The FT points out that US businesses wish to cooperate with China while the politicians in both parties want to compete:
America’s public and private elites are no longer as one on China, if they ever were. In Washington, vigilance to Beijing is the nearest thing there is to a bipartisan verity. Democrats, no less than Republicans, brood over Chinese gains in artificial intelligence and hypersonic missiles. Successive governments have tried to knit a web of Asian and Australasian friends by way of counterweight. Trump’s tariffs remain largely in place.
In Wall Street and beyond, though, commercial imperatives are reasserting themselves. There is no outright contradiction here: it is not as if the government barred or even discouraged all business with China. There is no lack of logic, either. If US firms don’t seize the openings, ones from Europe or elsewhere will.
Among some people on the left, the term ‘cooperation’ has a much more positive vibe than ‘competition’. They see the business world as ultra-competitive, and that often pushes their interests toward public policy. But what if they have it backwards? What if the business world is cooperative and the political world us ultra-competitive? After all, businesses are trying to do deals with people in China–mutually beneficial trades. That cooperation. Politicians in American want to hurt the Chinese economy, to prevent China from threatening the US position as being number one in the world. They do so with high tariffs on Chinese goods, and sanctions aimed at destroying Chinese tech firms such as Huawei.
Businesses are much less likely than politicians to engage in zero sum thinking. If China booms, there’s more opportunity for all US businesses to make profits in that growing market. On the other hand, there can be only one country that has the most powerful military on Earth.
This difference between business and politics shows up in many forms. While a growing economy helps all firms, the size of Congress is fixed at 535 senators and representatives. One more for the Democrats means one fewer from the Republicans. Politics is zero sum, a dog eat dog world.
Many people inappropriately apply sports analogies to business “competition“. When the Milwaukee Bucks played the Brooklyn Nets last night, the Bucks players stood in front of Nets players, trying to physically impede their progress. This type of “competition” is pretty rare in the world of business. You rarely see UPS organize blockades outside FedEx warehouses, trying to impede their trucks from delivering goods.
Most business advertising is aimed at making the firm’s products seem more desirable, to encourage cooperation with consumers and suppliers. A large share of political advertising is aimed at destroying the reputation of the other candidate—attack ads. US government sanctions against China are aimed at preventing Chinese firms from doing business, not at making the American “political product” look more desirable.
While the Bucks and Nets compete on the basketball court, they do very little competing in the business world. Indeed the two firms must cooperate at least to some extent; otherwise the league would not even be able to agree on a schedule of games. To the extent that the Nets compete with anyone (very indirectly), it is by trying to be attractive enough to Brooklyn residents that they will chose Nets games over other Brooklyn activities. They aren’t really even trying to lure Milwaukee fans away from the Bucks. That’s a very mild form of ‘competition’, if you insist on using that sports term. In a business sense, Nets star Kevin Durant “competes” only by trying to make his game look more appealing to fans at the nearby hockey game. (From a business vantage point, the GOAT debate would be whether Michael Jordon or LeBron James was more effective at luring other sports fans to the NBA.) In a business sense, Nets and Bucks players cooperate to produce “entertainment”.
At the end of the article, the FT issues a warning:
If what beckons is less a cold war than a lukewarm one, with contact maintained through economics, so much the better. But the US has not had to wrestle with such ambiguities before. It has never been so tied to an existential rival. As a doctrinally communist state, not a titular one, Soviet Russia wasn’t waving in foreign wealth-managers by the Audi-load. America was a relatively closed economy when it was up against wartime Germany, Imperial Japan and the Spanish empire.
If anything, there is something of turn-of-the-20th-century Europe about the US and China: the same economic integration and political froideur, the same sense of countries at once entwined and not. There is no reason the contradictions should unravel with similar force, but nor can they can be denied or glossed over.
I can’t know for certain who is right on the China issue, although my sympathies lie with the business perspective. But we do now know with almost 100% certainty who was right in the early 1900s. The Europeans businesses that favored globalization were right and the nationalists politicians were wrong. Not just the German nationalists, pretty much all the European leaders were wrong.
PS. BTW, when considering last night’s game keep in mind that the Bucks had a number of key injuries and the Nets shot a ridiculous 53% from three, in . . . oh wait . . in losing to the Bucks by 23 points. 🙂
READER COMMENTS
Rebes
Oct 20 2021 at 9:48pm
This is a brilliant post, best characterization of our relationship with China that I have seen. That’s all I have to say.
Jose Pablo
Oct 20 2021 at 10:20pm
“to prevent China from threatening the US position as being number one in the world.”
This is very interesting. What does it even mean to be “number one”?
