Growing Wealth Crowds Out Oppression

By Daniel T. Griswold

Dan Griswold is a director of the Center for Trade Policy Studies at the Cato Institute

December 3, 2005

 President Bush's trip to Asia highlighted once again America's ambivalence toward China.

While China has emerged as one of our most important commercial partners, its rising wealth has also raised new concerns about its military might and intentions.

Those concerns were stoked by a recent report by the U.S.-China Economic and Security Review Commission, which predictably painted virtually every aspect of the U.S.-China relationship in ominous hues. The reality is far more positive for both the U.S. and the future of freedom in China.

China's emergence from centuries of isolation and stagnation is one of the great stories of our time. The world's most populous nation has rejoined the global economy.

As Bush and other visitors to China see firsthand, hundreds of millions of citizens there are beginning to taste the rewards of middle-class life -- a home or business of their own, a telephone, appliances, a car, foreign travel, college for their kids. We should accept this trend while guarding our national security interests.

The U.S.-China panel further warns that our growing commercial ties to China are sapping America's economic strength. But it completely misses how trade and investment ties benefit both nations.

The more than $200 billion we will spend this year on Chinese-made clothing, shoes, toys, consumer electronics and other goods benefit tens of millions of American families every day. Lower prices in stores mean higher real wages for the large majority of American workers. For all the attention on China as an export powerhouse, its exports make up only about 6% of the world's total.

Even with its allegedly undervalued currency, China has become the world's No. 3 importer. Its companies and consumers have a voracious appetite for farm products, energy, raw materials, and higher-end products such as airliners and high-tech inputs.

Chinese demand is especially strong for American wheat, soybeans, cotton, plastics, semiconductors and industrial machinery.

U.S. exports to China have doubled since 2000, and farm exports have grown even "As the people of China grow in prosperity, their demands for political freedom will grow as well." President Bush faster. China has now surpassed Great Britain to become our fourth largest export market--and our only major growth market.

Our bilateral trade deficit with China will probably exceed $200 billion in 2005, but all those dollars the Chinese earn from selling in the U.S. market return as investments in U.S. financial assets. This helps lower U.S. interest and mortgage rates.

The big story of China is not the difference between China and the U.S., but the difference between China today and what it was only 25 years ago. Within China, economic growth has brought greater independence and freedom for individuals. The number of Chinese with cell phones, Internet access, and the freedom to travel abroad has been growing exponentially. Restrictions on religious worship and family life, while still oppressive, are gradually being loosened.

As seen in Taiwan, South Korea, Chile and elsewhere, economic reforms enabled a rising, educated middle class to undermine oppressive regimes, while tilling the soil for more representative governments.

As Bush said last week: "As the people of China grow in prosperity, their demands for political freedom will grow as well."

China's communist rulers are riding a tiger. The country's spectacular growth during the past two decades has lifted its per capita GDP into the neighborhood of middle-income countries. In contrast to lower income countries, ifs a neighborhood where "domestic violence" against civil and political liberties is much less common.

Of the 89 countries in the world that have higher per capita GDP than China, more than two thirds are described as "free" in political and civil liberties by Freedom House.

Of the 103 countries with lower per capita GDP, only about quarter are "free." Of those with higher per capita GDP than China, only 15% are, like China itself, "not free," where political and civil freedoms are systematically denied.

In other words, if countries are rich, ifs difficult for their governments to remain oppressive, and if governments are oppressive, it is difficult for those countries to prosper. At some point the Chinese government will confront the choice of achieving even greater wealth and economic status, or maintaining its oppressive rule. Experience shows that, absent a lot of oil in the ground, it is just about impossible to do both.

This article was originally printed in Investor's Business Daily on November 25, 2005.