Made in China

Today I was reading an article in the Washington Post about how China has surpassed the United States as the world’s top exporter of laptop computers, mobile phones and other information and communications technology devices in 2004, the Organization for Economic Co-operation and Development said on Monday. It was interesting to see how the scant amount of commentary about this topic, especially given the harsh climate of the American job market. Already, Bill Ford and other leading US firms are wrapping themselves with the US flag and making the plea that the best way to support America (and by extension, the troops) is to buy American. What’s so ironic however, is that

One major factor promoting China’s rapid growth is its fixed currency (the yuan), which allows China to keep its currency relatively lower than the US, thereby making China’s goods cheaper than the US. The other advantage that China has is America’s gluttony. Just how do you think Bush was able to pass tax cuts year after year while we are fighting in Iraq and Afghanistan? The Bush administration has tax cuts as its centerpiece of picking up the economy but as we run up more and more debt, guess who is buying up this debt? You guessed it, China. So if China suddenly decided that they didn’t want to buy American debt for some set of geo-political reasons, the interest rates in America would go through the roof. And my political folks will know what I mean when I say, “It’s the economy stupid.” And besides the fact that China has more than one-fifth of the world’s population, I should point out that China is a communist country? Don’t you think it’s funny how the wealthy communist countries are never referred to as communist but poorer countries are? But I guarantee you that if China and the US were having serious disagreements that might lead to war, the communist refrain would be deafening.

But I digress. The main point of today’s blog is to highlight that if we are living in a knowledge based economy that is fueled by technology, then the Chinese leading the world in information/computer technology is a sign that the US has been comfortable for too long and when we can’t beat a country on purely economic terms, the military might will be soon to follow. I believe Samuel Huntington wrote a book talking about the clash of civilizations. I am not suggesting that the Chinese and the US are posturing themselves for war but Thomas Friedman talked about how we are living in a flat society, which means that advances in technology have made the world a more level playing field. So whatever country takes the lead in technology (patents, faster computer chips, etc.) will have a comparative advantage that will make international relations a bit more nuanced than times of old. America’s economy is stuffed like you were after Thanksgiving, but unless get on Kanye’s workout plan, we will see the Chinese use their new found wealth to invest in their military and create a middle class that will want the excesses of American culture. In the long term, different countries will take sides and we will witness a clash none like the world has ever seen.

Stay up fam,

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