What is “US” (whatever “US” means in this contest) getting from being “number one”? After all I don’t really think that the Chinese military might is the key element in keeping the “exorbitant privilege” and if not this, what else?
Why is the possible invasion of Taiwan so terrible to US? or any chinese makiirrational claim on the South China Sea? Are they worse than the Chinese making a mockery of the 1984 agreement with Britain over Hong Kong?
Are really international affairs just about what president has it bigger? That would be very sad. Maybe every President in the world should be a woman. (I, obviously, mean a “bigger” military).
Scott Sumner
Oct 21 2021 at 1:17pm
Just to be clear, I believe a Chinese invasion of Taiwan would be terrible, just as the Russian invasion of Ukraine was terrible. My fear is that we would not respond in the way that we responded to the Russian invasion, rather we might stumble into war with China.
Jose Pablo
Oct 21 2021 at 1:26pm
Sure it would be terrible. Just not for the Americans.
And your fear is the right one since this invasion (like Ucrania’s) would NOT be terrible, in particular, for the Americans that will die there (or here) if USA stumble into war with China because of that.
Jose Pablo
Oct 20 2021 at 11:09pm
Just by chance I came across a Michele Huemer’s post that maybe explains the US “political” position versus China.
Paraphrasing Huemer:
P is outrageous
Outrage attracts votes
Therefore P
Obviously, it does not work for business since they are not looking for votes.
https://fakenous.net/?p=2620
MarkW
Oct 21 2021 at 7:35am
I think this is a bit of a misdiagnosis. The U.S. government’s attitude toward China before Xi was much less adversarial — similar perhaps to the attitude toward Japan in the 1980s (concerned about economic competition and with some protectionism as a result, but mostly friendly relations otherwise). Look, for example, at the U.S.-China relations portrayed in The Martian (2015) as an example of how things felt just half a decade ago.
And the concern now is not so much with China becoming wealthier and more militarily powerful, but becoming so while also becoming more internally repressive and externally aggressive. And it’s obviously not only the U.S. — China’s relations with its neighbors Australia, Japan, and South Korea have soured too (despite the fact that none of them have ambitions to be the leading global power). So I think this is much more about Xi’s increasing authoritarianism than it is about great power competition per se.
Scott Sumner
Oct 21 2021 at 1:15pm
And the concern now is not so much with China becoming wealthier and more militarily powerful, but becoming so while also becoming more internally repressive and externally aggressive.”
I agree with that (although the US doesn’t much care about internal repression, indeed President Trump encouraged the Chinese to put a million Muslims into concentration camps.)
Regarding the other countries you cite, they have not responded with high tariffs and sanctions on China. In those countries, the business perspective is winning.
Jose Pablo
Oct 21 2021 at 1:40pm
No, the US does not care about internal repression. Europe neither. Not even enough to boycott the Olympics.
Regarding “externally aggressive”: fact based, has been any country in the world, more “externally aggressive” than the US since the end of WWII?
Can the rest of the countries of the world together “match” the capacity of the US to “project aggression”?
Is there any reason why the US “should” be the only country in the world, “externally aggressive”? if so, which one?
rsm
Oct 22 2021 at 5:29pm
Could you criticize Xi in China like you criticize Biden on this blog?
Can mainlanders see this blog, because it mentions the Tiananmen Square incident?
MarkW
Oct 21 2021 at 2:52pm
I agree with that (although the US doesn’t much care about internal repression
I don’t think that’s true. People care at least in the sense that the Chinese regime’s actions (not just with the Uighurs but also the crushing of freedoms in Hong Kong, the absurdly thin skinned censorship of anything the regime dislikes — even Winnie-the-Pooh — and the recent un-personing of Chinese movie stars and billionaires) has created a sense among Americans that the Chinese government is becoming a scary, repressive, bad actor. And that’s completely apart from the barely veiled threats against Taiwan and Australia. Oh, and, preventing genuine investigations into Covid-19 origins. And all of this — one thing after another after another — makes it very hard for free-traders to push back against tariffs.
As far as the business community goes — they may want to ignore the repression, but when a globally famous business figure like Jack Ma can instantly become persona non grata, just how smart and safe it is to engage in investments in and deal-making with Chinese businesses? It’s interesting that the article that triggered Jack Ma’s cancellation was published in Apple Daily. I guess there’s no risk of that happening again. (Yikes! It seems that maybe Ma got off easy).
Jose Pablo
Oct 21 2021 at 5:47pm
Mark, I understand how much pleasure one can get from “outrage”, but with a cold mind:
“Uighurs” vs “native Americans” (until 1924)
“Winnie-the-Pooh” vs “Dr Seuss”
“the un-personing of Chinese billionaires” vs “the Congress “grilling” of Mark Zuckerberg (or Bill Gates back in the late 90s)
“veiled threats against Taiwan and Australia” vs the invasion of Iraq base on nonexistent weapons of mass destruction (one should assume that actions are more relevant that words).
