Written by Bradley G. Lewis
Saving America, Chinese Style is a fine, provocative work that is well worth reading. Author Frank Li was born and raised in China, with B.E., M.E., and Ph.D. degrees in Electrical Engineering earned in China, Japan, and the U.S., respectively, and became a naturalized U.S. citizen. After working for corporations in Europe and the United States, he formed his own company, West-East International, in the scale industry, in 2005.
He began writing, he says (and I believe him), because he is an American convinced that China is on path to replace the U.S. as the world’s largest economy-and not merely because it has so many people. Mr. Li has recombined, revised, and added to the columns that he has written online since May 2011 for Global Economic Intersection to create a useful, thoughtful book.
Frank Li sees China as succeeding despite some disadvantages (including a lack of natural resources), in no small part because it has a “slightly” more effective political system.
Li’s bottom line will jar many readers: China, theoretically communist, is now actually run like an efficient business, while the historically cherished free enterprise system of the U.S. is sabotaged by flaws in its theoretically democratic polity.
Americans who find this last claim shocking should reserve judgment until they’ve read his book. Mr. Li is especially strong, in my opinion, in putting China’s rise relative to the U.S. in perspective using objective data, Chinese history, personal experience, knowledge of political theory, and study of practical American and Chinese politics.
He finds the U.S. still strong in many ways but “deeply in trouble” partly because of the rise of the BRICS as competitors. But he also cites “The incompetence of American’s political system, especially when compared with China’s.” We elect presidents too young and with no executive experience. George W. Bush, he says, literally went to war in Iraq for political reasons, badly damaging the U.S. image abroad. Career politicians, especially in Congress, care only about being re-elected; too many programs are designed to do what Mao wrecked China by trying (punish the successful rich and give more not only to those who cannot take care of themselves but those who choose not to.) The extreme left and extreme right have too much influence. He prescribes a higher age requirement and experience requirement and limitation to one six-year term for U.S. presidents, and strict term limits for all of Congress, among other remedies. May we guess there are many Americans who currently agree with something like his remedy?
Mr. Li reminds his readers that not only did China have a great and long history, but that in fact as late as 1820 it still represented almost a third of the world’s GDP.
From 1821-1976, says Li, “China descended from heaven to hell, “ capped off by Mao’s cultural revolution. The new leadership under Deng Xiaoping embraced capitalism, put in place a succession plan that included a “dictatorship without a dictator,” focused on the economy, and introduced the one-child policy. China’s rise has been spectacular by any standards, including the number of people lifted out of poverty.
Li goes further in slaughtering a few American sacred cows. China is happy to trade with anyone, he points out—a position the U.S. used to take much of the time, but not so much now. The Communist Party, he says, is thoroughly in favor of continuing to pursue capitalism. China represents little military threat, especially since the U.S. military budget is as large as that of the next 16 highest countries in the world, while the U.S., he points out, has not been hesitant to use its power in ways that have often been very damaging. (His prime example is the war on Iraq.) Indeed, he worries that the U.S. military may find an excuse to make war with China.
In a recent review in this forum, John West, an Australian economist and Executive Director of the Asian Century Institute, argues—as I suspect many Americans would—that “Frank seems to exaggerate the challenges posed by the rise of China,” claiming that “In reality, the Chinese economy and its companies are in no way real competitors of America,” despite the “economic miracle” that he acknowledges China has achieved.
While Mr. West’s citation of China’s list of problems to overcome has some merit, I believe he is mistakenly underestimating China’s potential and the timetable on which it could be realized. Indeed, there are some uncanny traps for those who do not remember their history adequately.
Our preoccupation with China’s “theft” of our intellectual property may make us forget that the U.S. and other developing nations regularly did the same thing in their development efforts in a variety of ways, such as bringing in immigrants who were familiar with proprietary technology from Great Britain. The U.S. and other countries trying to catch up used temporary tariffs to protect their manufacturers, and Japan and Germany, among others, refused to revalue their exchange rates in the interest of continuing their export-led economies. We consistently underestimated the potential for Japan to become a world-class competitor at several stages in our history.
While many Chinese are frustrated by corruption and what they see as some dysfunction in their government, many in the U.S. equally decry what they see as an increase in regulations designed by those most able to make campaign contributions to get favorable treatment from the U.S. government. And China, along with most of the other “High-Performing Asian Economies” before it, have had, in the words of economist James Gerber, “growth . . . built around falling inequality, generally sound macroeconomic fundamentals, and the promotion of exports.” The U.S., by contrast, is increasingly coping with greater inequalities in income, wealth, and arguably
opportunities. China has not threatened to throw the world’s reserve currency into turmoil with a budgetary dispute, a threat that the United States is facing, however small we may judge the probability of its coming to fruition to be.
I find a few other aspects of Li’s specific economic analysis unpersuasive. Li repeatedly refers to our “excessive” spending and national debt as key symptoms of a broken system. It’s hardly a new refrain. But Reagan, who increased the national debt dramatically, ranks as one of Li’s favorite presidents while Clinton, who created budget surpluses, was merely “lucky”. Yes, Li has very specific reasons for his rankings; but the fact that they are virtually unrelated to the actual level or growth of the national debt is clear evidence that that probably has little to do with our problems.
I would also like to see Li coherently analyze the recent history of the Chicago region, for which he obviously has great affection and pride and some of whose prominent leaders he has talked with. Chicago has by almost any standards reshaped and strengthened its economic base in the last 30 years; has a second skyline south of the Loop; and has become a Midwestern Mecca for immigrants and young people. Yet Chicago and Illinois are both greatly afflicted by unfunded pension obligations for unionized public employees union, a group Li attacks. How did this all happen? Will the positives or negatives prevail? I would enjoy reading Li’s account of what he sees in the future for his own city.
- Saving America, Chinese Style (Frank Li, Amazon.com, 2013)
- International Economics (James Gerber, 6th edition, Pearson Education, 2014) The quote is from page p. 388 in chapter 16, “Export-Oriented Growth in East Asia,” which gives a variety of useful information on the “High-Performance Asian Economies.”
- Book Review (John West, Global Economic Intersection, September 22, 2013)
About the Author
Brad Lewis is Professor of at Union College in Schenectady, NY, where he teaches courses in financial markets and institutions, international trade and finance, monetary economics, and urban redevelopment. He has also held senior-level visiting positions for a term or more at Carleton College and Skidmore College in the United States and at Kansai Gaidai University in Japan. He is a long-time member of and has occasionally co-chaired the Columbia University Seminar in Economic History and is Vice Chair of the Schenectady (N.Y.) Metroplex Development Authority. Curriculum Vitae.