Published November 15, 2010
Completing his Asia trip, President Obama addressed the issue of China. On trips made to shore up our relations with China’s competitors in the region, both the president and Secretary Clinton did not always address their concerns about China by name, but they talked about “countries” opening markets and currency issues. Everyone knows they were talking about China. And at the end of the trip, China announced it was purchasing a piece of General Motors. How is it that they are eating our lunch, I wondered?
When I worked in health care my boss, Larry, used to say that much of our staff was “fat, dumb and happy” and he would search all the business book literature to find ways to motivate them.
I was reminded of Larry’s frequent observations a few weeks ago in Tiananmen Square, when a Chinese tourist asked to take a photo of two rather amply sized Americans traveling in my group. Smiling for the Chinese photographer were two Americans beginning to understand why China is going to eat our lunch and stay thin and lithe while doing it.
I spent most of the week in China trying to understand not if, but how they were going to do it. I am no fan of their human rights record. They have tortured supporters of the Dali Lama and put people who want freedom of speech in prison for years.
The facts are facts, however, and the Chinese are making rapid progress compared to the United States. Here is my, "why they are eating our lunch,” analysis:
1. Our balance of trade, a deficit, is less than 10 percent of the Chinese economy. They are making up the rest by developing a consumer market in China selling by selling to their own people, a tactic developed by Henry Ford. Almost 17 million cars were sold in China during the last year.
2. The Chinese have a long history of organization. In the year “0” they had a population of 57 million counted by census and highly organized and accounted for. The famous “silk road” was trading and producing goods for centuries before the United States was even on a map.
3. The population has a 91 percent literacy rate, which is unheard of in a “developing” country. Education is a priority for Chinese citizens.
4. Their “benevolent” dictatorship allows the Chinese to make decisions allowing their country to move forward when in the United States decisions would be tied up in years of litigation. I was impressed while viewing two huge LED screens in Tiananmen Square of the ethnic groups in the country. The cinematography was amazing.
If our government wanted to put two LED screens on The Mall in Washington, D.C. the litigation would take years. They don’t require environmental impact statements, zoning boards, etc. I witnessed Governor Haley Barbour’s solution to FEMA trailers by building “Mississippi Cottages” only to be stopped by local zoning boards.
Unhampered by a stuck Congress, China began to fiber optic wire the entire country in 1999. We have no central plan to bring parts of the USA into the 21st century.
5. We shrivel at the idea of government intervention and support of industry but countries such as China that provide direct support of industry have a major competitive advantage over American industries.
6. We complain that they are manipulating their currency and they are, however, if China changes the value of their currency their middle class will be wiped out. Most small businesses in China operate on a 5 to 6 percent profit margin and a change would create a destruction of their middle class and potential purchasers of USA products. Governments have a right to do what they want with their currency. It is up to us to figure out how to deal with their advantage.
We can still recover and gain our competitive advantage but we need to get out of our own way. We need to develop an economically oriented government that is not all checks and not enough balance. We need to end Congressional gridlock or we risk what happened to Poland in the 19th Century when it was in such disarray that other countries moved in.
We need to understand that if we have 50 states with 50 sets of rules and laws we will not be able to mount a strong economic challenge to countries that don’t have such impediments.
Our government was developed during the 18th century where the dominant force was agriculture. The world has moved passed agrarian economies but our system of government hasn’t. Science and math education must be given the priority it did after the Soviets launched Sputnik.
Lastly, we need to have a national conversation about the direction our country needs to move in and whether or not we can live with no longer being the world’s number one economy. If the answer is “no” then we need to take action to move our country and its laws into the new millennium. Otherwise, we will remain fat, dumb and (un) happy.
Ellen Ratner is Washington bureau chief for Talk Radio News Service and a Fox News contributor.