Thomas Friedman on China: One Big Thing Right, an Even Bigger Thing Badly Wrong
Thomas Friedman devoted his column to China today, making the point that it is ahead of the U.S. technologically in many areas and that its lead is likely to grow rapidly. As he notes, this fact is hugely underappreciated in U.S. policy circles where there is a prevailing view that China is well behind us and still badly needs our technology.
As Friedman makes clear, that day has long passed. China is way ahead in producing EVs, batteries, solar and wind energy and many other areas. It is even or ahead in AI, many areas of computing, and now many areas of biotechnology.
Thanks to Trump’s actions since taking office, China’s lead is likely to grow in many areas as he has adopted a policy of harassing and terrorizing many of our top scientists and the institutions that support them. He also has made the United States an incredibly uninviting destination for foreign scientists and researchers. It is the administration’s official position that it can arrest any non-citizen at any time for any reason, detain them as long as they like, and then send them back to their home country at the administration’s convenience.
Not many foreign researchers will likely want to come to the United States under these conditions. Many scientists already here aren’t anxious to stay under these circumstances either. A recent poll by Scientific American found that 75 percent of the scientists surveyed said they were considering leaving the country.
Friedman’s point that China is now number one as a technological power is an important one and people planning China policy really need to understand this fact. What Friedman gets badly wrong is his claim that China needs the United States because it needs the United States to buy its stuff.
Here he is following from the confusion expressed in a NYT article a couple of weeks ago by longtime China reporter Keith Bradsher. Bradsher told readers that China’s national government can’t help its local governments that are suffering revenue shortfalls because it lacks the revenue and is running a budget deficit. He also said that it is experiencing deflation.
These problems are actually mutually exclusive as problems. If China is experiencing deflation, there is no reason that it can’t just run larger budget deficits. Like the United States, China spends money in its own currency. It can just effectively print the money it needs to support its economy.
If it was experiencing inflation, then printing more money would be a problem, but Bradsher tells us China has the opposite problem, prices are falling, not rising. In this story, China doesn’t need the United States to buy its stuff, it can create demand domestically by simply running larger budget deficits.
There are obvious things the government could spend money on to improve the lives of its people, like increasing pensions and making the healthcare system better. It could also take a page from us and just send everyone $2,000 checks. If President Xi has a sense of humor, he could even put Donald Trump’s name on the checks.
There may be ideological reasons why Xi does not want to go this route, but then the problem is with his ideology, not the economy. Friedman is badly mistaken if he thinks there is some economic reason China needs the United States. There isn’t.
