that the Chinese taxpayer, the Chinese saver, is subsidizing foreign importers. On paper, it just seems like we're getting a good deal. I'm sure some people are upset about this, specifically people who manufacture outside of China. But it's certainly not something obviously insidious. So it seems like if it wasn't for this, there'd be some other reason that China can't grow as wealthy as us. I am playing a little bit of a devil's advocate here. But I don't really understand why this is such a big issue that there needs to be very powerful competition about it.…

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