“Jack Ma’s cancellation” vs Kathleen Stock cancellation (to use a non-USA example although it would not be difficult to find a few here).
Again, with a cold mind, are we that different from China?
MarkW
Oct 21 2021 at 6:53pm
Again, with a cold mind, are we that different from China?
Oh yes, extremely different. You seem like one of the many leftists who pushed ‘moral equivalence’ with the USSR before the end of the cold war. That was equally absurd. Your comparisons just don’t stand up to any scrutiny. Zuckerberg vs Ma? Really!? Is Zuckerberg out of his leadership position, and is it verboten to even discuss Zuckerberg on the Internet in the U.S.? Which American newspaper has been shuttered by the government, with its main editorial staff under arrest and facing long prison sentences? Does the U.S. have an unelected president for life who cannot be ridiculed or criticized for fear of imprisonment?
Do you really not see the vast gulf between the U.S. and China — or just find it convenient to ignore it? Leaving the U.S. out of it, you have to at least recognize (I think!) the increasing Chinese authoritarianism. Jack Ma was un-personed for an interview that was reported in Apple Daily in 2017. Now Ma has all but vanished from public life, Apple Daily has been forcibly shuttered, and it’s top staff arrested and facing long prison terms. That’s the direction the Chinese state has been going during the last few years under Xi. Let’s not pretend otherwise.
Jose Pablo
Oct 21 2021 at 8:30pm
Just for the record, I cannot be any further from being a “leftish” but, in any case, that “argument” is a textbook example of an “ad hominem fallacy”.
But you are, maybe, right: whether the Ma example is similar or not to the Zuckerberg grilling + the building of a guillotine in front of Bezos’s house + the attacks on Bill Gates following decades old “flirtatious” emails, is a “never-ending discussion” that goes nowhere.
And you are definitely right when you say that the Chinese regime is totally unacceptable. But I don’t think that more so now that back in 1989 when they crashed the Tiananmen protests killing between 2,000 and 3,000 people. After all, is very difficult to argue that the Ma’s cancellation is “more authoritarian” than 3,000 killings.
And, in any case, it can be factually defended that the Chinese score better in many other counts: number of foreign countries invaded in the last century, use of nuclear weapons against civilians or ethnic cleansing of native populations, to mention a few, relevant, ones.
Claiming the moral high ground is very tricky, indeed.
MarkW
Oct 22 2021 at 11:27am
And you are definitely right when you say that the Chinese regime is totally unacceptable. But I don’t think that more so now that back in 1989
I’m not arguing that the Chinese regime is at its worst now (and Tiananmen isn’t even anywhere close to the worst compared to the Great Leap Forward and Cultural Revolution periods). But China under Xi is clearly becoming sharply more repressive, aggressive, and authoritarian than it was before.
And, in any case, it can be factually defended that the Chinese score better in many other counts
Yes, for example, the Chinese government is factually at the top of the charts when it comes to ‘number of its own citizens starved & murdered during the past century’ with a score of probably 50-100 million. Not Stalin’s USSR could compete at that level.
Just for the record, I cannot be any further from being a “leftish” but, in any case, that “argument” is a textbook example of an “ad hominem fallacy”.
I didn’t say you were a leftist, just that you seemed like the 1980s leftists who pushed ‘moral equivalence with the USSR’. And you do! You’re pushing a very similar ‘moral equivalence with China’ argument here (using far-fetched comparisons and cherry-picked data).
This argument gives me no pleasure, BTW. There seems a decent chance that my own family will have Chinese connections nearly as close as Scott’s. But there is no good reason to pretend not to see what is happening.
Phil H
Oct 22 2021 at 1:26pm
“China under Xi is clearly becoming sharply more repressive, aggressive, and authoritarian than it was before”
Once again with this one… Not really, it’s much more that the world cared much less before, so it didn’t get reported in the western newspapers as much. Jack Ma’s fall from favour is striking, but the reason billionaires weren’t being shut down ten years ago is because there weren’t really any billionaires. Millionaires *were* being disappeared then. Apple Daily is striking because it’s in Hong Kong, but the Caijing saga was just as big, 10 or 15 years ago. Xinjiang yes, but remember Tibet around Olympics time? And Taiwan sabre rattling happens like clockwork every five years. It used to hit fever pitch at Taiwan election/arms deal times.
This claim that China has taken a sharp turn is not very well supported. China has always been like this.
