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The New Economy

Candidates indulge in China-bashing. But it's a distraction, not a solution.

Every presidential election seems to create a foreign bogeyman. But China in 2012 is no more a threat than NAFTA in 1996. 

By John L. GrahamContributor / September 25, 2012

President Obama (R) meets with China's President Hu Jintao at the G20 Summit in Los Cabos, Mexico, in June. Every presidential election, a foreign bogeyman pops up. In 2012, it's China.

Jason Reed/Reuters/File

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Xenophobia is the oldest trick in the book. Another election and another foreign bogeyman conveniently appears.

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In my own political memory, first it was the Saudis. In the mid-1970s, they were going to buy the United States with all their OPEC oil revenues. Then it was the Japanese. In the late 1980s, the American public was more afraid of Japanese yen taking over the country than Soviet missiles. Mexico via NAFTA would wreck the economy, or so said the Republicans in 1996 at their convention, strategically positioned in San Diego. For the 2000 election it was Chinese spying, Al Gore visiting a Buddhist temple, and such.

Just one of the problems with crying wolf is exemplified by our tragic vulnerability to Al Qaeda in 2001. You may remember the Bush administration was distracted playing Spy vs. Spy with the Chinese – bargaining for the return of our crash-landed spy plane from Hainan Island that summer, just short days before Sept. 11. 

Somehow in 2012, while the Middle East boils and roils once again, we’re talking about China as our biggest problem. Really?

Chinese defense spending is second in the world, but still just 20 percent of ours. American job losses? You cannot blame the Chinese, unless you ignore the facts. Indeed, my colleague Peter Navarro at the University of California, Irvine, is head xenophobe at the moment with his new book and movie, "Death by China." Perhaps Peter will thank me for adding to the press on his warmongering tome?

Unfortunately, both presidential candidates are pandering in this same vein.

Since 1960, through all the foreign bogeymen mentioned above, the US economy has faltered only once. In 2009, gross domestic product (GDP) per capita in this country declined to $45,192 from $46,760 in 2008.

In other words, the average American has gotten richer every year for the last half a century, except for 2009. The OPEC oil crisis, Japanese Sonys and Toyotas, NAFTA, Chinese made iPhones, not even Al Qaeda disrupted this steady growth in the average American’s wallet. If you control for inflation, this positive picture of the power of American commerce dims a bit, but not so during the last decade as cheap goods from China have kept inflation in check. 

If the Chinese were stealing our jobs, the flow would have begun in earnest in 2000/01 with our granting them Permanent Normal Trade Relations (PNTR) and their accession to the World Trade Organization (WTO). Even controlling for inflation, the GDP per capita of Americans has marched steadily higher despite those trade liberalizations. During that same period, unemployment was not a problem, meandering between 4.7 percent and 5.8 percent in the US. Then in 2009, it abruptly ballooned into a painful 9 percent.

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