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Paulson’s Kabuki: Integrating
China into the Neoliberal System
By Mike Whitney
05/22/07 "ICH"
--- - Treasury Secretary Henry Paulson is a man who knows
what he wants. And what he wants is to further integrate the
Chinese market into the global system---the “American-run”
system. To achieve that goal he has assembled a group of 10
cabinet-level officials—mostly from big-business--who will are
expected to urge the Chinese delegation to implement "sweeping
economic reforms" that will open up their market to U.S.
investment.
Undoubtedly, Paulson will pay “lip service” to China’s
manipulation of its currency which gives it an unfair advantage
in competing with American exports. In truth, the “undervalued”
Chinese Yuan is a godsend for Paulson and the US investor class
who see it as a good way to expand the trade deficit and keep
billions of dollars flowing into the stock market. From their
perspective, the $230 billion trade deficit allows America to
export its inflation, which keeps interest rates artificially
low and makes the economy seem healthier than it really is.
The down-side of this arrangement is that the American worker
gets hammered. We have lost 3.2 million manufacturing jobs in
the last 6 years while destroying America’s industrial base. If
there is a sudden downturn in the economy, the US will not have
the ability to work its way out of the doldrums. We are now a
service-oriented economy.
Paulson’s real goal is to see that the financial service
industry can set up shop in China and lay their hands on the $2
trillion of Chinese savings which is languishing in Chinese
banks earning a meager 2% interest per annum. This is the real
prize, and as the former head of Goldman Sachs, Paulson will
probably push hard to access to this promising new market.
There’s a misconception in the US (particularly among
“protectionist” Democrats) that trade with China is a “one way
street” that only benefits the Chinese. That is not the case. In
fact, the real beneficiaries of the present arrangement are the
US business elites who set out to destroy the American labor
movement by moving factories to a country with no labor or
environmental laws. The Bush administration has enthusiastically
assisted this corporate exodus by creating tax incentives for
“off-shoring” and by promoting a “free trade” ideology which is
ruinous to America’s future. As for the Chinese; consider the
comments of China expert Henry C K Liu in his article “A
Dialogue of the Mute”:
“China cannot expand domestic consumption because Chinese wages
and benefits are too low. Yet Chinese cannot raise wages faster
because real wealth has been leaving the country through export
trade while the yuan money supply is expanding through the
central bank buying dollar inflows with yuan. The result is a
liquidity bubble, with too much currency chasing a dwindling
supply of real wealth that has been exported.”
The Chinese are not to blame for our job losses or
“unsustainable “trade deficit---that’s the result of the
neoliberal policies which have enriched a few wealthy American
industrialists and bankers at the expense of everyone else. As
Liu says, “China has actually been a powerless respondent to the
dysfunctional terms of trade set by US economic policies,
aggressively exploited by US transnational corporations and
financial institutions for unfair profit.” (More than 60% of
China's trade surpluses are traded by foreign companies, many of
which are US firms)
The Strategic Economic Dialogue (SED) with the Chinese
delegation is shaping up to be nothing more than a
lecture-series on “How to run your Economy” by the world’s
biggest debtor nation—the USA. Paulson has said repeatedly that
the Chinese workers are saving too much of their wages. (roughly
50%) But it is precisely those savings which are so seductive to
foreign capitalists.
Why not skip the doubletalk and just be straightforward?
So far, it is the Chinese who’ve played by the rules of the free
market. They have promised aid to countries in Africa and Latin
America in exchange for consideration of their vital resources.
Meanwhile, the United States has eschewed the marketplace and
opted for direct military intervention everywhere across the
planet—creating chaos that now extends from the southern border
of Somalia to the northern tip of Afghanistan. It is the
“capitalists” have abandoned capitalism, not the Chinese. The
Chinese are still doing business the old fashioned way---with
the checkbook not the gunboat.
Liberals and leftists who ignore the administration’s economic
maneuverings are missing a crucial point. At its heart, the “war
on terror” is actually a global resource war which is being
fought on many different levels with many different armies. The
ultimate goal is control of the global economic system--Iraq is
merely one battleground in a much larger conflict. Field
Marshall Paulson is every bit as important as General Petraeus.
The only difference is that one is in Baghdad and one is in
Washington.
China is quickly becoming the world’s manufacturing superpower.
Its centralized, autocratic government provides a secure
environment which transnational corporations find desirable. The
fundamental question is whether China will subordinate its
national sovereignty to the dictates of foreign investors or
resist and follow an independent path for development.
Will China comply with Paulson’s directives and be assimilated
into the new world order or pursue a socialistic model that
rejects the rigid requirements of neoliberalism?
We’ll see.
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