The buggy prof will be gone for just about three weeks, starting Monday, September 1st --- off on a research trip. Thank you for visiting the buggy site. You can expect new articles to be posted around September 22nd. I hope everyone has had a pleasant summer, now alas rapidly moving to a close.

Originally published on April 26th, this article --- along with about 30 others --- was lopped off the buggy site when a hacker broke into a downstream ISP and forced us offline on July 1st. It's reprinted here in a markedly expanded and updated version. It begins with a set of observations sent by a visitor that ends with a query.

Professor Gordon,

I always appreciate your thoughtful comments.

I think a major concern of many Americans is the level of trust in France and Germany for what was previously thought to be truly shared values. Perhaps this was naive, or wishful thinking. Those values of freedom and security are not so shared. In the next pinch, will they be there for us? They weren't there for Turkey. While trade will and should go on, the deeper matter of trust is shaken, at least if not permanently lost. I would value your comments.

Regards, Chris Fallon Long Valley, NJ

THE BUGGY RESPONSE Chris:

Thank you for the kind words. Also for the very thoughtful observations and questions.

Most likely, the degree to which Germans, Frenchmen, and Americans share certain values in common --- democracy, a rule of law (applied with different success), respect for individuals and minority rights --- is still strong, and stronger still among Americans, Britons, Dutchmen, Danes, and Italians, and certainly it seems with the new East European democracies. But how these abstract commitments --- which after all are taken for granted in peoples' daily lives --- are then translated into shared national interests and priorities among them as governments pursue them regionally or globally is another matter.

In particular, it's worth keeping in mind that hard core alliances like NATO have usually thrived only with a common enemy, and since the end of the cold war, that bond has been less visible

Originally published April 25th, 2003, this article has been lost with its siblings between mid-April and July 1st after a hacker did what hackers do: hacked his way into a downstream Internet Service Provider and killed the buggy prof site for a couple of weeks in the upshot. Little by little, these articles are being published here again. Observe that a good if anecdotal New Yorker article on French anti-Americanism --- an ideology that unites almost all the political and cultural elites from the extreme left to the extreme right: in fact, just about the only political passion left in French life that excites people --- has just appeared: by Adam Gopnik, a regular essayist in that fine magazine, a mainstay of American cultural life for 80 years now. Gopnik has lived off and on in France for years, and if he's weak on certain historical and analytical insights, he's got a keen journalist eye and a nose for interviews. See the anti-anti Americans

You'll observe if you look at the Gopnik article on the handful of centrist pro-American French writers and intellectuals that Jean-Francois Revel is featured. Recall here the buggy prof article on his recent book assaulting French anti-Americanism that appeared in February 2002: it includes a buggy translation of the review of the book in Le Monde, the most influential French daily . . . and a mainstay of French anti-American sentiment for the educated and half-educated.

For other buggy articles on French anti-Americanism --- remember, the buggy prof ran a UC exchange program at Bordeaux University and taught there back in the 1970s --- "French Oil"; and "Nutbin French Anti-Americanism Run Wild: Or Who Killed JR of Dallas Fame?" There are others, but these two earlier articles, together with the updated appearance of this article, should give you a good feel for just how tenaciously rooted anti-American sentiment is among the French elite class . . . political, administrative, journalistic, and intellectual. Whether the average Frenchman is that anti-American is another matter. Public opinion attitudes toward the US wax and wane, depending on events; but generally, anti-Americanism isn't a nationalist ideology that seems to run deep among average Frenchmen . . . however much the French media poll-parrots the envies and resentments of the US --- its power, wealth, dynamism, and global impact --- mixed with chronic nostalgic longing for a France that makes a bigger splash on the international scene, politically and intellectually.

Note carefully the title of this article. It's actually not just the buggy prof's own claim regarding French anti-American ideology that is set forth there, but one shared by two political and intellectual figures in French life who know Chirac well personally. One of them, Guy Sorman --- after being invited to the Presidential palace for a discussion with Chirac about French relations with the US that had a group of French intellectuals present --- noted that he's the "most anti-American of us all." (For this and other quotes, see John Vincour's article in the International Herald Tribune, Vincour a long-time reporter stationed in Paris, and an excellent observer of the French scene.) Note too that this wasn't a discussion held in the midst of the recent French-American tussles over Iraq. It was in November 2001, shortly after the 9/11 attacks by Arab terrorists in New York and Washington.

