Global cooperation is way to recovery
U.S. Treasury Secretary Timothy Geithner recently criticized China for currency manipulation. But with many of the world's advanced economies in financial crises, commentator Helen Popper says now is the time to cooperate with them to boost our own.
Helen Popper, associate professor of economics at Santa Clara University. (http://www.scu.edu/business/economics/faculty/helen_popper.cfm)
More on Commentaries, America's Financial Crisis
TEXT OF COMMENTARY
KAI RYSSDAL: Scott mentioned China's got $2 trillion in foreign reserves. More than half of that's in U.S. dollars -- Treasury bills and the like. Combine that with the huge Chinese trade surplus with us and it's not too hard to connect the dots between our economic recovery and theirs.
During his confirmation hearings Timothy Geithner made what a lot of people consider ill-timed remarks about Beijing and currency manipulation. He said the Chinese were "manipulating" it to get an economic advantage.
Commentator Helen Popper hopes Geithner can think about the bigger picture.
HELEN POPPER: Now that Timothy Geithner is our Treasury secretary, it's time for him to set aside his provocative talk about China's currency practices.
Sure, China's currency is weak. But dogging the Chinese about currency manipulation won't get us anywhere right now.
Right now, we need an international effort to stimulate the world's economy. Stimulating just the U.S. economy isn't enough.
Our stimulus will "leak" a little. That is, when the government pays Joe the Paver, Joe might spend a little part of his money on a hockey stick from Canada. Imports like that help other economies, but weaken the stimulus' benefit to our own.
We need other countries to undertake their own big stimulus packages, ones that will "leak" a little the other way, and help us too.
China has proposed a nice, big package. It's nearly twice the size of ours relative to its economy.
And the rest of the world's economic powerhouses have packages in the works. But, follow-through is vital.
If the packages are delayed, watered-down or -- worse -- fail to get enacted at all, then prospects for a global recovery will fade.
The Obama administration should support China's new stimulus package, encourage other countries toward similar efforts and move aggressively to coordinate these mutually reinforcing policies.
The alternative is grim. Geithner's accusation of currency manipulation, justified or not, smacks of the mistakes of the Great Depression.
Then, each country relied on currency devaluations to spur its own economy, at the expense of others. The devaluations went hand-in-hand with protectionism, and global trade and economic activity plummeted.
U.S. trade fell from $10 billion in 1929 to only $3 billion in 1933. And, U.S. livelihoods fell right along with it.
In the current crisis, world trade already has moved down sharply. But trade is not a zero-sum game. We can all grow -- or shrink -- together.
The Great Depression was a global crisis. So is the current situation. The lesson from those dark times is that a return to growth requires a strategy of global cooperation, not mutual antagonism.
Let's hope Geithner's currency talk was an unfortunate rhetorical holdover, and not an omen of the new administration's policy.
RYSSDAL: Helen Popper teaches economics at Santa Clara University.
Comments
Comment | Refresh
From Davis, CA, 07/27/2009
Secretary Timothy Geithner's experience dealing with the Chinese is sufficient enough for me to acknowledge his tactfulness when saying that their currency is being manipulated. Like Prof. Popper is hoping, I suspect his choice of words serves as some sort of a gimmick to get the Chinese to "cooperating". What is dangerous about this that Prof. Popper doesn't seem to acknowledge is that China is ultimately interested only in China (i.e. they will not "leak" optimistically) and will use the current economic crisis as an opportunity to swallow enormous chunks of the U.S. economy. After much success and landmark progresses in the U.S., most of Americans will not take this lightly. I was actually a little outraged to see some very serious presumptions of this parodied on at a major website.
From Boston, MA, 02/11/2009
I think Obama administration is very inexperienced in dealing with foreign affairs. Mr. Obama should visit China and get the first hand knowledge about China himself.
From los angeles, CA, 02/11/2009
Well said. Please send this excellent commentary from Prof. Popper to President Obama. When trades don't cross broders, soldiers will. Secretry Geithner's China-bashing is regrettable.
From Ann Arbor, MI, 02/11/2009
I appreciated this story, but I found the statements on China were a little contradictory. First, you come down on Geithner for, in my opinion, mentioning the FACT that China devalues its money, and has benefited from this protectionist strategy. Then you talk about why we shouldn't join in this strategy because of what we learned in the 30's. It seems to me that he mentioned exactly what we, and the rest of the world already know about China, and what we all need to stay clear of. Thanks for bringing up this topic.
Post a Comment: Please be civil, brief and relevant.
Email addresses are never displayed, but they are required to confirm your comments. All comments are moderated. Marketplace reserves the right to edit any comments on this site and to read them on the air if they are extra-interesting. Please read the Comment Guidelines before posting.
You must be 13 or over to submit information to American Public Media. The information entered into this form will not be used to send unsolicited email and will not be sold to a third party. For more information see Terms and Conditions and Privacy Policy.