‘The great enemy of truth is very often not the lie – deliberate, contrived and dishonest – but the myth – persistent, persuasive and unrealistic.’
J F Kennedy
We have a lot of these myths around us, in economic or social areas, that have been penetrating the society, in a persistent and persuasive manner. The truth has been the casualty; the other casualty has been the poorer section of people across the world, more so from poorer nations.
Unfortunately there’s never existed a lobby for these two casualties. One does not have a voice of its own, and theÂ billions of the voices of the other does notÂ necessarily reach Washington or New York.Â
I can name many of these myths. There has been a time when I myself believed many of these mythsÂ as if they were as good as some universal scientific laws. They are like (1) Privatization is good (or whatever) but does not define what is ‘good’ or for ‘whom’, (2) Free flow of capital is good (again same questions), (3) free trade is good for individual nations, (4) Government and public sector represent inefficiency whereas private sectorÂ offers ‘unmitigated good’ to society, (5) Less Government therefore is good, (6) Market knows the best, etc.
One of these myths in whichÂ I still partly believe is: ‘Competition is good’, with a caveat – more competition at the top (firms, political parties, products, services) is better than more competition at the bottom (customers, job-seekers). However now we have more competition at the bottom in certain segments, as with job-seekers thatÂ results in exploitation or sweat-shops as it happens in much of developing nations.
These mythsÂ have persistentlyÂ persuaded many of theÂ common species of imbecile policy-makers, from both developed or developing nations,Â who believe they have an original Â mind when they actually have none but follow the cacophony generated byÂ the over-reacting stupid media-glare. People capable of original thinking, starting from eminent academicians or bright scholars also often fall in the trap of myths while searching for the truth.Â Myopic media further helps in establishing these myths at the cost ofÂ truth.
My humble submission is, irrespective of the above two categories where I may fit-in,Â I am no exception.Â However I have began to question many of these myths now, and realize that these myths may not always be enemies of truths. The act of assuming these myths to be universally true and thereby propagating forcefully these myths across the world on willing or unwilling nations, and thereby on its populace is an enemy of truth.
And essentially that’s what the ‘Washington Consensus Policies’Â have been doing. It remained broadly unquestionable as it came from Washington during the post cold-war era; however a rising, stubborn China questioned many of these principles forÂ decades internally albeit silently, and now has beenÂ doing so externally, and loudly.
The problem is severe because there’s nothing of the status of absolute truth in areas of economic or social sciences.Â The truth and the mythÂ often interchange their respective positions depending on the side of the viewer. There’s no model that can maximize the collective benefit of the global human civilization with complex variables, and in areas of trade-offs in economic and social policies.
For example, human rights may be a global term, but the definition or practice of human rights, asÂ followed by its avid preacher – the U.S. itself varies from context to context.
Although we have a much integrated global economy now, economics as a subjectÂ is stillÂ viewed within national domains. There’s very little discussion on global money supply, global inflation, global productivity growth to figure out global economic policies. Dollar may be a global currency and is being held in trillions of dollars beyond the U.S. borders, giving the U.S. an unprecedented advantage because of lack of competition in global currency ranks; Â but issues that affect dollar-policiesÂ has largely remainedÂ U.S. centric.
Economists from the U.S. and China would love to fight on root-causes resulting in present race to the bottom currency war, which may evenÂ embarass the armies of these two nations.
Economics as a subject can probably do better, in deciphering the truth from the myths and the lies, by looking at the world in totality than by viewing parts of it.
It is high time that global policy-makers starting from the IMF, the World Bank, The UN, or the WTO along with the U.S. realize that what’s good for the U.S. need not be good for the world. I suspect that they know it well, however they don’t admit itÂ openly, because of obvious reasons.
Europe has been maintaining stoic silence on U.S. policies and blaming China at times for its undervalued currency; JapanÂ has been naturally myopicÂ about a rising China’s impact, not only on its economy, but also on its security and geo-political influence in the region as well.
Admit it or bluntly overlook it – Washington now has been challenged from the dragon alone.Â China has nowÂ been slowly acknowledging the fact that even if China follows the policy of peaceful rise of China, the majority of the developed world and (naturally) part of China’s geographic neighbors see an obvious conflict of interestÂ between ‘rise’ and ‘peaceful’. There’s probably no historical precedenceÂ of peaceful rise ofÂ any independent-minded nation (rise of Japan or South Korea may not be comparable as these nations never effectively questioned the U.S. authority, nor had the size – economically or militarily).
An unchallenged superpower further strengthening its position may lead to peaceful times, but not when another has been trying to rise under the very eyes of an existing superpower. The conflict is natural when the existing superpower perceives any further rise of China to be detrimental to the U.S. interests, more so whenÂ U.S. realizes the consistent rise of China against a consistent decline of the U.S., as it has been happening over the past decade.
So longÂ a rising ChinaÂ might have been ‘a win-win’ for the U.S., but it’s not necessary that it would always remain a win-win.
The latest of this dispute involves a trade and currency war where the U.S. alleges China of having an undervalued currencyÂ (much widely publicized globally) whereas China alone accuses the U.S. of wealth stealing, from the poorer developing nations, who hold trillions of dollar as forex reserves as they effectively have no choice.Â As per China, The U.S.Â is engaged in wealth stealingÂ by not following its global responsibility to maintain a stable and strong dollar, in which others have been forced toÂ trust in present financial world.
Taking advantage of dollar’s unique status in global economy, the U.S. has always believed in what John Connolly (the then US Secretary of the Treasury)Â stated inÂ 1971Â to his European financial ministers: â€œThe dollar is our currency, but your problem.â€ Today the dollar is the U.S. currency, and is the developing nations’ problem. Europe has managed to come up with its own version of global currency.
Can’t China take a similar stand when it comes to Yuan? Rest of the world is not holding yuan, so question of global responsibility of yuan does not arise.
In the 2nd part of the article,Â we try and apply Kennedy’s wordsÂ in finding who is right, or if none is absolutely right – who happens to be more right in this China -U.S. dispute on trade and currency issues. Before we do so, we need to define stakeholders who get affected,Â assuming both the allegations to be partly or totally true, one by one. To do so, the obvious dilemma is how to view the allegations. We can examine from (1) the U.S. interests (and that of its job-seekers in the U.S.), or that ofÂ (2) China’s interests.
Both the above approaches do have in-built biasesÂ becauseÂ truth and myths would inter-change from the perspective (U.S. or China) from which we see it. The approach suitable and more acceptable probably would be to take global interest, and if there’s conflict in definingÂ global interest, one can take the interest of the poorer or relatively poorer section of the world. This section has its numbers majority, not in the 3rd world poorer developing nations alone, but in the developed world (including the U.S.)Â as well.
Part II of the article, titledÂ ‘Wealth Stealing Under the Myth of an Undervalued Yuan’ isÂ here.