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Once again, the refusal to face geopolitical reality was in full view, this time from Hillsdale College Economics Professor Robert P. Murphy. In this piece posted by the Ludwig von Mises Institute, Murphy puts forth some easy straw men on trade with Communist China, and then knocks them down. If he actually dealt with the real objections to trading with the Communists, he might have been harder to refute. Then again, he might have also realized he would have had no case.
I guess I shouldn't be surprised that one of the leading libertarian organizations in the world would get the U.S.-Communist China relationship so terribly wrong. Far too many libertarians (particularly the economic-based ones) prefer to see this as a free-trade or free-market issue; as if Communist China is no different than, say, India. If what follows sounds a lot like my reaction to Lawrence Kudlow's disastrous column from half a year ago, that's because Murphy makes some similarly foolish points.
We'll begin with Murphy's first argument about the reason no one should concern themselves with the nearly $200 billion trade deficit we will have with Communist China for this year when it ends in two and a half weeks. Every tried and true free trader has used this (and it is not without merit, up to a point): "There is nothing intrinsically disturbing about a trade 'deficit' or 'imbalance' between any two countries, in the same way that there is nothing shortsighted in my own practice of consistently buying more goods from McDonald's than I sell to the restaurant chain."
Murphy is tipping his hand here on what he thinks of Communist China, i.e., that it is not a hostile nation bent on defeating us in Cold War II, but just another economic actor on the world stage. That’s why he can equate the regime to McDonald's. However, I would humbly submit that if MacDonald's had a history of ties to al Qaeda that included buying unexploded American cruise missiles from it and laundered Osama bin Laden's drug money for him, even Professor Murphy might consider switching to Burger King.
Murphy then notes, correctly, that one cannot have a trade deficit without a capital surplus, i.e., the nation who exports more to you than they import from you has to invest in your economy to make sure you have the currency to buy their goods. He then asserts, "Most people think that trade surpluses (in goods and services) are good, as well as net capital inflows (i.e., when foreigners invest more in America than vice versa)." In point of fact, we in the anti-Communist community don’t want Communist China "investing" in any part of the American economy, or vice versa. Again, it's the difference between treating Communist China a just another country and seeing it for the enemy it really is.
Murphy does have the guts to discuss the argument that the trade deficit helps finance Communist China’s military and his response sounds reasonable at first: "It's not as if the Chinese government says, 'This year let's set military spending equal to whatever our trade surplus with the US happens to be.' If American consumers bought fewer toys and TVs from China, would that really thwart the ambitions of their political rulers, or would it simply make their people poorer and increase international tensions?"
Kudos to Murphy for recognizing Communist China wouldn't care a whit about its own people if forced with that decision. However, he makes the mistake of assuming Communist China is interested in making its people richer now. In fact, the Chinese Communist Party's only concern is its own well-being. Nearly all of the economic gains in recent years have been siphoned off by the Communists themselves, or been poured into their Potemkin cities on the Pacific Coast. The improvement of the people at large is not on the cadres' agenda. Would the Communists take the money from the Potemkin cities to fund their military if we stopped sending over $200 million? Probably, but at least it would make the regime's deceptions harder to maintain, and thus make it easier for the Chinese people to liberate themselves from the CCP. Sadly, Murphy doesn’t even seem to consider this scenario.
Murphy then addresses the concern over Communist China's American debt holdings, but he makes the same mistake by comparing the Communist regime to a loan-issuing bank. Again, a bank's interest is in making a profit; it could care less about you individually. Communist China, by contrast, considers the United States to be the enemy; profit motive is not what they have in mind.
Next up is the matter of wages, and here Murphy simply ignores the real problem. Nowhere is his supposed refutation of concern over Communist China's depressed wage rates doe he mention two of the most critical reasons for it: the lack of independent labor unions and the widespread use of "reeducation" camp prison labor. Murphy would have us believe that Communist China’s comparative advantage in certain products is a natural market effect, where in fact it is largely resulting from the above distortions to the free market imposed by the Communists.
Murphy's arguments on the Communists' deliberately devalued currency hold a little more water, if we were just talking about the U.S. and Communist China. In fact, the real story of the devalued currency is largely missed: it has greatly hurt the exporting ability of America's other trading partners, including some of her largest and most important allies. For the American consumer, that’s not very important. For an American worried about bringing together the democratic world to face the Communist threat, the fact that said allies are far weaker economically than they would be in an unfettered market should give everyone pause.
Murphy's last point is a dismissive reaction to the intellectual piracy issue: "the notion that our national security is at stake because of bootlegged DVDs is ridiculous." If we were only talk DVDs, he'd be right. The trouble is counterfeiting goes well beyond home entertainment: "more than 90 percent of software (in Communist China) is pirated, the Business Software Alliance says" (Seattle Times). Given Communist China’s determined effort to achieve a high-tech economy and a high-tech military (second item), concern about stolen software is anything but "ridiculous."
Murphy ends his piece with an absurd argument: "Let me end simply by asking the concerned reader, do you think our free enterprise system works or not? After all, if you really do believe that blind faith in market forces will be trumped by crafty foreign politicians who intervene in their own economies, then shouldn't you welcome our domination by self-proclaimed communists?"
No one has to lose faith in the free enterprise system to wonder if it can withstand a regime that not only subverts it domestically, but also has as its central foreign policy aim to take control of the world from its most well-known implementer: the United States. Would Professor Murphy be so cavalier about free trade with, say, the Soviet Union? Or would he instead recognize that we were correct in (mostly) steering clear of selling them the rope they needed to hang us?
Communist China is, if anything, a more dangerous threat to us now, in the Second Cold War, than the Soviets were in the First. Yet Murphy refuses to see the danger, and thus treats the Chinese Communist Party like any other government. It is nothing of the kind; the CCP is an evil institution that cares not how many people it has to kill in order to maintain its power. One does not trade with such a monster. Instead, one isolates it economically, contains it geopolitically, and works with the monster's greatest victims – the Chinese people – to help them liberate themselves from their Communist jailers.
America, and the entire democratic world, will never be secure until China is free.