Timothy Taylor — US Not the Source of China's Growth, China Not the Source of America's Problems

A sizeable portion of the US discussions about economic policy toward China seem to me based on two conceptual mistakes. One mistake is that China's rapid economic growth fundamentally depends on trade with the US. The other mistake is that the bulk of US economic problems depend in some fundamental way on trade with China....

It's worth spelling out the underlying logic here a bit. The formula for economic growth is to invest in human capital, physical capital, and technology, in an economic environment that provides incentives for hard work, efficiency, and innovation. China has made dramatic changes in all of these areas, and they are the main drivers behind China's extraordinary economic growth in the last four decades, and its expectation of above-global-average growth heading into the future.... 

Conversely, the US economy has not done a great job of investing in the fundamentals of economic growth....

These US economic issues and others are in any substantial part not the result of trade with China, or the result of international trade at all. Lasting solutions will not be found in trade squabbles, either…

The great leveling is in full swing as the emerging world catches up, often with leapfrogging. Since capital investment is flowing to the emerging world where returns are greatest, the developed economies are treading water or stagnating as financialization takes over.

Conversable Economist
US Not the Source of China's Growth, China Not the Source of America's Problems
Timothy Taylor | Managing editor of the Journal of Economic Perspectives, based at Macalester College in St. Paul, Minnesota