The Economist put this out today. I wonder what the comparable figures are for Brazil, Russia, India & China (not to mention the Gulf). This is not sustainable
Incidentally, note that Britain went from the biggest surplus to the biggest deficit in just 10 years. Shades of Iceland?
Ever since the White House recognized Beijing as the “real” China, there was always a fear that Taiwan would be seen as something left over from history. Congress put paid to that obliging the US to come to Taiwan’s aid. That commitment is still there, and even though the US doesnt want Taiwan to do anything to provoke Beijing, that commitment remains. The Chinese have built a powerful military machine against Taiwan and it is unclear if the US will have the staying power (or risk the consequences) in an actual war. Even so, Taiwan is an ally, and backing down from giving it the arms it needs would send exactly the wrong signal to China. The Chinese understand power – and respect it. It was overwhelming US superiority that had led them to speak softly on the world stage for so many years. Since the economic crisis, a new much more resurgent China is emerging. Despite this rise, the Administration doesnt have the flexibility to back down in Taiwan even if it wanted to (a fact Beijing knows full well). But even if the US were to find a way to dilute support to Taiwan, it would not appease China, but encourage more challenges from it. The US needs to recognize its enduring strengths that persist no matter how fast China may (or may not) be rising or how loudly they shout. So, sell arms to Taiwan. Meet the Dalai Lama. Speak up over Tibet and Xinjiang. Back India on a border dispute that China is provoking. And tell Beijing that cyberattacks (whether on Google or the White House) are not acceptable.
The Administration’s budget today contains some interesting things when it comes to NASA. It has correctly committed the state space agency in helping commercial rockets reach low Earth orbit. In doing so, it is ensuring American predominance in many of the space industries of the future. But it is also cutting back on the big projects that inspire nations, capitavate the imaginations of its children who will be its future scientists and engineers. America, it seems, is pulling back from its plan to put another man on the moon by 2020. In doing so, it is ceding the moon to China, which has the burning ambition and excitement to get there come what may. This is not about vanity (for either nation). Its about scientific progress and the high ground in future technologies. America’s retreat is a matter of great concern
Over the first year of his Administration, President Obama has done what he can to please a rising China. He has afforded it the greatest respect. He has refused to meet with the Dalai Lama. He has been silent as China has ratcheted up border tensions with India. He has even kept quiet over China’s blatant currency manipulation. But could reality be sinking in in Washington? China and America are indeed partners when it comes to economics. But on strategic terms, they are rivals. Recognizing this, the US has made the correct decision to provide defensive weapons to our ally, Taiwan, at a time when the Chinese military is pointing ever more missiles at it. We should not be cowed down by threats from Beijing of downgraded relations. Secretary Clinton has also had stern words with China on both sanctions against Iran and now on the cyberattacks on Google. It seems to me that the idealism of the first Obama year is giving way to the fact that this is a very fraught and uneasy relationship. China is not quite an enemy. But nor is it a friend. Managing China’s rise will be America’s toughest long term policy challenge in the coming century. The best way to do this is not to retreat into Fortress America and bemoan our shortcomings. Rather it is to play to our manifold strenghts. China still needs the US far more than the other way round. Furthermore, America, and its democracy has withstood the test of time. History will be the judge of whether China’s “communist” (state capitalist) system will do the same.
Over the past 20 years, the world has made a definite move to capitalism. (I do not consider recent proposals to reign in the worst excesses of the market as a repudiation of capitalism – not at all). However, has the world made a decisive shift to democracy? We had thought that it had, but that was more our own hubris at the end of the Cold War when we thought history had “ended”. In reality, we mistook the adoption of capitalism with the adoption of democracy. Many authoritarian regimes have adopted capitalism (China, Gulf) but never embraced democracy More recently, other countries who had begun democratizing slid backwards (Russia, Venezuela). The staggering success of some of these countries in delivering prosperity to their people suggests that democracy may not be inevitable. How can you deny China’s stunning growth? Or Dubai’s gleeming skyscrapers? It may be that to continue this growth, democratic freedoms will be necessary (and i believe that it will), but for citizens of these countries, the authoritarian model doesnt seem so bad right now (so long as it delivers).
China’s recent spat with Google should not come as a surprise. This is not some kind of complex dispute about internet search technology. China has (correctly) identified that Google is a threat to the Communist Party monopoly on power, in much the same was as the Dalai Lama or the Uighurs are. Its approach to Google will therefore be similar to its approach to all challengers – to act tough and stare them down. It may be that China can continue to cow down its opponents. If it can continue to deliver economic growth, it may be able to sustain itself in this manner for years or even decades. In fact, there is widespread support for one-party rule so long as it can deliver prosperity. But if it cannot deliver, or if its restrictions on its population serves to itself hinder growth, then all bets are off
While the US is focused on Massachussetts and its impact on the President’s domestic agenda, the world moves on.
I note that Secy of Defense Gates is in Delhi and headed on to Islamabad. The US is getting sucked into the India-Pakistan rivalry as it tries to sort its way out of Afghanistan. This was bound to happen. Pakistan is obsessed (illogically) with India. They are more concerned with India than they are with their own affairs. So any perceived loss to India in any way whatsoever just hurts too much.
