What with the Olympics and the perceived "threat" of the growing power of the Chinese economic machine, what discussion on the internet isn't focused on the U.S. presidential election is concentrated on our "problem" with China. Let's be honest, however. Our problem isn't with China. Our problem is with us — just as China's problem is with China.
China is steamrolling forward with all the aspect of an economic juggernaut that will very quickly come to dominate the world. There is, however, one extremely serious error the Chinese are making, and it's an error that will cause the Chinese economy to implode faster than it is growing.
By focusing exclusively on producing goods for export and ignoring the legitimate wants and needs of its own people, China is laying the groundwork for its own ultimate collapse as well as that of the United States. A case in point is the $40 billion spent on the Olympics — which few Chinese can afford to attend — contrasted with the estimated $10 billion budgeted for rebuilding the areas affected by the earthquake.
No country can survive for long if it does not first meet its own needs. Securing that, anything produced for export is a bonus, a surplus that allows your country to benefit from whatever comparative advantage it has by trading for the products generated by other countries' comparative advantage in whatever they produce.
By trying to be number one in all markets and ignoring both comparative advantage and the needs of its domestic market, China may very well bankrupt other countries. It will then bankrupt itself by accumulating more and more foreign currency at the same time that they undermine the value of those currencies by throwing trade out of balance. This also undermines the U.S. economy by feeding off the American proclivity to meet consumer needs by going into debt — an addiction as deadly to a national economy as opium is to personal health.
Fortunately, there is a simple solution to both our problems. A program of Capital Homesteading implemented at the same time in both China and the United States will allow both countries to meet the legitimate wants and needs of their citizens, provide adequately for national security, and participate as equal partners in trade for mutual benefit.
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