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In recent years, popular wisdom has held that opening American markets to Chinese goods was the best way to promote democracy in Beijing—that the Communist Party’s grip would quickly weaken as increasingly affluent Chinese citizens embraced American values. That popular wisdom was wrong. As Eamonn Fingleton shows in this devastating book, the culmination of twenty years of research and study, instead of America changing China—i.e., making China more democratic—China is changing America.
While the Chinese people’s rising affluence is, of course, an occasion for wholehearted rejoicing, Uncle Sam should give the Chinese power system a wide berth—lest he catch his coattails in the jaws of a dragon.
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America's fate looks dicey in the showdown with the Chinese juggernaut, warns this vigorous jeremiad. Fingleton (In Praise of Hard Industries) argues that China's "East Asian" development model of aggressive mercantilism and a state-directed economy "effortlessly outperforms" America's fecklessly individualistic capitalism. Nor will economic development democratize a "quasi-fascist" Confucian culture. More likely, Fingleton contends, is "the Confucianization of America" as Chinese wealth subverts American politics and media. Fingleton's brief against Confucian societies can seem vague and paranoid; fortunately, his economic analysis is incisive. His most telling critique is of American business elites and policymakers, who have wrecked the U.S. economy, he insists, by promoting laissez-faire nostrums, free trade and a hollowed-out service economy. More compelling than Fingleton's exaggerated dread of the Confucian dragon is his well-supported case for economic nationalism.
--This text refers to an out of print or unavailable edition of this title.
Review
Praise for In the Jaws of the Dragon
“America’s fate looks dicey in the showdown with the Chinese juggernaut, warns this vigorous jeremiad. . . . his economic analysis is incisive.”—Publishers Weekly
“One of the most powerful, shocking, well-written, solidly documented, tear-the-scales-from-your-eyes books I’ve read in more than two decades. . . . I couldn’t put this book down—at least 100 of its 310 pages are dog-eared and highlighted. It’s probably the most important book that's ever been written about the future of our republic.”—Thom Hartmann
“Eamonn Fingleton demonstrates once again why his analyses of modern capitalism deserve serious attention. He lays out the consequences of seeing China the way outsiders would like it to be, rather than the way it is.”—James Fallows, The Atlantic Monthly
“Eamonn Fingleton’s riveting and provocative book is required reading for anyone who cares about the U.S.-China relationship.”—Senator Byron L. Dorgan, author of the New York Times bestseller Take This Job and Ship It
Eamonn Fingleton is a former editor for the Financial Times in London and Forbes magazine in New York who is known for his early and outspoken identification of postindustrialism as a prime cause of American decline.
In Blindside in 1995 and In Praise of Hard Industries in 1999, he challenged the then consensus that a shift to an all-digital New Economy would propel the United States to a new, unchallengeably high level of competitiveness. He poured particular scorn on what he called financialism, a tendency for financial services to pre-empt an ever larger share of U.S. GDP and human talent. America's financial services industry, he argued, was "a cuckoo in the economy's nest." Writing from a base in Tokyo, where he lived for 27 years, he warned that if Washington failed to stop the erosion of manufacturing, America would rapidly lose competitiveness, incur increasing trade deficits, and sink ever deeper into debt to the manufacturing-based exporting economies of East Asia.
He calculated that, per unit of output, manufacturing businesses are nearly ten times stronger exporters on average than services. One reason is that manufactured products generally require little adaptation to sell abroad. By contrast such key postindustrial products as computer software have to be expensively adapted to meet different cultural needs in foreign markets and the costs are generally incurred abroad. In other cases, American postindustrial companies hire large numbers of foreign employees to provide direct services to foreign customers. Either way the net receipts transmitted back to the United States are minimal.
In Fingleton's view, those who have dismissed America's manufacturing base as the "Rust Belt" display deep ignorance of modern First World manufacturing. Advanced manufacturing these days is highly capital-intensive, which means that each worker's productivity is greatly leveraged by sophisticated production machinery. This creates ample scope for employers to pay high wages. Advanced manufacturers moreover require great accumulations of proprietary production knowhow - typically knowhow acquired over generations of "learning by doing" and often understood only by top engineers who incorporate them into secret machine settings - and this powerfully shields them from low-wage foreign competition.
Fingleton argues that American opinion leaders have been blinded by dogma in believing that when American factories close, this is dictated by the "wisdom of the market." In reality, American manufacturers are competing in a globalized marketplace that is comprehensively rigged against them. The fact is that almost as soon as American corporations invent new, more efficient production technologies, they come under pressure from foreign governments to transfer these out of the United States. If they don't do so, they face non-tariff barriers in the relevant foreign markets. By contrast by moving their best technologies to overseas operations, they improve their foreign market access while retaining their ability to sell into the American market. The net effect is that it is increasingly foreign workers, not American ones, who benefit from corporate America's innovation.
