Richard D. Wolff, a professor of economics emeritus at the University of Massachusetts, Amherst, asserts that the reality for the United States is its economic dependence on the world’s second-largest economy, which deepens with China’s persistent campaign to become the number one economy in the world.
“On the one hand, U.S. policy aims to constrain China’s economic, political, and military development because it has now become the United States’ chief economic competitor and thus enemy. On the other hand, U.S. policy seeks to secure the many benefits to the United States of its companies’ trade with and investments in China.
U.S. debates over ‘decoupling’ the two countries’ economies versus the milder version of the same thing – ‘de-risking’ – exemplify, on both sides, U.S. policy’s split approach to China.
The difficult reality for the United States is economic dependence on the world’s No 2 economy that deepens with China’s relentless march toward becoming the world’s No 1. Likewise, China’s stunningly rapid growth over recent decades entangled it in a complex economic co-dependence with the U.S. market, the U.S. dollar, and U.S. interest rates.
In stark contrast, neither the Soviet Union nor Russia ever offered the U.S. economic opportunities or competitive challenges comparable to what China now does. In this context, consider World Bank 2022 data on GDPs in Russia, Germany, China and the United States: $1.5 trillion, $3.9 trillion, $14.7 trillion, and $20.9 trillion respectively.
China’s investment of its accumulating dollars in U.S. Treasury bonds helped to enable the fast-rising U.S. national debt over the last half-century. That helped keep U.S. interest rates low to fuel U.S. economic growth and its recoveries from several economic crashes.
China’s relatively low-priced exports reflected its low wages and active government development supports. Those exports to the United States helped prevent inflation over most of those years. In turn, low prices reduced pressures from employees for higher wages and thereby supported U.S. capitalists’ profits.
In these and still other ways, U.S.-China connections became deeply embedded in the functioning and success of U.S. capitalism. Cutting those connections would risk very adverse economic consequences for the United States.
Moreover, many proposals favoring such cutting are ineffective and ill-informed fantasies. If Washington could force U.S. and other multinational corporations to close up shop in China, they would most likely move to other low-wage Asian locations. They would not return to the United States because its wages and other expenses are too high and thus non-competitive.
Where they do go will entail sourcing inputs from China, already their most competitive producer. In short, forcing capitalists to leave China will help the United States minimally and hurt the Chinese minimally as well.
Closing off the China market for U.S. microchip makers is likewise a faulty fantasy. Without access to the booming Chinese market, U.S.-based companies will be uncompetitive with other chip makers based in countries not closed out of the Chinese market.
U.S. capitalism needs the inflow of most Chinese exports and needs inclusion in China’s markets. U.S. mega-banks need access to China’s fast-growing markets or else European, Japanese and Chinese banks will eventually outcompete the U.S. banks.
Even if the United States could force or maneuver G7 banks to join a U.S.-led exit from China, China’s banks and those of its allies in India, Russia, Brazil and South Africa (the BRICS) would control access to the profitable financing of China’s growth. In terms of aggregate GDPs, the BRICS are already a bigger economic system, taken together, than the G7 taken together, and the gap between them keeps widening”. -Richard D. Wolff, Asia Times
One wonders, given the Chinese intent on undermining the financial dominance of the United States and the coming surrender of NATO and Ukraine, how willing will countries throughout Europe be to economically cut ties with Washington, D.C., the World Economic Forum, and the Society for Worldwide Interbank Financial Telecommunications (SWIFT) in favor of aligning themselves with the developing BRICS economy further down the road.