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A Bad Case for Fearing China

Summary:
Here’s a letter to National Review: Editor: If Victor Davis Hanson’s case (“China’s Brilliant, Insidious Strategy,” May 14) for why we Americans should fear China can be judged by the quality of Mr. Hanson’s economics, we can breathe easily. Mr. Hanson’s economic arguments are hopelessly confused. For example, he regards America’s trade deficit with China as a “price” that we Americas pay – a price that is “now-worrisome.” But Mr. Hanson’s claim (one, of course, also made repeatedly by Trump) is economic nonsense. In a world of more than two countries, there’s no reason whatsoever to suppose that any pair of countries will import from, and export to, each other the same amounts. It follows that America’s “trade deficit” with China has no more economic significance than does Victor

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Here’s a letter to National Review:

Editor:

If Victor Davis Hanson’s case (“China’s Brilliant, Insidious Strategy,” May 14) for why we Americans should fear China can be judged by the quality of Mr. Hanson’s economics, we can breathe easily. Mr. Hanson’s economic arguments are hopelessly confused.

For example, he regards America’s trade deficit with China as a “price” that we Americas pay – a price that is “now-worrisome.” But Mr. Hanson’s claim (one, of course, also made repeatedly by Trump) is economic nonsense. In a world of more than two countries, there’s no reason whatsoever to suppose that any pair of countries will import from, and export to, each other the same amounts. It follows that America’s “trade deficit” with China has no more economic significance than does Victor Davis Hanson’s trade deficit with United Airlines or his favorite restaurant.

And to the extent that America’s trade deficit with China does reflect differentially high Chinese investments in the U.S., those investments both enrich us by bringing more capital to our shores, and reduce Beijing’s incentives to wage war against America.

Another confusion: Mr. Hanson assumes that Beijing’s mercantilist policies are for China’s economy a source of strength. This assumption, too, is sheer nonsense. Cronyism and hubris in Beijing are just as certain to weaken China’s economy as cronyism and hubris in Washington are certain to weaken America’s economy. Because Mr. Hanson’s employer, the Hoover Institution, is a leader in warning of the dangers to Americans of Washington’s cronyism and hubris, it is quite curious that Mr. Hanson assumes that Beijing’s cronyism and hubris will not weaken China’s economy but instead, through some miracle, strengthen it.

Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030

There is a lot more that can and should be said in justifiable criticism of this essay by Hanson. If time permits, I’ll soon say two- or four-cents more.

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Don Boudreaux
He is a professor of economics at George Mason University in Fairfax, Virginia. Previously, he was president of the Foundation for Economic Education.

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