Wednesday, February 1, 2012

Foreign Policy: "Are we becoming China's bitch"?


Posted by Isaac Stone Fish

The year 2012 will see a stream of new books in the patented Thomas Friedman "Oh My God the Chinese Are Eating Our Lunch with Environmentally Friendly Chopsticks" mold. Some will be more worthwhile than others. One book in particular, however, is sure to stand out, if only for the title: "Becoming China's Bitch: And Nine More Catastrophes We Must Avoid Right Now."

The author, Peter D. Kiernan, a former partner at Goldman Sachs, explains in the introduction that "it's not a book about China exactly. It's about how America got diverted and lost momentum, and a dragon leapt into the breach. It's also about getting our mojo back."

I spoke with him over the phone:

FP: When did you first realize we were in danger of becoming China's bitch?

PK: When it first occurred to me was in 2008, as a card-carrying member of a discredited class, everyone in Wall Street had to re-think everything. We had gone through a 30 plus year bull market. We now had to wrestle with the idea of who was going to fund the 42 percent of our government that has to be borrowed. Whenever you depend on one major source of finance, if it's too heavy in one area, it deserves a re-thinking.

We haven't really thought clearly about this as a nation. It was a part of this re-thinking everything. We have a much greater co-dependency on China than we'd like to acknowledge. The book is not solely about China, but Becoming China's Bitch is about the cost to our dithering.

FP: How is the 1 percent different from the 99 percent in their fear of becoming China's bitch?

PK: I don't spend a whole lot of time worrying about the one percent in the book or in my life. What I do spend the vast majority of my time focusing on is the 99 percent. We have developed a dependency, and that dependency allows us to be poor savers, roughly 5 percent saving rate in America, compared to 30 percent in China.

I literally believe that we have been opiated as a nation. I believe we've been diverted about issues. The debt ceiling has been raised 100 times since you started working here-it's no big deal. These are not problem solving conversations. These are skin rashes that have nothing to do with the problems. Occupy Wall Street is not the problem, but the symptom. Among them, we have worked ourselves into a co-dependency.

FP: What can we do to prevent becoming China's bitch? How do we make China our bitch?

PK: The title is deliberately provocative, I understand. It's meant to push people outside their comfort zone. We're inert. How do we snap people out of it? We helped create an export monster. We helped them because we developed an appetite for their goods. So we've kind of gotten in this dynamic of exports for finance-we will buy your cheap goods so we can stock our Wal-Mart shelves. They're moving up the value chain. And in exchange for that, we'll look for you to be our number one lender, and that, in pop psychology, you call a co-dependency-exports for finance. They're stuck with us, we're stuck with them. Stalemates, or co-dependencies like this, don't last forever.

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