As America Goes . . .

Globalism: The experts said China and India were the
new economic “juggernauts”—strong, independent
and insulated even from America’s financial woes. The
experts were wrong.

The Chinese and Indian economies are in a free fall, proving
that when America booms, the world booms; and conversely,
when she sneezes, the world catches a cold. Stripped of
all the hype, the “China Miracle” now looks more mirage, and the
“Shining India” rather dull. Both countries, it turns out, have been
desperatelydependenton Americafor their growth.
Nearly 60% of China’s total exports are churned out by plants not
owned by the Chinese but by American and other Western companies.
And they’re now starting to close them. The resulting layoffs
havebeen so massive that dislocatedworkers are rioting.
At a factory in Dongguan that makes Nerf toys for U.S.-based Hasbro
Inc., some 500 workers battled security guards, turned over a
police car, smashed the headlights of police motorcycles and forced
theirwaythrough the factory’s front gate.
Some 3 million Chinese have already been fired in the industrial
province of Zhejiang alone. Millions more layoffs will follow by
Christmas, the World Bank predicts, as China grinds to its slowest
growth intwodecades.
It’s a far cry from 2005,whenthe media breathlessly predicted the
“communisteconomicjuggernaut”would“challenge the West.”
“It’s an article of faith in the West that democracy and free enterprise
must exist hand in hand,” said U.S. News&World Report in a
special cover report. “China is teaching theWestsomething new.”
Meanwhile in India, the economy is sliding into crisis mode, with
dislocated workers also turning violent. After Jet Airways, India’s
biggest private airline, laid off 1,900, a large crowd of workers
stormed the airline’s headquarters inMumbaito vent their anger.
Thoughlessexport-dependent thanChina, keysectors of the Indian
economy are exposed to the U.S. recession. The business outsourcing
industry is particularly vulnerable due to its dependence
onour crippled financial sector.
TheIndianemploymentbase relies heavilyonthe U.S. for call-center
jobs, as well as those involving technical support. India’s softwareindustry
is also taking a beating.
The U.S.-led global recession smashes the myth that Asian economieshavebecomeso
powerful their batteriesnolonger needchargingby
the American economy.
Neverbefore has a country risen as fast a China.Anditmayfall just
as fast. As foreign direct investment slows to a trickle, all the talk of
economic hegemony shifting to China and India won’t seem so authoritative.
Many best-selling books have been predicated on this
false assumption, however,andmoreare in the pipeline.
All this good press must be going to China’s head. In Beijing last
Thursday, U.S. Treasury Secretary Hank Paulson was lectured by
Chinese officials to get America’s economic house in order.Among
others, Zhou Xiaochuan, governor of the Chinese central bank,
called for a rebalancing of the American economy.
“Overconsumption and high reliance on credit is the cause of the
U.S. financial crisis,” he said. “As the largest and most important
economyin the world, the U.S.should take the initiative to adjust its
policies, raise its savings ratio appropriately and reduce its trade
andfiscal deficits.”
According to the Financial Times, the tone of the comments reflected
“an underlying shift in power”—a shift that’s also been detected
by a senior fellow at the Brookings Institution. “One result of
the crisis,” Eswar Prasad told the FT, “is that the U.S. no longer
holds the high ground to lecture China on financial or macroeconomicpolicies.”
What the financial crisis and U.S. recession have really exposed is
the Big Lie. Far from posing a threat to our economy, China and
IndiahaveprovedtobepapertigersdependentoncorporateAmerica.
AsAmerica goes, so still goes theworld—inbad times as in good.

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