I want to talk first about the interdependence between the United States and China.
Because it is at least as important as anything else we're going to be saying about the competition.
Let's begin with the enormous flow of Chinese-made goods and services into the United States.
They have become a staple part of the consumer goods that Americans buy.
In fact, the explosive growth of China is closely linked to the explosive growth of
the Walmart corporation and not just Walmart, but I like to tell the story.
You know, China was able to produce all these things that we buy: clothes, appliances, and
in the very near future, automobiles and so on.
But they weren't able to distribute them.
They had mastered the technology, they had mastered the manufacturing, they had mastered
the transport.
But in order to sell to the American people, you have to have a system of distribution:
stores, warehouses, the comfort and knowledge of people that they can go to this particular
store and buy these goods.
China would've taken decades to do that, but they didn't have to.
They had a partner.
Yeah.
Walmart.
There is no Walmart without the People's Republic of China.
Even though it is also true that the growth of the People's Republic of China is likewise
dependent on Walmart having made the decision to be the distribution network, one of the
most important, for the Chinese production of goods.
Walmart profited by doing this and China profited by doing this.
And in the process, not only did China and Walmart become interdependent, but so did
the level of consumption of the American working class and middle class.
Were the flow of inexpensive Chinese consumer goods into the United States to be seriously
stopped or disrupted, the substitute goods that Americans would find- no longer Chinese
because it was stopped- would be much more expensive.
In other words, if you think we have an upsurge of strikes and labor actions today, and we
do, they're nothing compared to what would be activating and irritating the American
working class were the Chinese flow of inexpensive consumer goods to be stopped.
The Chinese don't want that because its very profitable for them.
Walmart doesn't want it for the same reason.
But every capitalist in the United States doesn't want it because if it were to happen,
the pressure from your workers Mr. and Mrs. Capitalist for higher wages to pay for the
higher price of consumer goods would be very serious as a problem.
So there's a lot of interdependence between the United States, whose very wage level is
dependent on the export of Chinese goods.
Then China has become a very important outlet for U.S. investment.
Most of our large mega-corporations, corporations many of you think of as quintessentially American-
and the same applies for Japanese or British or German corporations- are now heavily dependent
on the enormous investments, hundreds of billions of dollars, into China, into production facilities
in China.
They don't want to lose the value of those investments.
They don't want them to become unprofitable.
And they know that the power of the Chinese government and of the Chinese Communist Party
to take steps in that direction is already proven and demonstrated.
So, there's an interdependence.
China wants the benefits of the technology, of the connections that it brings for them
to invite, as they have done, foreign capitalists to invest in China.
But the very fact that foreign capitalists have creates the interdependence between them.
And I want to stress it because comparable interdependencies didn't exist between the
United States and the Soviet Union and that had a great deal to do with the so-called
Cold War and with the whole history of post World War 2 global economic events.
The interdependence I'm describing between the U.S. and China did not exist between the
United States and the Soviet Union.
But I'm not done.
The interdependence goes further.
The exports of goods from the United States to China is relatively small compared to the
reverse.
In other words, we buy more Chinese goods than Chinese buy American goods.
And the result is that the flow of dollars leaving the United States to pay for the goods
that come from China is much greater than the amount of dollars the Chinese need to
buy the goods they buy from America.
The net flow accumulates dollars in Chinese hands.
Without going into the details, here's what ends up happening to a lot of those excess
dollars, the dollars flowing to China that they don't need to buy goods from America.
They lend that money to the United States government.
Very important that you all understand this.
That is a choice the Chinese have made.
It is a reserve of wealth they can count on, they hope, if and when they need it, say if
a pandemic strikes or say if war breaks out or fill in the blank.
So they've done that.
And now let's watch the interdependence.
They have sent over an excess of a trillion of these dollars.
More than a trillion.
That's an enormous source of money given to the American government by China, to be used
by the American government pretty much as it wishes, say for example fighting wars in
other parts of the world.
Woah.
So the American governments ability to print money, to raise money in the deficit to cover
spending more than they raise from Americans.
Part of the reason the government can spend more than it raises from us is that the Chinese
lend it to the U.S. government.
There's an interdependence.
On the other hand, the Chinese now own the debt of the United States.
They are either the number one of number two- it goes back and forth between China and Japan-
creditor of the United States.
Were they to demand repayment of the debt owed to them, the value of the dollar, the
value of interest rates in the United States would go God knows where.
We have the classic relationship of debtor and creditor.
A relationship of interdependence if ever there was one.
The United States is the largest debtor country in the world and China is one of the greatest
creditor countries in the world.
Each for their own mostly domestic reasons but the interdependence is very real and limits
what both governments can do.
And here's a relatively small point but one that I know you'll want to think about.
When the Chinese use those excess dollars to buy U.S. treasury bonds, that is to lend
the money to Uncle Sam, the loan of course carries an interest rate like all such loans
do, which means if the United States government has to pay interest to the People's Republic
of China for the trillion dollar debt that the U.S. owes to the holders of these government
securities in China.
Well that's 30, 40, 50 billion dollars a year that Uncle Sam collects and taxes from you
and me and sends over to the People's Republic of China, which it is free to use to, say
for example, build up their military which you and I are paying for in this interdependent
system.
Finally, the Chinese have become investors here in the United States, buying companies,
becoming partners with American companies, becoming important players in various markets
here in the United States.
And American companies looking to sell are eager for the Chinese to become buyers because
maybe then they can get a better price for whatever it is they're selling in the market.
These are interdependencies.
American companies line up.
They don't want a war with China.
Trade war, tariff war- none of it.
They want the Chinese to continue to do what has been so profitable in so many different
ways to both public and private institutions here in the United States.