On August 2nd, the buggy prof had a long article --- with one more installment to come --- on the impact of the Chinese economy on the US: China's Growing Economy, A Threat to the US or An Opportunity. It tried to distinguish between the current impact on the US economy --- more and more dislocating to many US industries (mainly low-tech ones), thanks to a huge export drive --- and its long-term promise as a huge, rapidly growing market for which the exports of US high-tech industries will be able to find more and more customers. The short-term problem, recall, has four facets.

* The size and rate of Chinese imports into the US economy. In 1997, those imports totaled $62 billion; last year they had more than doubled to $125 billion; this year, the influx has been even faster so far. In the same interval since 1997, $US exports rose from only $13 billion to $17 billion (2002). This year, the US deficit with China will almost certainly top $100 billion.

* The huge import surge is concentrated in certain industries: textiles, wood furniture, steel, plastics, and a few others, almost all low- or mid-tech in nature. That is causing big problems for employment in those industries at a time when the US job market has markedly worsened over the last two years, ever since the 2001 recession officially ended. It's one thing to encourage an economy's less technologically advanced industries to adapt to international competition through free trade, particularly if the declining competitiveness of these industries is underscored by a steady but predictable and limited growth rate of import competition, and at a time when the rest of the US economy is growing rapidly and creating lots of new jobs. It's another thing to let industries be overwhelmed by a flood of imports, and especially when the job market has been gloomy. (Note that integrated steel mills in this country are finally getting relief, in part from the dollar's falling against the euro, but even more from the protection that the Bush administration put around the industry last year. Imports tumbled 35% in July compared to the same month a year ago.)

The following discussion was prompted by a selection from The Center on Budget and Policy Priorities, a Washington Think Tank, that Professor Brad DeLong --- an economist at UC Berkeley, with an unusual grounding in economic history that he draws on for his views on contemporary economic problems and trends --- posted on his web site on August 22, 2003. The buggy prof then replied at length in the comments-forum on the posted selection, plus Professor DeLong's own brief supporting commentary at the end.

Note the title above, which ends in a question mark.

The short answer: there may be some reasons to worry about the Bush Jr. deficits, particularly if they were to initiate an era of high government deficits that lasted, say, a decade or more. For all that, it seems unlikely they will. Before national debt as a percentage of GDP rose above the high point of the Reagan-Bush Sr. era, around 60% of GDP, corrective measures would probably kick in: either GDP growth would rise fast enough to generate new revenue to offset some or most of the deficits; or taxes would be raised to collect more tax revenue, something that happened in 1990 under President Bush Sr. and then at the start of President Clinton's administration in 1993; or government spending would be cut back in some areas to reduce the overall burden; or some combination of these first three alternatives would follow.

For the time being, however, they aren't worth worrying about and should be welcomed. Why? For two reasons essentially:

[1] As at the start of the 1980s, so today the US economy faces a major problem of high unemployment --- 6.3% now, almost 10% then (plus 10% annual inflation!) --- and large unused industrial capacity, now operating only at about 75% of full capacity. As the buggy prof argued in a mini-series of 4 articles published on this site between July 20th and July 26th, we need to find a way to kickstart aggregate spending in this country --- personal consumption, business investment, and government consumption and investment --- in order to close the output gap between actual GDP growth (averaging 2.4% annually over the last 23 months) and the new long-term growth trend of the economy. The latter seems to be about 3.5% or even more, thanks to big improvements in labor productivity that emerged in the latter half of the 1990s and have been sustained ever since. That long-term improvement in our future economic growth, welcome as it is, creates a major problem of short-term growth: it has increased the output-gap between a full-employment economy and current GDP growth. Hence the desirability of the large federal deficits for the time being.

