The Money Man’s Burden
The comment reproduced below was posted to Marginal Revolution (the blog of a pair of economics professors who dance mainly on opposite sides of the libertarian divide), in response to some thoughts on ‘fixing’ the trade imbalance with China.
The poster, a US Naval officer, makes a very rational, non-conspiracy-laden case for the sturdiness of the seemingly ludicrous current fiscal situation, where the USA depends on poor nations such as China to finance our deficit spending. Essentially, he frames the current account deficit and the associated dollar hegemony as a mild tax on global trade, paid to ensure security of transporting manufactured goods against the very real threat of service disruption, a service that no military besides ours is currently capable of providing (and in fact as the relative capabilities of non-state actors increases, this service will become increasingly costly to provide and difficult to match). The very first US standing military presence was created explicitly to halt piracy (after bribing them didn’t work out so well), and that role has continued more or less uninterrupted to this present day. I disagree with the commenter about how sudden the move between security regimes would have to be, but after reading I don’t disagree that it’s unlikely to change for a significant period of time. Europe doesn’t have the desire to be a military superpower on our scale, and China might have the will but would need to increase it’s military spending by at least a factor of twenty in order to rival ours… even accounting for lower labor costs (ahem), there’s much to be said for experience in these matters…
So, take this an example of why the rampant China fear (something I’ve succumbed to myself from time to time) is at least partly hype, inflated because it is a convenient tool for protectionists and xenophobes and other vested interests…
The original comment, after the jump Read the rest of this entry »
