The last presidential debate is upon us, and although I have little hope that these international economic issues will be raised or addressed substantively, here goes:
1. China. America has spent 40 years trying to manage China’s peaceful rise into the family of nations. Now China has the world’s second-largest economy. But it plays by different trade rules than America and (generally) Western Europe and even Japan. These include requiring companies to locate manufacturing there and share technology; lax protection for intellectual property; a variety of protectionist measures to keep out American exports and wall off so-called strategic industries from competition; state-owned companies, and, yes, currency manipulation.
Do we keep the status quo, which has been good for American “consumers” and CEOs, but terrible for jobs and the middle class? Do we try to play China’s game with more protectionism here (why, for god’s sake, was the new Bay Bridge built in China?)? Just cracking down on currency manipulation — if one could even do it — won’t be enough.
2. Energy and climate change. Both candidates have talked as if America can really drill and frack its way to energy “independence.” No serious expert believes this is possible. Even if it were, we would burn up the planet. The candidates don’t dare tell the truth: Most of the remaining fossil fuels are safer if left in the ground and we make the transition to a society that burns less greenhouse gases. Beyond this, we are in a world that will see increasing destabilization as historic oil producers hit peak and nations without much oil, notably China, try to lock up supplies that their neighbors also wants. The world economy in the 21st century can’t run on the fossil-fuel depletion rate as it did in the 20th century. Some intelligent responses from leaders would be refreshing.
3. International banking. Many of the elements that caused the financial panic remain in place: big banks, derivatives, the shadow banking system and assorted frauds. Dodd-Frank has barely been implemented and leaves the banks too big. The Basel accords may actually encourage more risky business and gambling. And all these playerz are globally interconnected and backstopped by U.S. taxpayers. How about some real reform? Bonus points: Transaction taxes and closing down international tax-dodge havens (awkward!).
4. “Strength.” We’ll hear much about this during the debates, but what does it mean? Is America stronger having committed $3 trillion to wars in Afghanistan and Iraq that have failed to leave safe or even coherent nations in their wake? It has left us less safe and poorer. On the other hand, China’s Deng Xiaoping believed a “rich nation” necessarily came before and ensured a “strong army.” So China has been happy to watch us bleed ourselves and even help finance it. Real strength would mean nation-building at home, being mindful of the cost of conflict, and undertaking an even greater effort to increase our exports. Nah. Better to worry about Putin’s head rising over Alaska.
And Don’t Miss: Bank CEOs fear the fiscal cliff they don’t understand || NY Magazine
Today’s Econ Haiku:
Windows 8 gamble
Giants reinvent themselves
GM rolled snake eyes