Arthur Laffer, of Laffer Curve fame, writes about the highly politicized trade deficit in today's Wall Street Journal:
[O]nce you realize that the trade deficit is, in fact, the capital surplus you would clearly rather have capital lined up on our borders trying to get into our country than trying to get out. Growth countries, like growth companies, borrow money, and the U.S. is the only growth country of all the developed countries. As a result, we're a capital magnet....So what's not to like about the U.S.? Whether you're an American or a foreigner the U.S. is the choice destination for capital. That's why we have such a large trade deficit. The only way foreigners can guarantee a dollar cash flow to invest in the U.S. is if they sell more goods to the U.S. and buy less goods from the U.S. Our trade deficit is not a sign of a structural flaw in the fabric of the U.S. economy but is instead a stark reminder of our privileged status as the most pro-growth, gree market, rule of law economy the world has ever known.
Such words couldn't have come at a better time, for across the Atlantic, William Rees-Mogg is prepared to give the 21st Century to the Chinese (via the Corner):
The 18th and 19th centuries were the British centuries, in which industrial, political and imperial development in Britain shaped the world. The 20th century was the American century; the United States changed the world, providing a margin of victory in two world wars, and developing all the major new technologies: telephones, automobiles, television, jet aircraft, the internet and so on. We all assume, as Washington undoubtedly assumes, that we are still living in the era of American hegemony, though it is already clear that China may be an emerging superpower.
Rees-Mogg goes on to talk about apples — which is helpful, as he's found an orange. America ascended and invented half the modern world because it is a capitalist democracy, offering cumulative individual liberties unparalleled in the world. Britain's 19th-Century provision of liberal common laws and an increasingly parliamentary aristocracy certainly gave it phenomenal productive strength, and though the English created an iron empire, it was one distinguished in procession by its civilization of the indigenous and in recession by its humility before the same. Rees-Mogg uses the example of Japan for his own ends but in reality, Japan — a capitalist democracy set, postwar, in the American image — produces three times as much as China with one tenth its population.
China is halfway between kleptocracy and fascism, perilously close to the path Japan took in its early 20th-Century Meiji period: exchanging small amounts of curtailed liberty for state power. Elsewhere on the Corner, John Derbyshire echoes these sentiments. Prosperity under tyranny is hollow, short-lived and deceiving. The Red Dragon will flex its muscles but like any dictatorship its population, bound and gagged, will be inadequately self-supportive, the country requiring conquest to sustain any industrial growth. To that end, the 21st Century will only be "China's Century" if all capitals goosestep, with appropriately red color, to Beijing's cadence.
One note to Derbyshire: is China logical or convenient? From his paper trail, Rees-Mogg is a reasonable man, but one has to wonder that if Swaziland were the only remaining country that could half-conceivably step on America's toes, know-it-alls would be talking about "Swaziland's Century."
KLEPTOCRACY, INDEED: More from — where else? — Craig Brett on China's potential.