The Obama administration has been pressured to take retaliatory action against China’s “policy” of devaluing its currency. What happens when a country devalues its currency? Simply put, Chinese exports are cheaper and more attractive when it keeps its yuan low, resulting in a trade imbalance. The less Americans sell, the worse off they are, and the more manufacturing jobs they lose to the Chinese – hence the misdirected anger.
Politicians have taken full advantage of this. No less than 29 senatorial and congressional candidates from both parties, according to a New York Times article, have variously painted their opponents as Chinese sympathizers who have exported American jobs. Ohio congressman Zack Space (D), West Virginia hopeful Spike Maynard (R), Nevada incumbent Harry Reid (D) among others have capitalized on worker frustration to gain voters.
An educated perspective demands that Americans look past the uneasy truth of their own shortcomings. “China,” as Time Editorialist Zachary Karabell pointed out, “is far from perfect and seeks its own advantage, but holding it accountable for our domestic problem is beyond anachronistic.” A similar scapegoating of Japan during the 1980s for taking away manufacturing jobs and has been a perennial way for politicians win over a credulous public.
The truth is the American economy has been deteriorating while China has been growing 10% annually over the last ten years. Long term Chinese investment in its infrastructure and education has been setting the stage for a robust economy, and now they are reaping its benefits. American students ranked 21st out of 30 industrialized nations in science literacy and 25th in math (based on the 2006 PISA report), and they lag Chinese counterparts in fortifying industrial and technological infrastructure. Would the fiercely proud Chinese have let ten years go by without rebuilding the World Trade Center? The famous innovation edge Americans hold may not last long.
One promising step has been taken by the current administration. President Obama launched an “Educate to Innovate” initiative in 2010 to improve student performance and participation in STEM (Science, Technology, Engineering and Mathematics) fields and invested in public/private partnerships to make it happen. A long-term investment in education can only benefit a nation in its future progress, but will it be too late? One thing is for sure: hostility towards another nation as an excuse to galvanize a nation may be politically natural, but is not an educated solution to improving the American economy.
UPDATE: The noted American policy analyst Fareed Zakaria supports the notion of shifting from American consumption to investment to improve the long term American economy in the November 1, 2010 issue of Time magazine: “[America] has managed to invest in human capital by taking smart, motivated people from around the globe, educating them…and then unleashing them in a dynamic economy.” He asserts the importance of going back to investing in education and training, research and technology, innovation and infrastructure, very similar to my original post above.