Scott Sumner
Oct 22 2021 at 1:41pm
“People care at least in the sense that the Chinese regime’s actions (not just with the Uighurs but also the crushing of freedoms in Hong Kong, the absurdly thin skinned censorship of anything the regime dislikes — even Winnie-the-Pooh — and the recent un-personing of Chinese movie stars and billionaires) has created a sense among Americans that the Chinese government is becoming a scary, repressive, bad actor. ”
That’s a complete non-sequitor. Yes, China is a repressive bad actor, just like America’s ally Saudi Arabia is a repressive bad actor. But that’s not why we treat China like an enemy. My point is that US officials don’t actually base their policies on compassion for the people suffering in Xinjiang, to suggest otherwise is naive.
Also, do you find it “scary” that President Trump encouraged the Chinese to put a million muslims into concentration camps?
Thomas Lee Hutcheson
Oct 21 2021 at 7:44am
The difference makes a tiny amount of sense. The falling ratio of US to Chinese GDP is a collective problem that business relations with China are not to the firms. There is an externality
The real problem with US politicians’ approach to China is that they are not in fact focused on increasing US GDP as they could be by ramping up immigration, reducing barriers to trade and investment, eliminating structural fiscal deficits at federal and state levels, reducing obstacles to commercial and residential development in cities, and other ne0-liberal stuff.
Jose Pablo
Oct 21 2021 at 1:21pm
“The falling ratio of US to Chinese GDP is a collective problem”
Why is this a “collective problem”? (whatever “collective problem” means)
China population: 1,452 mi
US population: 329 mills
The only possible way of keeping Chinese GDP below American GDP (letting apart stopping the actual ratio from keeping falling) is by “condemn” the Chinese to be 5 times poorer than the Americans (well, technically you should use the PPP adjusted GDP, but you get the idea)
What do we have to gain “collectively” by keeping 1.5 billion people in poverty (relative to us at least)? is that even moral?
I, personally, think it is immoral, but going further, it does not make any sense at all: the richer the Chinese, the richer the Americans. An strong, innovative, ingenious, open, market oriented society benefits from a richer world (and China IS almost 20% of the people of the “world”)
steve
Oct 21 2021 at 9:33am
I think you put this up just so you could have a picture of the Bucks winning their first game. Nice picture but what you really should have put up is the one with Connaughton dunking. Didnt know he had it in him.
Steve
Scott Sumner
Oct 21 2021 at 1:11pm
You don’t watch many Bucks games. He dunks quite frequently.
David S
Oct 21 2021 at 10:47am
I would be careful about seeing too much consensus in the position of U.S. politicians towards China. If Mitch McConnell saw an opportunity to gain power by staking out a pro-China stance on something he would go for it. Your argument, and the point raised by FT, is valid for the time being, and I’m worried about hawks in both countries. In the meantime, Americans get to pay more for washers and dryers because of stupidity that Trump initiated and Biden is perpetuating—truly a heroic example of bipartisanship.
BTW, there is a small typo in your first paragraph
“…political world us ultra-competitive”
Richard A.
Oct 21 2021 at 4:34pm
Japan does not seem eager to increase trade restrictions on China. Japan, which was so falsely demonized as a highly protectionist country in the 80s is moving more and more in the direction of free trade while we are moving more in the direction of protectionism. Japan has a major trade agreement with the EU. We are too protectionist to have such an agreement. We can’t even have a major trade agreement with the UK–our government is too protectionist to allow that.
Unlike the US, Japan is engaging the world with trade, not with bombs.
MarkW
Oct 22 2021 at 11:35am
Yes, the U.S. under Trump and now Biden is very bad on free trade (unfortunately, I think, because the median American voter is now very bad on trade — remember when Hillary when from bragging about negotiating the TPP before turning around to oppose it when running in 2016?)
Japan can ill-afford to erect trade barriers with China. But at the same time, from a few days ago:
Japan Leader Calls for Greater Military Capability, Spending
John S
Oct 21 2021 at 8:26pm
Michael JordOn [X]
Michael JordAn [Y]
Also, don’t teams compete for arena/jersey sponsorships and merchandise sales? For example, the Nets just signed a jersey patch deal for $30MM/yr, while the Bucks got around $10MM for Motorola (which sponsored the Nets last year).
https://en.wikipedia.org/wiki/List_of_NBA_jersey_sponsors
Pro sports are really weird to compare economically to other industries, particularly at the franchise level, since post-season competitiveness often directly conflicts with profitability. (Ex: Is the ROI on any team’s luxury tax bill positive? The Nets will pay $110MM this year, more than double their gate receipts for 2019-20.)
rsm
Oct 22 2021 at 4:03pm
Why don’t we beam free, uncensored, encrypted speech into Hong Kong and China? Don’t totalitarian regimes fear their people talking amongst themselves more than war?
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