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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. 

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Now, if you’re an unemployed autoworker reading this, you're getting pretty angry – “What about my job, you academic know-it-all?” Well, you can go along with the xenophobes who blame Mexicans and Chinese and so on. But, I repeat, the average American’s income has increased throughout the last half century. What has changed is how we distribute that average income.

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Circa 2012 we are witnessing a dangerous continuing bifurcation of our people into rich and poor. We are losing the stability of our middle class.

These divisive changes have taken two forms. First, tax policies established during the George W. Bush years are getting scrutiny in the present presidential campaign. And,they are crucial. But the second change is not being addressed directly. 

Yes, formerly high-paying union factory jobs have gone to the cheapest labor countries around the world. Having worked in a heavy-industry factory myself, I can attest to the mind-numbing and dangerous work in such places. Thankfully, the US is now a services economy.

Think FedEx, teachers, nurses, McDonalds, Wal-Mart, etc. Because of the Bush league’s successful emasculation of American labor unions, the wages in such jobs are low. That growing “average GDP per capita of Americans” isn’t being distributed fairly for both reasons.

These causes of our economic divide are internal. Exacerbating them is the failure of our pension and health-care systems. In the US we are now in year four of a decade-long adjustment to the demographic shift that is wrecking the social system designed by the so-called Greatest Generation. Social Security and Medicare have served them well, but not us baby boomers. The problem is my parents’ generation didn’t plan beyond their own demise.

The Chinese have no culpability in this. Thus, bashing them with rhetoric and/or trade sanctions will have no effect on our problems. The Chinese are just a distraction. Indeed, the Chinese have much bigger problems of their own. The reason they maintain such a huge army is to control their own, often unruly people. And if you think the graying we’re now experiencing in America is bad, just wait 10 years when the Chinese run headlong into the consequences of their one-child policy. Who will take care of the elders there?

Aside from being a distraction from our own policy mistakes, the current wave of xenophobia is a disaster for the US in at least two other ways: First, isn’t it too bad we can’t see the common interests we have with the Chinese, such as in keeping the Strait of Hormuz open so oil can flow to thirsty customers around the world. Second, but of primary importance, trade has always enhanced peace. Lack of it has encouraged wars. The burgeoning commercial interdependence of China, Taiwan, and the US will always make war in the region unthinkable – except, of course, for the panderers of xenophobia.

– John L. Graham, professor emeritus of marketing and international business at the University of California at Irvine, is coauthor of "China Now: Doing Business in the World’s Most Dynamic Market."

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