Before reading this article, it will have helped --- no, been indispensable really --- to have read the two previous articles . . . which are parts one and two that, together with part three here, form a coherent mini-series on the US balance of payments. The two previous parts looked at the various causes of the large and persistent US trade deficit. This one deals with some technical aspects and is much more concerned with the question whether or not we should worry about the annual deficits here.

Some Technical Observations about the US Balance of Payments

There are essentially three ways to understand the balance of payments, and in particular for a country like the US, how it persistently runs large current account deficits --- the sum total of exports and imports in goods, services, and gifts or unilateral transfers like foreign aid or Mexican workers in the US sending US dollars back home. Each has their uses. Understanding them will help us answer our main concern here: should we be worrying about these trade and current account deficits? The answer, as you'll see, might be surprising to those of you who aren't economists or specializing in that discipline in university studies.

This is part two of a three-part mini-series on the US Trade Deficit --- its causes, and whether it's really a problem worth worrying about. Part one was published two days ago, and needless to add, it will help if you've read it before plunging into part two. It starts off with some thoughtful comments left by a visitor, Tom Dechaene in Belgium, and some lengthy replies by the buggy prof that help clarify and illustrate many of the main points that the argument in part one unfurled.

Note that part one dealt mainly with the causes of the large and persistent US current account deficit over the last two decades or so, with some ups and downs. Part two continues the analysis of these matters. Part three, which will be forthcoming soon --- probably tomorrow --- will dealt much more directly with the question whether these current account deficits of ours are something worth worrying seriously about . . . or at all.

Comments on the US Trade Deficit by Tom Dechaene

I agree with your refutations of the 3 "exorbitant" privileges. Furthermore, central banks are small players in the international currency markets.

I believe the reason the US has been able to sustain a trade deficit for so long without depreciation is that Japan and the EU have much higher savings rates and their financial institutions channel a large proportion of these to the US because (i) they want to geographically diversify, (ii) they believe(d) in better prospects for US companies than for their counterparts in Japan or Europe.

It was interesting to see how these capital inflows fell as soon as the US markets fell. I guess these inflows have picked up again somewhat lately, given the positive earnings forecasts from US companies, hence the $ has done better lately than in quite some time.

All it means is that more and more of the US is owned by Japanese and Europeans (although they tend to be investors when markets are high...).This is not much different from myself borrowing from my bank because I spend more than I earn. This is OK as long as my earnings increase fast enough. If Japan and Europe stopped investing in the US, I guess there is only one way for the $ : down, which should solve the trade balance somewhat, but not totally.

Does this make sense ?



THE BUGGY REPLIES

An economics professor at UC Berkeley who runs a good web site, Brad DeLong expresses some stimulating thoughts about the size and duration of the US trade deficit . . . presumably in manufacturing and agricultural goods plus fuels and raw materials, as well as in services. See the chart on the page linked to here. (The Trade Account refers to exports and imports in the goods just mentioned. Add in Trade in Services and Unilateral Transfers, in which the US consistently runs a surplus, and you get the Current Account . . . itself highly negative for a couple of decades, save for 1991, but not nearly so large as the trade in goods itself.)

DeLong's puzzled about the size of the trade deficit (presumably, the current account) and its persistence at high levels with some ups-and-downs for more than two decades now. Why, presumably, doesn't it adjust in textbook fashion towards more balance in exports and imports on the trade side? The buggy prof left a trio of lengthy rejoinders at DeLong's site; revised and amplified, they will be found here in a few moments. First, though, we need to summarize DeLong's thought-provoking reflections that prompted the buggy replies.

Note that by the time you've worked your way through DeLong's argument and the three sets of buggy replies, you should be able to understand much better, let's hope, what the balance of payments is, the causes of the US trade deficit, how that deficit relates to the rest of GDP, and whether it's a big problem or not. And, to top it off --- because of some bugged-out comments in reply to someone else at the DeLong site --- whether or not the US is a particularly violent country compared to other industrial countries. On the latter score, expect some surprises.

