An Imaginary Press Conference by President Obama:
A Parody about China
(This is not a parody about American politics or the Obama Administration; the characters and setting were chosen solely to dramatize the arguments pertaining to China.)
Good afternoon. Late last night I received a call from Senator Paul, congratulating me on being reelected President of the United States. I would like to thank Senator Paul for his continued service to our nation, and for running a distinguished campaign. I believe the American people were well served by the honest debate he and I engaged in.
Starting today, my Administration will be making some significant political and economic changes. The aim of these changes will be to accelerate our economic growth. I will first explain each of the key changes, and will then elaborate upon the larger rationale for emulating China.
Let me begin with three key political changes:
First: The executive branch will now exercise complete authority and control over all other parts of the federal government, including the legislative branch, the judicial branch and the Federal Reserve. This will streamline all decision-making and implementation processes, enabling my Administration to formulate and enact policy as effectively as possible for the good of all citizens.
Second: Our financial system will be nationalized. No outright ownership changes will take place, and all the publicly listed securities will continue to trade. However, my Administration will now issue directives to the management of our banks regarding all business and financial decisions. In short, the banks are now a de facto arm of the government; this will enable us to finance some of our new economic priorities, which I will elaborate upon shortly. (We have not yet determined whether other industries will also be nationalized, but will continue to study the matter carefully.)
Third: We will be rewriting the Constitution. Among the changes to be made, freedom of speech, freedom of the press and the right of free association will be interpreted, and in many cases curt tailed. Since my Administration has the best interests of the American people in mind at all times, the radical freedoms articulated in the Constitution are no longer necessary. In addition, there will be no more elections, as my successor will be selected via a secret process that serves the best interests of the nation.
These political changes will enable us to implement the following economic policies:
First: It will now be the policy of the United States to exercise strict control over the value of the dollar. In the near term, this will help us eliminate our trade deficit; more broadly, we will henceforth manage all capital flows to suit our economic aims. We realize that the economy of the e United States is larger than China’s, so we will take account of our impact on other nations inn managing our capital flows. But the days of allowing the world to take advantage of our open capital markets are over.
Second: In order to spur economic growth, we will be embarking upon a massive and sustained program of infrastructure investment. This investment will be financed by the banks, which (as noted above) are now under government control. As part of our new policy of managing capital flows, the ability of citizens to invest outside the country will be restricted; this should result in significant growth of bank deposits that will fund the increased lending by our banks. Also, the increased savings from our new economic program should result in a current account surplus, thus eliminating the need to borrow money from abroad going forward.
Third: Once our infrastructure program takes effect and economic growth accelerates, we expect inflation to increase. At that point, our new monetary policy will be to maintain negative real interest rates indefinitely in order to maximize lending and investment. Although we believe this policy is in the nation’s best economic interest overall, we do recognize the potential for inflation to inflict harm on some citizens. For that reason, we will implement price controls and subsidies of key commodities as appropriate. For those rare times when it is necessary to tighten monetary policy, this will be done by strategically curtailing lending rather than allowing real interest rates to become positive.
Fourth: We will begin too issue five-year economic plans in order to address all structural deficiencies in our economy on an ongoing basis. Secretary Geithner will be publishing our first Five Year Plan within a few weeks. The design and implementation of these plans will both enable income to be redirected where it is needed in the present, and also ensure that the economy develops the capabilities that will be needed in the future; we will no longer rely upon the invisible hand of the market for such important tasks.
Before I explain the larger rationale for emulating China, I want to reassure you that this new system will not eliminate the role off entrepreneurialism. China has correctly recognized the need for the innovation that entrepreneurialism provides, and America has the world’s best entrepreneurs. We want people to continue getting rich by creating and running new businesses. What is needed is simply a harmonization where the entrepreneurial elements off capitalism are combined with the benefits of an all-powerful and benevolent Central Government.
Let me now discuss the larger rationale for emulating China’s economic and political systems.
Our goal is to achieve a similar rate off economic growth that China enjoys. At first, we considered simply emulating China’s economic system while leaving our political system unchanged. But as we thought about it more deeply, we realized that the two are inextricably intertwined, and that there was no way to change our economic system in such a fundamental way without also fundamentally changing our government.
Why emulate China? Quite simply, because China is widely considered the world’s greatest economic success over the past three and a half decades, and because most analysts believe its growth will moderate only slightly in the coming years.
Now, I know that many people think China’s situation is an exception. According to this view, China’s lack of human freedoms, its opaque government and its state-dominated economy have only facilitated – or at least not hindered – its economic growth due to special circumstances. Specifically, this view states that China is in a special situation partly because its level of urbanization is only 500% (compared to 70-80% for developed nations), and partly because it has invested so much less capital per person than developed nations. According to this view, it does not matter that the economic and political reform unleashed in China more than thirty years ago has slowed markedly over the last decade and a half. All Chine – and only China – needs to do is to keep moving its citizens to the cities and keep investing on a massive scale.
This was also my view at first, but when my Administration thought about it more deeply, we realized that this made no sense. Because if this view is correct, then the true, underlying return on investment should have declined throughout the last fifteen years during which economic and political reforms appear to have stalled. After all, the more China grows, the less “catch-up” that remains, and therefore the more such investment should be wasteful and ineffective: if China ultimately needs to adopt Western reforms to succeed, then all the years of investment without reform should have created more and more misallocated capital. The natural end state to this process would be a bubble, and as we know from our own recent experience, growth and prosperity can look their best just as the bubble is about to break. If the majority of China’s economic growth for many years has been powered by wasteful and corrupt investment, then the inevitable bursting of its bubble should be a cataclysmic event that would fundamentally alter its future economic prospects.
Yet this is not what most financial analysts believe. Our best and brightest feel that China’s system is working wonderfully, and that it faces only a modest reduction in its future growth rate as it continues indefinitely to grow faster than the rest of the world. If this is true, then China’s economic and political system must not be a hindrance to its growth, and it should be a system that others can emulate if they so choose.
For all those who doubt whether America could make such radical changes, I say: Yes, we can! We can and we will reinvigorate our economy. We are the change we have been waiting for. When America puts its mind to something, nothing can stop us.
Thank you, God bless you, and God bless the United States of America.
by Patick Wolff, Grandmaster Capital
April 2, 2012