Two “Models” That Need to Be Re-examined
Published in Les Echos
(France) on 21 January 2011
by Jean-Marc Vittori (link to original)
(France) on 21 January 2011
by Jean-Marc Vittori (link to original)
Translated from
by Mylène Perdreau.
Edited by Heidi Kaufmann.
China has not caught up with the U.S. yet, but it is already ahead of it. Yesterday, Beijing published its first official economic-growth estimate for the past year — eight days before Washington.
This estimate shows that the Chinese production increased by more than 10 percent in 2010 — probably three times more than the U.S.' growth. At that rate, the Chinese economy will be producing more than the U.S. as early as 2016 (when converting its gross domestic product to the purchasing power parity exchange rate).
In such a setting, the summit meeting between the Chinese president, Hu Jintao, and the American president, Barack Obama, turned into a battle for the upper hand. The president of the communist People's Republic of China taught the president of the capitalist United States of America economics lessons. Careful with deficits!
In reply, Barack Obama gave political lessons. Human rights have to be respected! So do American manufacturers, who are either hit by a manipulated exchange rate or technology piracy. The explanation was of unusual honesty — so much for the better.
It is better that the two greatest powers clearly state their disagreements and make up for them by signing lots of commercial contracts rather than no contract at all.
Yet, behind this very open exchange of lessons, reality is really different. Because today's China's great challenge is to become more American, to shift from an export-led growth model to a consumption-based model — all the while avoiding the scourges that affected the paper tiger that is the U.S.: the 1970s inflation, the real estate bubble and the financial system's underassessment of risk since the 2000s.
As for the United States, it will have to become a bit more Chinese to maintain a higher savings rate and to manage to make decisions, even though Congress is more and more paralyzed by institutional mechanisms that are too heavy and by lobbies that are too powerful. The American democracy must gain efficiency in order to resist the pressures from the Chinese dictatorship.
These goals may seem unreachable. But after all, Hu Jintao did admit that "a lot still needs to be done" in his country in terms of human rights. And an aggressive beast can give way to a quiet animal, as the Chinese Year of the Tiger is going to end soon and let the Year of the Rabbit begin.
This estimate shows that the Chinese production increased by more than 10 percent in 2010 — probably three times more than the U.S.' growth. At that rate, the Chinese economy will be producing more than the U.S. as early as 2016 (when converting its gross domestic product to the purchasing power parity exchange rate).
In such a setting, the summit meeting between the Chinese president, Hu Jintao, and the American president, Barack Obama, turned into a battle for the upper hand. The president of the communist People's Republic of China taught the president of the capitalist United States of America economics lessons. Careful with deficits!
In reply, Barack Obama gave political lessons. Human rights have to be respected! So do American manufacturers, who are either hit by a manipulated exchange rate or technology piracy. The explanation was of unusual honesty — so much for the better.
It is better that the two greatest powers clearly state their disagreements and make up for them by signing lots of commercial contracts rather than no contract at all.
Yet, behind this very open exchange of lessons, reality is really different. Because today's China's great challenge is to become more American, to shift from an export-led growth model to a consumption-based model — all the while avoiding the scourges that affected the paper tiger that is the U.S.: the 1970s inflation, the real estate bubble and the financial system's underassessment of risk since the 2000s.
As for the United States, it will have to become a bit more Chinese to maintain a higher savings rate and to manage to make decisions, even though Congress is more and more paralyzed by institutional mechanisms that are too heavy and by lobbies that are too powerful. The American democracy must gain efficiency in order to resist the pressures from the Chinese dictatorship.
These goals may seem unreachable. But after all, Hu Jintao did admit that "a lot still needs to be done" in his country in terms of human rights. And an aggressive beast can give way to a quiet animal, as the Chinese Year of the Tiger is going to end soon and let the Year of the Rabbit begin.
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