So Good of the Likes of Sen. Schumer to Care So Deeply for Ordinary Chinese Citizens

by Don Boudreaux on July 11, 2011

in Seen and Unseen, Subsidies, Trade

Here’s a letter to the Wall Street Journal:

You report that “China’s critics, including members of the U.S. Congress, say an undervalued currency unfairly helps Chinese exporters” (“China Boosts Lead in Global Exports,” July 11).

Indeed.  If Beijing truly is pursuing such a policy, that government is beyond doubt unfairly enriching some people at the expense of others.  And the people unfairly enriched do include a few Chinese exporters.  Overwhelmingly, though, the beneficiaries are non-Chinese consumers (including Americans) of China’s subsidized exports.  In contrast, the people unfairly burdened are exclusively Chinese citizens – both as consumers forced to pay higher prices at home, and as taxpayers forced to fund Beijing’s practice of purchasing U.S. dollars in order to depress the price of the yuan against the dollar.

It is, in fact, obscenely unfair for Beijing to oblige the Chinese people to hand over chunks of their wealth to Americans, even the poorest of whom is far richer than is the typical man or woman in China.

Donald J. Boudreaux

American producers, of course, are no more ‘unfairly’ harmed by Beijing’s policy of driving down the price of Chinese exports by suppressing the price of the yuan than these American producers are ‘unfairly’ harmed by Beijing’s policy of driving down the price of Chinese exports by building highways and wharves in Qingdao.

UPDATE: Mark Perry chimes in

MP: The chart above [in Mark's post] helps to show how American consumers have benefited from China’s “unfair” currency policy by comparing the overall increase in prices (CPI: All items) since 1998 to the price increases for clothing and toys, which are both mentioned in the  WSJ article as examples of China’s export dominance in labor-intensive products.  While overall prices in the U.S. have increased since 1998 by 39%, clothing prices have fallen by almost 10% and toy prices have fallen by more than 50%.  That means that in real terms, clothing is about 49% cheaper now than in 1998 and toys are cheaper by almost 90%.

We can of course thank China’s low wages in part for the dramatic decreases in real prices for clothing and toys purchased in the U.S., but we can also thank the Chinese government for manipulating its currency in favor of American consumers, and we should be grateful for the billions of dollars saved by Americans over the last decade from that manipulation.

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John Papola July 11, 2011 at 6:55 pm

Is there anything weirder than the claim that because one government is intervening and distorting people’s choices, another government should do the same. Surely no government can effectively target a policy with some counter-balance. They simply pay off domestic cronies (such as swing-state steel makers under Bush or unionized tire makers under Obama) which have very little to do with whatever nonsense the other government may be doing.

Fraud. It’s what the state does best.

vikingvista July 11, 2011 at 7:16 pm

Fraud. It’s what the state does MOST. Since they get your money whether or not you see through their lies, they don’t have to be particularly good at it.

Methinks1776 July 11, 2011 at 7:32 pm

Is there anything weirder than the claim that because one government is intervening and distorting people’s choices, another government should do the same.

Yes. I find the person of Chuck Schumer to be even weirder than that idiocy. Funniest thing is he doesn’t understand the first thing about anything he ever talks about. If he didn’t have so much power, he would be hilarious.

vidyohs July 11, 2011 at 10:07 pm

“Is there anything weirder than the claim that because one government is intervening and distorting people’s choices, another government should do the same. “

Yes most definitely.

What is more weird is that people with an IQ above a single digit knee jerk believe in everything that is passed on to them as conventional wisdom, even though the evidence that conventional wisdom is wrong is available to any one that questions.

To me it is weird that no one questions. To me it is weird that with the internet as a research tool people still never question. To me it is weird that people who supposedly know the English language can’t hear the qualification in the phrase, “the American people have more freedoms than XXXXXX”. It is weird to me that no one asks if qualified freedom is actually freedom or just another way of saying your slavery sits lightly upon on you, but don’t make us yank the leash.

Buddy, you just barely brushed up against weird.

Chucklehead July 12, 2011 at 12:21 am

“It is hard to understand politics if you are hung up on reality. Politicians leave reality to others. What matters in politics is what you can get the voters to believe, whether it bears any resemblance to reality or not.”
The Great Thomas Sowell

vidyohs July 12, 2011 at 6:14 am

Just so.

Martin Brock July 12, 2011 at 3:00 pm

I wouldn’t say that the U.S. government should respond to foreign export subsidies with retaliatory subsidies, but I also wouldn’t say that subsidizing exports is no more “unfair” than building roads or enforcing property rights.