DELONG'S ARGUMENT

A Trio of Likely But Incomplete Causes

DeLong notes that there are three immediate and likely causes of the persistent and growing trade deficit since the 1970s . . . none of which in his view fully exhaust the size of that deficit or its long-term duration for two decades now. Specifically, large US trade deficits are:

1) Due at times to macroeconomic mismanagement in the US --- a point he doesn't clarify, and may be wrong as you'll see below because, as it happens, despite claims to the contrary, there's no clear correlation between US federal deficits or surpluses and the size of the US trade deficit.

2) Due also, in part, to macroeconomic mismanagement abroad . . . . by which DeLong presumably means overtight monetary and fiscal policies that produce slower growth in the EU and Japan and most of East Asia than is desirable, in which case faster US growth is bound to increase our imports from those countries and regions and slow down our export sales there. That's much more likely to be true.

Originally published April 24th, 2003, this two-part mini-series was slain and laid to rest in some forlorn wind-blasted graveyard on July 1st, no doubt skyhooting happily ever since with frolicking cyberspace angels . . . or wherever else hacked-into archives end up in the next life. It's reproduced here in mid-August, with part two of the series unfolding right now. Part one was published earlier today.

As the title notes, this is the second article in a series on neo-conservatism: what it is, why it originated, how it has come to have such a deservedly profound influence on the current Bush administration's foreign and security policies. Needless to say, you should read the previous article; it's indispensable background for understanding the three commentaries that follow, the first by the buggy prof himself on neo-conservatism's origins and evolution . . . a follow-up to his initial commentary in the previous article. The remaining two are by Joe Hagan, a journalist, and Prof. Anthony O'Regan.

Some of the introductory comments that appeared in the previous article follow immediately with a few added remarks by way of clarification. Consider them something of a prologue, nothing less. Even if you've read them already, it might not be a bad way to look them over as a jog to your memory.

A PROLOGUE TO PART II

[1] First there's an extensive commentary on neo-conservatism that the buggy prof sent to his several hundred subscribers last October, fully updated to make it more relevant. (See gordon-newspost) Essentially --- a point worth getting across right from the start --- note that the pioneer intellectuals and policymakers who developed neo-conservative thought were all former anti-Communist liberals, influenced by three intellectual heritages that came together in the late 1960s. These three heritages are shared these days by moderate liberals too, who remain --- the does the buggy prof --- in the Democratic Party. No surprise. Neo-conservatism is anything but rigid primal conservatism of the pre-1980s stuff, and a liberal weekly of notable neo-con thought that is still oriented toward the Democratic Party --- mainly for domestic reasons --- is The New Republic. Here, with some brief clarifying remarks, are those shared heritages:

• A firm adherence to Wilsonian liberal traditions in foreign policy, which espoused waging ideological warfare against the totalitarian challenges of Nazism, militarism, and Communism --- not just managerial realism and diplomatic accommodation to them (AKA appeasement, a EU specialty by the late 1960s, if not earlier . . . almost all the EU governments only too happy to get along in managerial realist ways with brutal Communist, African, and Middle East regimes, and do profitable business with them). Only when clear and important security interests pull in an opposite direction to supporting or encouraging democratic trends abroad will neo-conservatives, like managerial realists on both the moderate left and moderate non neo-conservative right in this country, tone down or reject support for democracy.

Originally published April 24th, 2003, this two-part mini-series has been buried and lost forever in some distant, dismal pc-cemetery . . . or whever else hacked-into archives, killed off and lost sight of, end up in the next life. It is now reproduced here in mid-August, with part one of the series unfolding right now. Part two will follow in the hours to come.

Neo-conservatives, who are they, what do they believe, and why are they so influential these days in the Bush administration, especially in foreign and security policies? Right now, a front-burner topic. In particular, lots of journalistic speculation about them, some good, most not.

The buggy prof himself has talked about the neo-cons repeatedly in the past, all published in the gordon-newspost . . . the newsletter subscription that the he ran for four years until this February, when the current web site seemed a more appropriate outlet for his and others' thoughts on political, economic, and cultural matters. And especially when those thoughts happen to be politically charged --- full of significance for US foreign and domestic politics, the politics of foreign countries, developmental history and prospects, globalization, and in reciprocal fashion for philosophy and cultural life.



