China, bank manager for the US

The Chinese ambassador to the UK has appeared yesterday on the Andrew Marr show (20/3/08) and today (29/03/08) on Channel 4 news, interviewed by John Snow. She was at pains to say that China was still a developing country, that China's dollar reserves are not very much given the number of Chinese people - $1000 or £1000 (I forget which, but it didn't sound like much) per person. No need to worry: China is still poor and is just trying to make its way in the world.

Yet I have blogged recently on the Chinese monopolising of raw materials for industrial production and remarked on the obvious fact that with industrial capacity and trade surpluses comes economic and military power as well as influence. More important than China's increasing strength is our increasing weakness: the lack of ability to pay our way, the lack of a production-based economy leading to impoverishment and a loss of independence, even basic security. In my inexperience as a political blogger, I thought the new phase of China's influence over the US was new, given America's immense debts and financial troubles.

Not so. Paul Craig Roberts, and others no doubt, made this clear two years ago in August 2007. He argued even then that China's holding of American reserves meant that the US had no influence on China, that the Chinese could precipitate a dollar crisis; that offshoring has eroded American living standards and pushed up deficits, and that America is as dependent on Chinese imports as it is for imported oil. The media don't discuss it; economists adhere blindly to Free Trade orthodoxy.

How can the West have been so stupid? Well, a drunkard will justify his drinking binges by various rationalisations. We cling to the notion that there is a privileged developed world and a (formerly oppressed) less privileged developing world, including China, that Free Trade leads people out of poverty, that trade reduces tensions, helps to create a better, more unified future. The West, by leading on trade liberalisation, is helping to save the needy. They rationalise our indebtedness as a kind of post-imperial largesse for the world's poor.

The weakness of the US and most of Europe should be apparent; an aging population, a debt-based economy and no signs of addiction to consumption abating; social decay; an inability to protect our borders; the military capacity of many European countries is laughable; those countries with a military budget are struggling to pay for it. Yet white guilt and one-world ideology has led us to a belief that our liberal trade policies are helping save the world. Why not save ourselves?

We are in denial. the US and Europe are in terminal decline. Maybe Africa is still poor enough for us to continuing patronising that resource-rich and demographically vital continent, although I wouldn't be suprised if Africans were richer than Europeans in 30 or 40 years. But the Chinese have already surpassed us; by raising the idea of a new reserve currency, they are telling the US that they veto US decision making, even while the Chinese ambassador in London, on being asked about trade imbalances, tells us that China is still a developing country. She is just passing the drunk another drink.