Don routinely argues here that foreign subsidies can only help residents of the importing nation, but I don’t see how the price distortions created by export subsides differ so fundamentally from the price distortions created by inflationary monetary policy and other state policies. If the state favors one supplier over another, within a nation, I suppose this favoratism creates malinvestment. Why doesn’t foreign favoratism create malinvestment?

When the Chinese government stops subsidizing exports, the U.S./China trading relationship will adjust back to something based on unsubsidized comparative advantages. This reorganization is costly, and these costs are a consequence of the subsidies.

More significantly, my own government cooperates with the Chinese policy by selling the Chinese government entitlement to rents imposed on me. If China could only buy U.S. produce or invest in U.S. productivity with its dollar subsidy, I could more easily believe that Chinese nationals bear much more of the cost, but my own government effectively bails out Chinese “investments” in the U.S. in advance by substituting entitlement to tax revenue (Treasury securities) for these “investments”. It even bails out Chinese “investments” in nominally “private” assets, like mortgage backed securities.

That “my” government imposes these rents seems irrelevant to me. As Ralph Raico notes, the real international class struggle is not between capitalists and laborers, except insofar as “capitalists” describes rent seeking, forcible proprietors. The more meaningful distinction is between people closer to the center of state power and people further from it. Barack Obama has more in common with Hu Jintao than he has in common with me, and it shows.

“China v. the U.S.” is a meaningless construct to me. Chinese statesmen and U.S. statesmen might as well be one center of statutory authority, as far as I’m concerned. Neither group of statesmen represents my interests. They all represent their own interests, and their interests coincide.

rhhardin July 11, 2011 at 7:21 pm

I think you have to work from the misallocation of resources rather than fairness.

The harm comes from misallocation, and is a net result. There’s more harm than help; that’s why it’s a misallocation. It’s off the maximum.

Methinks1776 July 11, 2011 at 7:43 pm

Suppose there is a global misallocation of resources resulting from China’s subsidizing certain industries. Do you know what exactly those misallocations are? No, you don’t. Thus, it is an act of sheer stupidity to punish American consumers in the name of correcting “misallocations”.

Also, anyone deeply concerned about misallocation resulting from government subsidies and currency manipulation have PLENTY to work on in this country before they concern themselves with China.

juandos July 12, 2011 at 9:51 am

Also, anyone deeply concerned about misallocation resulting from government subsidies and currency manipulation have PLENTY to work on in this country before they concern themselves with China“…

Absolutely Methinks

Can you say coal?

Russ Nelson July 11, 2011 at 9:16 pm

Schumer is a deeply stupid person. Ugly is skin-deep, but stupid goes straight to the bone. He’s probably the only person less intelligent than muirgeo.

Tim July 11, 2011 at 10:19 pm


Looking forward to a few of these letters pointing out the equally insidiousness of Republicans in Congress. Let’s not forget that they are the merely the other half of the same evil coin.

Greg Webb July 12, 2011 at 12:44 am

Tim, the issue is not Democrat vs Republican…nor is it liberal vs conservative…nor is it left vs right. Rather, the issue is big government elitist control vs individual liberty.

Tim July 12, 2011 at 12:51 am

I’m with you 100% Greg. Sadly though Don’s been spending a lot of time lately harping against liberals and Democrats more than, in my opinion, the equally appalling conduct of the Republicans.

vidyohs July 12, 2011 at 6:24 am

Perhaps, just maybe, it is your perception that is warped and not Don’s.

In the genre of politics I think your bias is revealed in the two words you used, equally appalling.

The ideology of the democrap/socialist/liberal/regressive/communist as represented by the Soviet union, Nazi Germany, Mussolini’s Italy, Red China, The Khmer Rouge, Castro, Luminoso Sendero, Kim Jong Il, etc. et. al. is responsible for the deaths of well over a hundred million of their own citizens in just the 20th century alone.

Name an equally appalling political belief that competed or is in competition with that kind of thought, regressive ideas, and deadly actions.

Nothing is equally evil with that looney left ideology.

Tim July 12, 2011 at 11:24 pm

The wacky religious right that wants government to tell people how to run their lives are no less a threat to liberty than the particularly colorful examples you chose to list. The major problem with many here is their willingness to overlook the fact that Republicans and Democrats are one and the same. They are all threats to liberty and the lesser of two evils is itself evil!

vikingvista July 12, 2011 at 2:29 pm

Just wait until the Republicans regain the White House.

Powerless Republicans always look better than Democrats because of their lying economic rhetoric. Democrats openly call for the mass looting of innocent citizens and brutal top down central planning. Republicans typically speak against that to some extent, except for the case of a few choice markets where they are openly barbaric. In power, however, R & D’s are all a cabal of idiotic thugs.