What Follows: A Brief Intro

As it turns out, this is an uncommonly long article that has five different commentaries, all of them focused on neo-conservatism as an ideology and its influence, plus some lengthy buggy prof comments. A quick survey of what follows might just be useful as an intellectual compass. (Hold it! As an after-thought, it just dawned on the buggy prof that it would be better to divide the article into two parts: part one today, part two later. That way, the attention-span of our visitors won't be strained. Still, what follows is the summary of all five parts, the latter three to be hived off and moved over to the next article.)

Last April a Canadian citizen, Ron N, sent the buggy prof some criticisms of US policies toward his native country and toward Latin America. That prompted a three-part mini-series in response to Ron's criticisms. Along with all the articles published between April 19th and July 1st, those published articles lie buried in some desolate cyberspace boneyard . . . lost forever in that haunted unsacred terrain. Fortunately, copies of the buried articles have been sent to the buggy prof by various visitors, and little by little they are being revised, updated, and published anew.

The first article in the mini-series that Ron N's criticisms prompted was published on April 18th . It deals with US-Canadian relations, especially in the run-up period of the war on Iraq, and is available in the archives and for that matter can still be found on the home page here. No more needs to be said about it. That's not true of the the remaining article, lying in permanent cold-storage somewhere in that desolate pc-cemetery, beyond redemption in their original form. Not, however, in an updated, revised version. That's what follows here. Its topic: US policies toward Latin America. Ron N's criticisms of those policies, as it happens, are fairly standard fare on the left: in particular, his claims that the US has been an imperial power in Latin America and bears a large responsibility for that continent's economic backwardness and struggles, off and on, to develop stable and effective democratic systems of government. For an updated version of US policy toward Allende Chile in the early 1970s, plus a link to a very good article on this, see The Neo-Cons II . . . published August 17th.

US POLICIES TOWARD LATIN AMERICA: A BRIEF HISTORY SURVEY

The Swings in US Policies Since 1900.

This article is actually a composite of four sets of comments that the buggy prof left at another web-site, run by Professor Brad DeLong --- an economics professor at UC Berkeley, who brings to his impressive academic work an unusual historical perspective that helps illuminate contemporary economic trends, both within the US and globally. That perspective shows up in his daily commentaries left on his site, most of them stimulating even when you don't agree with him . . . and a source of extensive and vigorous comments by others. Three of the four sets of comments that I left on his site, yesterday and today, were prompted by DeLong's commentary entitled "Some Optimism in the Forecasts" for the US economy, and in particular by some speculation about job- and productivity trends afoot for three years now. The fourth set --- actually the earliest --- was left in response to a DeLong commentary called "Productivity Growth Trends" (August 9, 2003), which has a nifty chart of the growth of productivity since the early 1970s and how unusual it is for productivity to grow so rapidly in a recession and for two years after.

Revised and extended, it's these comments, which deal with productivity trends in the US economy --- and some comparisons with other countries --- that you'll find here.



First, Some Lead-In Remarks To Those Comments

In effect, what we're experiencing in the US economy --- as three earlier buggy prof articles noted for July 21st, 23rd, and 26th --- is a curious short-term conflict between the surging growth in labor productivity and the poor performance of the economy in employment matters since the end of the short-lived shallow recession of 2001 almost two years ago. Unemployment continued to grow for a good 21 or 22 months afterwards, something we've never experienced before; and as those earlier buggy prof articles have argued, the long-term benefits of rising labor productivity in our economy --- which bode well for ever higher living standards in the future --- have created a short-term problem for the job market. If productivity is rising, say, around 3.3 - 3.5% annually, then short-term economic growth has to rise at least into that range to get firms to start hiring back laid-off workers and create new jobs. With GDP growth averaging about 2.6% in the seven quarters since the end of September 2003, that hasn't created enough sales and profits for the owners and managers of firms to create those jobs. Instead, they have managed to keep profit margins from falling too much by squeezing out ever more productivity from their smaller work forces.

