Tuesday, September 25, 2018

Interesting Fallouts From The US China Trade War

The US and China have very different political systems. China was the biggest beneficiary of the collapse of the Soviet Union. It allowed China to let loose the market cat that would catch mice. China today is a peculiar mix of the market and the one party state. In putting "a knife to China's neck," as the Chinese put it, Trump has necessarily questioned that mix which, curiously, allows room for the Chinese to question the role of the US government in the US market. Why are you not better educating your children? Why are you not better retraining your workers?

One line of thinking is after Trump gets his ass whooped during the impending midterm elections, he might start singing a different tune, or that the Walmart shoppers - the hard core Trump base - might revolt, or that Trump might get impeached. That might change the flavor of the trade war, if not outright downgrade it.

Many in the US argue the US government should invest more in education and training, should invest massively more in science and research. It is not "socialist" to invest in science and research. The US government could invest massively in clean energy and artificial intelligence, like the Chinese plan to do. But to be able to do that you will have to cure the dysfunction in Washington DC. Donald Trump has been a Pied Piper who has channeled the rage of the American working class to give himself hefty tax cuts, a transfer of money to the richest Americans borrowed by all Americans, from the Chinese, of all people.

The trade war has gone too far to leave the Chinese mix of the state and the market the way it was. The new mix the Chinese might be forced into would likely hew closer to the market.

But Germany is no one party state, and it runs a huge surplus with the US. The US needs to introspect. Maybe it is a capitalist that is refusing to invest in human capital. Immigration brought America this far. For America to complain about immigration is a country tired of being number one.