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Posted May 14, 2009
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Brilliant study of economic realities
This is an excellent study of US-China relations, written by the author of the brilliant books In praise of hard industries and Unsustainable: how economic dogma is destroying American prosperity.Was this review helpful? Yes NoThank you for your feedback. Report this reviewThank you, this review has been flagged.
Fingleton says that China follows the East Asian model. This is mercantilist, protectionist, and generates high savings because of curbs on consumption. So its savings average 40% of GDP, which they largely invest in manufacturing.
Since 1979, China's export revenues have grown by a record 16% a year. In 2007 it exported more than the USA (in 1996, the USA had out-exported China by four to one, in 1956 by ten to one). China is now Japan's largest trading partner (in 1992, Japan did five times more business with the USA than with China). China's foreign currency reserves are the largest in history - $1.2 trillion in May 2007 and its current account surplus is a world-record 9.5% of its GDP.
By contrast, the US current account deficit in 2006 was a record 6.5% of GDP, the second largest by a major nation in peacetime (in 1924, Italy's was 7.7%). US imports exceed exports by two to one.
Fingleton sums up the comparison, "in the last four decades those advanced nations that have been most faithful to laissez-faire - the United States and Britain - have been notable for economic mediocrity, if not downright dysfunction. Their currencies have on balance fallen precipitately, their trade positions spun out of control, and they have lost the advanced manufacturing industries that provided a bedrock of well-paid secure jobs to support broad-based prosperity."
But the US capitalist class keeps on outsourcing, shutting US industry and moving jobs overseas. Its sole aim is to maximise profit, whatever the cost. As Fingleton notes, "the big gainers are . just a few thousand top corporate executives who reap huge returns via bonuses and stock options." They refuse to invest in industry because most of its returns go to workers in higher wages, not to shareholders. "Globalism is clearly not delivering the promised economic dividends for the American nation."
He calls for a manufacturing renaissance and for tariffs to protect the USA against destructive imports. He calls his final chapter, 'Globalisation or democracy': that is indeed the choice.