Yellen’s visit to Beijing: penny lectures from economic ignoramuses

With the USA’s national debt topping an eye-watering $31tn, inflation running rampant and the accelerating deindustrialisation of the economy, treasury secretary Janet Yellen clearly has her work cut out.

But instead of facing up to the reality of the situation at home, Yellen used the occasion of her week-long April visit to Beijing to lecture her hosts on how best to run their economy.

Through the tunnel vision of her unipolar lens, Yellen could plainly see that the origin of all the USA’s woes lay in the unreasonable insistence of China on her right to continue the dynamic industrial expansion that has raised so many millions of Chinese citizens from poverty and looks set fair to help the independent development of many more millions globally via the Belt and Road initiative and other partnerships.

Yellen’s real complaint about China is that it is “simply too large”. “The Treasury has called on China to stop over-subsidising [!] its green-tech industry — a situation that US officials say risks [!] flooding global markets with cheap solar panels, electric vehicles and lithium-ion batteries. ‘China is now simply too large for the rest of the world to absorb this enormous capacity.’” (Janet Yellen says US-China relations on ‘stronger footing’ by Claire Jones and Joe Leahy, Financial Times, 8 April 2024)

Whatever happened to saving the world with green industries and products? Surely the ecowarriors in the White House should be dancing a jig to see that economies of scale in China are rapidly bringing down the costs of solar panels and electric cars?

But apparently solar panels and electric cars only save the world if they bring profits to western corporations!

While the USA belly-aches about the effects of a giant global powerhouse on its remaining industrial base, we can’t help remembering that no such qualms bothered Washington when it was the American colossus that bestrode the world.

But with the balance of forces in the world shifting fast, it seems that those who only yesterday were the most zealous evangelists of capitalism have to be reminded of the basic tenets of their beloved ‘free market’.

“Supply and demand balance is relative, with imbalance often being the norm,” Chinese vice-finance minister Liao Min said on Monday, dismissing Yellen’s concerns. “This can occur in any economy operating under a market economy system, including historical instances in the US and other western countries.”

Meanwhile, Chinese commerce minister Wang Wentao pointed out: “The country’s renewable energy and EV industries were not the product of subsidies but the outcome of innovation and market competition.” (How Janet Yellen struggled to move the needle on US-China trade by Claire Jones and Joe Leahy, Financial Times, 10 April 2024)

These hard economic realities will be evaded neither by diplomatic soft-soap nor by ramping up economic aggression (as, for example, the 25 percent levy imposed by the USA on cars and parts imported directly from China).

The plain truth is that the USA has been spending far beyond its means for decades – an unsustainable and ultimately catastrophic model that the Chinese government politely refuses to follow.

While the USA was living on borrowed money, amassing unserviceable debt and printing new dollars on a vast scale to try to escape a looming economic crash, its money-printing had the effect of exporting inflation around the globe, thus forcing the rest of the world to pay the price for US impecunity.

Now US monopolies are livid that Chinese industry is out-competing them, foiling hopes that they might somehow export their way out of the deep economic crisis in which they find themselves.

The problem of overcapacity is central to capitalist commodity production and will only end when that system is replaced with socialist planning. Pending that happy outcome, let Yellen and company save their unsolicited advice on how China should run its economy!