In his most recent book In the Jaws of the Dragon, published in 2008, he identified a policy of suppressing consumption as a main driver of China's rise. The policy - implemented through, for instance, ultra-tight zoning policies which have forced housing costs through the roof and created huge profits for landowners - generates a vast surplus of savings which Chinese leaders then direct, via a state-owned banking system, into equipping industry with ever more efficient production technologies.
Born in Ireland in 1948, he is a graduate of Trinity College Dublin. He is working on a new book entitled Sandcastle Empire: American Decline and the Crisis of Individualism.
I think anyone concerned about the global balance of power and America's economy should read this fascinating, beautifully written, impeccably researched book. It clears up myths about global trade and makes it quite clear that unless an American government wises up, our economic power will continue to diminish, with grim consequences for prosperity at home. Just one example: you hear all the time that America doesn't build cars that the Japanese want and that's one reason our car industry has suffered a collapse. Nonsense. The Japanese have strict import controls and only allow 5% of the cars in their country to be foreign-made--which means European cars are in effect boycotted as well. I've never hward anyone argue that the Europeans don't make good cars.
I wish everyone in the White House and Congress would read this book and think through our trade policy--because it puts us at a great disadvantage on the world stage.
Eamonn Fingleton has more than twenty years of experience on the ground in Asia and he has brought his wealth of knowledge about the region to his latest book, In the Jaws of the Dragon. Far from integrating smoothly into a democratic capitalist world order, China, Japan and other Asian countries are going their own way with their own economic and political model - with authoritarianism and bureaucratic control of the economy and the general population a centerpiece.
Apologists for globalization like Thomas Friedman write from 30,000 feet and conclude all is well in the new flat world, but on the ground Fingleton makes clear in this book that China is following in the footsteps of Japan (with the aid of the Japanese, in fact, directly for "reformer" Deng Xiaoping's rise to power) towards a new form of capitalism that is on a collision path with the west. American readers will be surprised and should be concerned about Fingleton's detailed discussion of the long standing and very close relationship between Japan and China. We are seeing the emergence on a world scale of a major competitor and possible rival for global leadership in East Asia.
Particularly interesting to me in In the Jaws of the Dragon is Fingleton's discussion of the state's suppression of consumption in order to accumulate capital wealth controlled by the government. China, for example, recently renewed its "one child per family" policy - an ultimate form of suppression of consumption. Similarly, the Chinese regime continues to outlaw the formation of genuine trade unions and the right to strike which leads to artificially low wages.
While some in policy circles argue that China's admission into the WTO heralds an era of openness to western investment, Fingleton argues that this is not the case. My own research on the reform of state owned enterprises, like PetroChina, confirms this view. The goal of the regime, in my view, is to navigate an evolution to a more competitive economy but not a democratic society. The party shows no sign of giving up control and the variety of measures it uses to control access to its markets reinforces this approach.
This book is a must read on China as we approach the Olympics and as demonstrations for the independence of TIbet have now broken out in Lhasa. But I would also highly recommend this book for adoption in high school, college or graduate school level courses on Asia, globalization or international politics or economics.
This is an excellent study of US-China relations, written by the author of the brilliant books In praise of hard industries and Unsustainable: how economic dogma is destroying American prosperity.
Fingleton says that China follows the East Asian model. This is mercantilist, protectionist, and generates high savings because of curbs on consumption. So its savings average 40% of GDP, which they largely invest in manufacturing.
Since 1979, China's export revenues have grown by a record 16% a year. In 2007 it exported more than the USA (in 1996, the USA had out-exported China by four to one, in 1956 by ten to one). China is now Japan's largest trading partner (in 1992, Japan did five times more business with the USA than with China). China's foreign currency reserves are the largest in history - $1.2 trillion in May 2007 and its current account surplus is a world-record 9.5% of its GDP.
By contrast, the US current account deficit in 2006 was a record 6.5% of GDP, the second largest by a major nation in peacetime (in 1924, Italy's was 7.7%). US imports exceed exports by two to one.
Fingleton sums up the comparison, "in the last four decades those advanced nations that have been most faithful to laissez-faire - the United States and Britain - have been notable for economic mediocrity, if not downright dysfunction. Their currencies have on balance fallen precipitately, their trade positions spun out of control, and they have lost the advanced manufacturing industries that provided a bedrock of well-paid secure jobs to support broad-based prosperity."
But the US capitalist class keeps on outsourcing, shutting US industry and moving jobs overseas. Its sole aim is to maximise profit, whatever the cost. As Fingleton notes, "the big gainers are ... just a few thousand top corporate executives who reap huge returns via bonuses and stock options." They refuse to invest in industry because most of its returns go to workers in higher wages, not to shareholders. "Globalism is clearly not delivering the promised economic dividends for the American nation."
He calls for a manufacturing renaissance and for tariffs to protect the USA against destructive imports. He calls his final chapter, `Globalisation or democracy': that is indeed the choice.
