WSJ article "Deficits and the Chinese Challenge"

It was recommended by fellow members of BayHelix, an association of professionals in the Biotech/Pharma industry most with training in the US after college.

This "interesting article for BayHelix" as mentioned by one member, in my opinion is one of the rather shallow and narrow-minded articles in the WSJ, taking Wall Street Journal Asia as WSJ's Asia edition. World affairs such as wars and survival of nations go way beyond debts and lending. America did not gain power and respect by lending money-- think of the Marshall plan to rescue Germany from the Soviets. America's contributions to both world wars and the prevention of the 3rd one so far certainly included money, lots of it, and blood, lots of that too. Americans took part in so many wars around the world, and the only territories they occupied are those that were used to bury the fallen American soldiers as many of us have already known. Creativity and innovation are results of an open, fair, and competitive society, not a plan of a nation’s leaders or its people’s collective will. Can anyone find another place where competition in a society is more based on one's personal talent, effort, and hard work than in the US? There is no absolute fairness and justice, the American society as a whole is the closest thing to it.

“Fights over health care and climate change are the cultural equivalent of fiddling while Rome burns.” stated in the WSJ Asia article. How about ignoring health care and climate change is historical equivalent of burning Rome by Romes own citizens. When the earth burns, do you really care that much about who still owes you debts?

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Deficits and the Chinese Challenge
– How United States supplanted the British Empire
By ZACHARY KARABELL
Printed in The Wall Street Journal Asia, October 14, 2009
The dollar's sharp drop over the past few weeks has led to considerable
anxiety about the status of the United States as the dominant force in the
global economy. Closely related to this fear is constant worry about the
rise of China and the evermore complicated relationship between Beijing and
Washington.
Most people are now aware that China is the largest creditor to a heavily
indebted U.S. government. It holds close to a trillion dollars of U.S.
Treasurys and has invested hundreds of billions more in private enterprises
in America. Even though these facts are plainly acknowledged, policy makers
and experts continue to underestimate the full ramifications of this
relationship.
Consider what happened in 1946, when a cash-strapped Great Britain turned to
the U.S. for a loan. For 30 years or more, the British had been consumed by
the threat of a rising Germany. Two wars had been fought, millions of lives
had been lost, and the British treasury was dramatically depleted in the
process. Britain survived, but the costs were substantial.
In spite of its global empire, a powerful military, and an enviable position
at the center of world-wide commerce, in early 1946 the British government
faced a serious risk of defaulting on its financial obligations. So it did
what it had done at various points over the previous decade and turned to
its closest ally for assistance. It asked the U.S. for a loan of $5 billion
at zero-interest repayable over 50 years. As generous as those terms seem
today, such financing had been almost routine in years prior. To the
surprise and shock of the British, Washington refused.
Unable to take no for answer, Britain explained that unless it received
funds the government would be insolvent. The Americans came back with a
series of conditions. They would lend Britain $3.7 billion at 2% interest,
and the British government would have to abide by the 1944 Bretton Woods
plan, which made the dollar rather than the pound sterling the reference
point for global exchange rates and required Britain to make the pound
freely convertible. Even more significantly, Britain had to end its system
of imperial preferences, which meant no more tariffs and duties on goods to
and from colonies such as India. These were not mere financial penalties:
Taken together, they meant the end of the British Empire.
Within two years, Britain had left India and was on its way to decolonizing
throughout Asia and Africa. Unable to compete with the U.S. economically and
no longer able to reap the benefits of colonial trade, Britain's military
shrank and its commerce contracted. It quickly receded from its dominant
global position and entered several decades of economic malaise. In the
1980s, Britain finally emerged as a prosperous country, but it was a shadow
of what it had been in its heyday.
The U.S. replaced Britain as the guardian of the West. As one British
official, Evelyn Shuckburgh, remarked in the late 1940s, "it was impossible
not to be conscious that we were playing second fiddle." And that was
precisely what the U.S. desired. Having supported the British for decades
and become its banker and manufacturer during two wars, at the end of World
War II the U.S. fully intended to supplant the British Empire. The loan
request provided the pretext, but by then the balance had already shifted
and Britain could have done little to reverse the tide.
By 2030—if not sooner—China is likely to surpass the U.S. in the size of
its economy, though it will remain on a per capita basis a much poorer
society for many years after that. Trajectories can change, but the recent
implosion of the American financial system has only accelerated China's
rise.
Given the lesson of the British Empire's demise, it would be foolish to base
current policy on the assumption that China will hit a fatal speed-bump
before it is able to supplant the U.S. And while the level of current
indebtedness is manageable for the U.S.—and in fact tethers the Chinese
closely to the U.S. economy in ways that are arguably beneficial for both
countries—the fact that these economies are currently bound together does
not mean that their interests will always be in sync.
Here, too, the British analogy is sobering. For decades, the relationship
between Britain and the U.S. was mutually beneficial, though the Americans
resented being treated as junior partners. As tension festered, the British
were consumed with the more immediate threat of Germany. But in the end it
was the U.S. that delivered the knockout blow.
The Americans have not had to deal with a true economic rival since the
British more than half a century ago. America today is as unaccustomed to
global economic competition as the British were at their apex. The U.S.
often seems lumbering and ill-suited to the demands of economic rivalry.
The only way to avoid Britain's fate and meet the challenge of China is to
reinvigorate economic life. This is a multiyear endeavor that must be done
primarily through innovation, not legislation. America needs to retool its
domestic economy to build on the global success of many U.S. companies. It
must focus on inventing new products and generating new ideas, rather than
defending the rusty industries of yesterday. Fights over health care and
climate change are the cultural equivalent of fiddling while Rome burns.
China thrives because it is hungry, dynamic, scared of failure and convinced
that it should be a leading force in the world. That is why America thrived
a century ago. Today, such hunger and dynamism seem less evident in American
life than petulance that the world is not cooperating.
The U.S. is in danger of assuming that because it has been a dominant nation
on the world stage, it must continue to be so. That is a recipe for becoming
Britain.