Will this jobless recovery continue? Not likely.

Thanks to a hacker attack, the initial version of this article --- published May 10, 2003 --- is wandering restlessly amid the pitch dark of a distant and dismal CPU-Purgatory, no reprieve in sight, along with all the other articles that appeared between April 18th and July 1. Revised and updated, that article now makes a re-run appearance here. Of the 120 articles or so published since the buggy prof site went into operation in late January this year, it's probably the most challenging intellectually . . . though, let us hope, not beyond the ability of university students or graduates to follow and either agree or disagree with.

Introductory Comments

As a discipline with aspirations to to being a science --- or even claims that it already is --- economics encounters a horde of problems that play havoc with the claims and frustrate the aspirations. In the past. Right now. And very likely way into the future. Two such problems stand out, one theoretical, the other practical:

[1] The limited ability of economists to cumulate reliable knowledge of economic behavior, with good predictive power: whether of business firms, or nation-wide economies, or the impact for good or bad of public policies, or the global economy --- including how they interact in increasingly complex ways. All this, moreover, in the face of relentless technological changes, some of a radically restructuring nature that drastically change the way we live, work, and fight wars; or of marked shifts in market dynamism from one country or region to another; or of extra-economic events ("exogenous variables" outside formal models, but influencing the interaction of economic variables) like wars, economic sanctions, and disruptions of critical supplies like oil.

[2] The discipline's limited ability, which follows directly from the first problem, to offer reliable guidelines to policymakers in the public realm beyond common sense and whatever learning occurs over time for dealing with two big sets of stubborn, repetitive challenges:

This is the third article in a mini-series on the US commitment --- hedged carefully and rightly so --- to intervene in the raging Liberian civil war that has been plaguing that country off-and-on for almost two decades . . . something we did briefly in 1990 in the Bush-Sr. era, though it was limited to evacuating US citizens from a new flare-up in the fighting.

INTRODUCTORY COMMENTS

[1] As the first article tried to show, the problem of intervening in Liberia reflects a much larger problem for American foreign policy: how and when the US should intervene in a civil war --- usually in either a failed-state or one ruled by a brutal dictatorship --- where there are no important security or economic interests at stake . . . instead, humanitarian ones full of political significance for the local population. On the whole, prof bug favors an intervention, carefully hedged, based on the model we helped pioneer in East Timor in 1999 and 2000, then part of Indonesia. The local states with a major stake in Indonesian stability --- Australia, the Philippines, Malaysia, Thailand, and Singapore --- provided the effective peacekeeping forces on the ground. The US role was carefully limited but important in backing this UN-sponsored intervention: we provided logistics and air-lift capabilities as well as significant intelligence and diplomatic support, but did not send troops themselves onto East Timor soil. In the end, the multilateral intervention proved successful. East Timor completed its secession from Indonesia, then held elections and has been stable ever since.

The key point in the East Timor model: the regional states near a country in distress ---- again, almost always a failed-state and breakdown in civil war or one ruled by a cruel dictatorship brutalizing large parts of the population (as in Rwanda in 1995 or Kosovo in 1999) --- have the most at stake in that country's stability and any spillovers onto themselves; and hence they're the ones that should be energetically encouraged to take the leading role in any multilateral intervention . . . and above all when it comes to providing the bulk of multilateral forces on the ground. Not the US. Call that lesson one of multilateral interventions in which the US will participate, but where no major security or economic interests are engaged.

Only if we have a major security or economic interest at stake should large numbers of US troops be committed on the ground. There's one exception: a clear genocide as in Rwanda. In the spring of 1994, with preparations for the genocide on display for several weeks, somewhere between half a million and a million Tutsi and moderate Hutus were slaughtered by a kill-crazy government and hordes of running-amok Hutu zealots. The outside world stood by; it did nothing. The UN did nothing; the French and Belgian peacekeepers on Rwanda soil were withdrawn, rather than fight and protect the locals being massacred in alarming numbers; and – to our shame – the US did nothing either and helped block an effective UN intervention.

