China: on an accusation of mercantilism

Mercantilism and China? I have to say that the term, now used to describe China’s commerce with other countries, is pejorative. England and Holland were mercantile trading nations during the industrial revolution and their time as exploiting colonial powers. Japan and Korea have also been accused of this type of government-business co-operation as they deliberately focused on exports in order to kick-start their economies and lift their GDPs.

Sounds to me like it might be a developmental thing: a step that developing nations might take along their road to economic success.

Perhaps the only difference between mercantilism and a modern international freer-trade regime is time. And politics of course. The problem today appears to be one of dys-synchrony in development rather than of economic morality. An indicator of globalisation rather than of selfishness.

Today, China is accused of employing mercantilist practices as a means of keeping her currency low in a beggar-thy-neighbour strategy to maximise exports and minimise imports. Now the USA is crying foul. Pot calling the kettle black if you ask me. The good old USA has ruthlessly exploited developing markets all around the world for years. How else could a poor peasant in China develop a taste for Coke and Mcdonalds?

I have lived and worked in China for six years. I have to tell you also that I am no economist. However, sometimes generalists like me find it easier than the specialists to see the big picture. And the big picture I see in China is a little different from the one I read about in the New York Times or the Wall Street Journal. Sometimes grand old institutions betray their age. You know, like lately conservative grannies who conveniently hide embarrassing details of a miss-spent youth from the younger generations.

Suddenly, the USA has got religion. She is becoming moralistic. She is being squeezed by that nasty communist regime across the Pacific and her pride is hurt along with her savings. Well, she shouldn’t have been so profligate with her money when she was young anyway. Now she has to pay the piper … and the interest bill as well. Hypocrisy is alive and well in Washington.

Young China (forget about her 5,000 year history, I am talking post 1949 revolution China which was isolated and pilloried by the USA for years) is behaving with all the arrogance of youth. Flaunting her new found strength and rubbing it in our faces. We, the West, deserve this kind of treatment. Our past arrogance is coming back home to bite us.

Now we will have to deal with China as an equal, without the support of our own collective mercantilist policies whereby countries like Australia (in the pre Hawke-Keating years) encouraged exports while simultaneously protecting a less-competitive manufacturing sector.

That Holden in a suburban garage cost more than it should have in those days.

Not so long ago, China was seen as giant market for American goods. An opportunity for American industry to enrich itself selling stuff to millions of Chinese - the largest potential market in the world. And along the way, America told itself that it would teach young China about capitalism and democracy and human rights and whatever. Not a thought for the pride and aspirations of the Chinese people themselves.

But things haven’t worked out as the US planned. China is calling the shots now, and the Americans don’t like it. And President Barack Obama and the people of the USA, who have been handed a shit-sandwich by the Wall Street bankers, are left to clean up a mess of their own making.

Labelling China’s self-interested economic policies as mercantilist today is the same as me accusing my own Irish-Catholic ancestors of religious bigotry yesterday. We have to understand where China is coming from now, just as much as I must understand where my forbears were coming from then.

Yesterday, America was the dominant trader on Commercial Street.

Today, a new kid on the block is challenging Uncle Sam.

We should try to remain friends with both parties.