This is what has happened in Afghanistan.
The Pakistanis see the overthrow of the pre 9/11 government as a disaster . In losing them, they lost what they call their “strategic depth” against an Indian attack, a dubious notion at best. Now, they have to deal with a pro-US Karzai government that has strong links with India. These links are only growing as India provides increasing amounts of aid to Kabul. Each Indian shipment of food drives the Pakistanis apoplectic.
Pakistan would like the US to somehow stop India from playing a part in Afghanistan’s reconstruction. This is not going to happen – India has too much at stake in what is going on over there. At the same time, Pakistan is hardly a guarantor of US interests once American troops go home. After all, it was under their proxies, the Taliban, that 9/11 was plotted and hatched.
Pakistan will not aid US interests until it is sure that there will not be a pro-Delhi government in Kabul. In fact, they are actively aiding anti-US Taliban forces – something the US understands very well, which is why we are now fighting a silent war in Pakistan’s own territory. But in order for real peace, we need Pakistan to back down and start playing ball.
Ultimately (and this will annoy my Indian friends), this means that US will have to play some kind of role in smoothening out India-Pakistan relations. That is not to say that the US should try and broker a Middle-East style accord. Rather, it will need to get Pakistan to start focusing on its own reality (ie that it is a failing state) and stop obsessing about India. Unfortunately, this will be difficult, as its the Army that is in real power in Pakistan, and they have a vested interest in playing toy solidier.
But if we want to resolve the Afghanistan issue, what choice do we have than trying to knock some sanity into Pakistan?
The unbelievable, though not unpredictable, has happened. The Democrats have lost the Massachussetts Senate seat of Edward Kennedy, possibly killing his very life’s goal of healthcare.
The healthcare bills up for discussion – both of them – have major problems, most notably they dont bring down the crippling costs of health. But an advanced industrial country should be able to take care of its own.
Rushing something through the Senate is being mooted. The Republicans may have done this if they were in the majority. But that doesnt make it right. In fact, it is not right.
However, the Seante has already voted – legitamately – on a bill. The House Democrats need to take a deep breath and vote the same bill. They need to understand that any short term unpopularity will be vastly smaller than the long term electoral gain they will enjoy for doing something that has elluded politicians for generations.
You may wonder why i, a fiscal conservative, support health care reform. The answer is that we need to get health care cost down as a percent of the nation’s GDP. The current system cannot do that. The new system will not help either initially, but it starts a reform process in place that ultimately will.
Beyond that, this country cannot afford a crippled Administration for the next three years.
Voters gave George W Bush a second term to govern. President Obama deserves at least a second year.
If this were a movie script, it would be rejected for being too unrealistic. But the unbelievable may actually be happning. Tuesday night could see the Democracts actually lose Edward Kennedy’s seat in the Senate, thereby killing his life’s dream of comprehensive healthcare, just when it was inches from the finish line. In doing so, it also promises to torpedo the Obama Presidency and a (short) period of Democrat ascendancy.
Have no doubt, I have big issues with the healthcare bill – both the House and the Senate versions. Neither really tackle the issue of exploding costs, and as anyone who has read this post knows, long term deficits and national debt are a critical concern of mine. But I also know that an advanced industrial country should also be able to take care of its sick. There has to be a solution here.
I also worry about the country having a wounded leadership at a time when it needs to command authority to deal with the critical economic situation (let alone deal with global threats). The President has staked everything on this, and to lose now would be devastating for him and the country.
The Dems need to do more than soul searching about wasting so many lost opportunities in 2009 (or excommunicate Coakley, whose laziness and highhandedness has been breathtaking). In order to save their political credibility, and that of this Adminstration, they are going to have to figure out a way to pass healthcare without that 60th vote.
Stalling tactics just dont seem right.
If the Democrats can’t hold on to Senator Edward Kennedy’s seat on Tuesday night (and i still cant believe i am even thinking this), the House will have no other choice but to vote the exact Senate bill, line by line. The Democratic Party will need Nancy Pelosi to pull off a legislative miracle one more time. And if the Dems cant stick together on this, heaven help them in the midterms.
For all my concern about the ballooning deficit and the long term decline in the dollar, I have perhaps overlooked writing about one of the most important economic developments of the past year. It does not concern an event that happened, but rather an event that didn’t happen. Last November, we were gripped with fear at the prospect of total collapse of the financial system. This did not come to pass. The markets didn’t collapse. Credit didn’t freeze in the way it could of. And a depression didn’t ensue. The President’s economic team, particularly Ben Bernanke, deserve credit for this. Decisive action was needed and the Administration provided it. I still maintain that a lack of a plan to restore long term fiscal balance will burden this country in ways not imaginable at present. But the choice to stimulate the economy in the immediate term (even if I question the need for both monetary easing and a fiscal stimulus) was the right one. It was infinitely better than ideas advocated by some in the Republican Party that would have triggered a Hoover-style collapse. Unfortunately for the President and his team, history tends to overlook events that didn’t happen.
