Twofish's Blog

December 3, 2008

About Obama, China and trade

Filed under: china, finance — Tags: , , — twofish @ 7:28 am

http://mpettis.com/2008/12/china-isnt-losing-its-competitive-edge/

lark: I have never heard ANYONE say that without trade with China, they would lose their job. I have MANY times heard resentment about manufacturing gone to China, poor quality products, tainted food, etc. Not a week goes by that I don’t hear such complaints.

Well then we know different people then.  It will be interesting when push comes to shove and we start counting votes.  The people I know are people in finance in NYC, software developers in Texas, and semiconductor designers in California.  This opinions never make it to the press, they are lunch time conversations.  Part of the reason people aren’t loud about being pro-China trade is that there is no point in complaining when you are winning.

So who do you know?  Let’s count votes.

lark: What part of that is due to globalization, offshore outsourcing, China particularly, may never be quantifiable. But it doesn’t need to be.

Actually it does, because you need go convince people that the problems are due to globalization if you want to go China-bashing.  I don’t think that the problem is globalization.  I personally think that the problem is that the benefits of globalization have been unequally shared, and that government needs to be heavily involved to make sure that the economic gains from globalization get equally shared.  This means low tariffs and high taxes on the super-wealthy.

lark: The fact is Obama doesn’t owe his election to the economic actors who have profited from the China trade.

Yes he does.  You look at the groups of people that I just mentioned.  Obama won in large part because he was able to out-technology McCain because of help from Silicon Valley and massively outspend McCain because of contributions from Wall Street.  Those are the two most “pro-China” groups in the United States.

Also if you look at organized labor, two of the most active and vital unions in the US right now happens to be Pacific longshoremen and Teamsters.  Think about that.

I voted for Obama because I was sick and tired of Bush era incompetence, I’m worried about keeping my own job, and because McCain came across as an economic idiot.  The interesting thing is that now that Obama is in power, he really has to define “change” rather than just talk about it and that is going to lead to some interesting conflicts.

lark: They will be parties at the table but they will not determine policy.

Yes they will (or rather yes *we* will).  Look at who Obama is naming to his cabinet.  One thing that is interesting about Obama’s election is that it marks the ascent to power of political forces that have been dormant.

Google/Goldman-Sachs/MIT/Teamsters.  This is the new governing coalition that Obama put together.  Strange bedfellows, but that’s politics.

lark: More important, in my view, will be the stressed American workforce.

Sure.  But the workforce isn’t what it was in 1985.  You have investment bankers, software developers, and auto workers that are afraid of losing jobs.  McCain’s strategy of “Joe the Plumber” and “bash Wall Street” failed very badly because he didn’t realize how the workforce has changed.  Citicorp employs more people than GM.

It’s odd to see an investment banker as a “worker” but good politicians listen carefully and see beyond stereotypes.  So rather than bashing bankers and mid-level managers, Obama was able to tap into this feeling in a way that McCain was not.

By the way, most Wall Street investment bankers don’t make multi-million dollar bonuses, and if you want to bash *upper* management and talk about more regulation, then you’ll get a lot of support.

lark: I’m sure his team will try to solve these problems without destructive protectionist measures but I don’t think that means status quo for China. It doesn’t even mean that protectionist measures are impossible or even unlikely.

But the type of protectionist measure is important.  If Obama and the United Auto Workers thinks that tariffs on auto parts and textiles will help save American jobs, then sure I’ll go along with that.  We are on the same team, and we need to be nice to each other.  However, I *haven’t* heard the UAW or GM suggest that tariffs would be useful, and it’s likely to be the reverse since China is the only place in the world that buys Buick.

However, if Obama starts sounding like Lou Dobbs, then I (and a lot of other people) will turn against him in a big way.

The beauty of the internet is that you get to meet different people, and I’m just saying what things look like from my neck of the woods.

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