Like the previous article on the EU and the US, this one --- on China's economy and its impact on the US, including its growing trade surplus with us (over $100 billion, much bigger than Japan's bilateral surplus) --- is essentially a series of observations, with extensive revisions, that the buggy prof left yesterday at another web site devoted to economics and political economy, Arnold Kling's Econ Log. Go to the topic for August 1 entitled "China Menace?" After linking to three very different articles on the Chinese economy and how it affects the US, Kling asked why it is that journalists tend in his view to see the growth of foreign economies as a threat to US prosperity, whereas economists --- he's a Chicago Ph.D in the discipline --- see it differently, thinking of the mutual benefits that free trade bring to economies that practice it. The three articles that Arnold linked can be found there, and to make it easier in the future to get hold of them --- one in the Washington Post, another in the Wall Street Journal, the third in Foreign Policy --- here's the permanent link for "China Menace".

What the Argument Here Seeks to Show

Good question, this one about China. Any effective answer needs to distinguish between the short- and long-run impact of China's rising trade surplus with the US. In the short-run, the surge in Chinese imports --- along with their concentration in certain industries --- is causing more trouble for those affected industries and with US GDP growth and manufacturing jobs than is desirable. Fortunately, as we'll see, there are ways to handle this surge and bring some relief to the affected industries without resorting to permanent protection; even the WTO rules allow for import-relief in such circumstances, and there are additional policies the US government either already has in operation or can develop for further relief.

That's the short-run situation.

In the long-run, China's growing wealth and the size of its market can be considered an opportunity for the US --- business and labor alike . . . doubly so because China's economic future, for the next two or three decades, is not likely to lie in advanced cutting-edge technologies --- our big strength. By the same token, China's continued technological backwardness compared to us --- or even Japan or Taiwan or South Korea --- will further dampen its leadership's ambitions to make China a regional hegemon or global great power, particularly in any militarist ways. Something else too. The more the Chinese economy integrates into the wider global economy, the more likely any resort to aggressive behavior by Beijing to assert itself in Pacific Asia will likely be seen by its political leaders as doubly costly, engendering prudence and caution in its diplomacy.



The Short-Run Impact: A Clear Problem

Some statistics will help put the argument here in rounder perspective. Right now, our bilateral deficit with China in trade --- which is heavily concentrated in certain industries --- is running well over $100 billion a year, and rising. Last year, 2002, that was almost 40% of the $266 billion of exports that China sold around the world. Can it go on, this torrid pace of imports into the US market at a time when we are suffering from a jobless recovery, with unemployment up from 4.0% at the start of 2001 to around 6.2% in the summer of 2003, almost two full years after the short and shallow recession of that earlier year officially ended? And, for good measure, at a time too during which the US has lost another 2.3 million manufacturing jobs?

What follows is really a series of observations that the buggy prof posted yesterday evening at another web site in the comments pop-up section, the site itself dedicated to a fairly serious exchange on economics and finance: http://www.janegalt.net/ It was prompted by a reference, left July 31st, on the big gap between the US and the French labor-market participation ratio --- the percentage of the adult population (usually 18-65) that happens to be actively working over a period of time, say a decade or two to average out the ups-and-downs of the business cycle. More generally, as the buggy comments here note, a similar gap exists throughout the EU save for Britain and Ireland and to an extent parts of Scandinavia and Holland.

These comments should be read against the background of some earlier articles published on this site in the winter of this year. In particular, [1] "Are EU Workers More Productive than US Workers?", and [2] "Follow-Up on the EU, US, Economics and Power"

1) When the big divide in post WWII economic growth occurred in the mid-1970s --- reducing it by about 75% in Japan ever since, and in the EU by about 50% for the big economies (Germany, France, Italy, and for a while Britain) --- about a similar percentage of the eligible population (ages18-65) was employed on both sides of the Atlantic: roughly 65% in the US and EU. (The actual percentages will vary according to the ages chosen. Some studies will lower the minimum to 16 years. And some studies will separate full-time employment from part-time job-holders, some of whom are voluntary, others (especially in the EU countries) wanting full-time jobs.)