Tim July 12, 2011 at 11:25 pm


vidyohs July 12, 2011 at 7:02 am

Governments, Nazi Germany, Soviet Union, Fascist Italy, Red China, Cuba, Khmner Rouge, Luminoso Sendero, Kim Jong Il, etc. et. al., acting in the name of liberal/democrap/regressive/socialist/communist ideology degenerated, demoralized, impoverished, and then killed well over a 100 million of their own citizens/people in just the 20th century alone.

Name a competing ideology that racked up a score like that, much less an ideology that wants smaller government and more people paying their own way.

Your bias is revealed in your choice of two words, equally appalling. Nothing equals the ideology of the democraps as appalling.

Aw you say, our home grown looney left imbeciles would never be that vicious or that callous. You’d be wrong for thinking that. Our home grown looney left imbeciles have no problem with eliminating opposition any way they can. They speak in their writings, they preach it from their pulpits, and my observation of the looney left in the histories of the governments I listed above, tell me that when the looney left seizes power the true vicious crazies somehow managed to percolate to the top where they do the most damage.

Balanced against that is the appalling behavior of the right which believes people out to be self responsible, self sufficient, and left alone………God how awful!

vidyohs July 12, 2011 at 7:15 am

edit: …..ought to be self responsible,

vidyohs July 12, 2011 at 7:39 am

Strange pattern in posting comments lately, one never knows for sure if a comment is going to post or not.

an edit is needed in the last sentence of my last comment………..ought to be self responsible…..

Morbius July 12, 2011 at 8:24 am

you would be correct and i would agree.

If the right were not hell bent on invading every nation in the middle east, wasting trillions in treasure and countless lives in the process of enriching their particular friends.

There is no difference between the left and right in the USA, it’s a question of which corrupt group of politicians is “your team” to root for, as if it’s a football game.

No i could never support the right. I can never support out right murderers. I could also never support the left, for the same reason.

A pox on both their houses.

Scott July 12, 2011 at 9:13 am

The Bush Doctrine is not an invention of the right. It is the warped ideology of the neoconservative. The right is about individual liberty not some ill conceived precautionary principle. Just because a politician assumes a political label doesn’t mean they actually fit the category.

Jack Davis July 14, 2011 at 3:21 am

No true Scotsman fallacy here. The pro-war people, they’re not real conservatives, because, well, I don’t agree with them.

vidyohs July 12, 2011 at 4:41 pm

Why is it, Morbius, that this guy can see the difference that you are too stup………, foolish to see.

yet another Dave July 12, 2011 at 6:38 pm

Republican =/= right

At the national level it’s more accurate to say the Republican party is the left and the Democrat party is the further left. That’s not really correct either, but it’s closer than calling Repubs the right.

Brian S July 12, 2011 at 8:19 am

This practice clearly hurts the competitors as well; the company that would have made the sale had the Chinese company not made it.

So to say the Chinese people are the only ones unfairly burdened is crazy.

Kendall July 12, 2011 at 8:45 am

Brian is right. Just emphasizing the overall benefit without recognizing some people lose jobs due to government subsidized trading will not help us get the policies we want.

vikingvista July 12, 2011 at 2:23 pm

The only good policy is a dead policy.

Smash Equilibrium July 12, 2011 at 1:36 pm

Not taking a position here, just thinking aloud. Would the result of Chinese currency manipulation actually be the pushing out other of countries who are competing with for trade with America? No real harm to Americans (short-term at least) and merely a benefit to Chinese. However, other poorer countries in the world may be negatively affected had they been able to buy and sell to America in the absence of currency manipulation.

vikingvista July 12, 2011 at 2:22 pm

Only in a narrow sector. The Chinese government could create RMB to subsidize Chinese widgets. The effect is a transfer of resources from the general Chinese economy toward Chinese widgets. But that would cause a relative increase in the cost, or relative loss of productivity increases, of Chinese gidgets. The Thai widget makers would then be encouraged to shift to gidget making.

Governments cannot produce. They can play whack-a-mole with their nation’s economies, selectively illuminating what they want people to see, or they can do the easiest and simplest thing–get out of the way of economic growth.

To the extent the Chinese have become more competitive, it is because of the latter.

tms July 12, 2011 at 4:15 pm

Yesterday, my in-laws brought over a gift for my 5 year old son – a set of Jr Golf Clubs. I am looking at this set of clubs thinking , wow, that is a really nice set of golf clubs for a 5 year old. I got my first set of jr clubs when I was much older, they were not nearly as nice, and I think they were about the same price, even in 1987 dollars.

Sure enough…Made in China!

vikingvista July 12, 2011 at 4:32 pm

Made in China. Enjoyed in the USA.

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