Two Smart Guys Trying to Figure It All Out

By Tom Plate

The two looked over the precipice and gasped at the steepness of the drop. They looked down at a desert of dashed hopes and old skeletons, scraping the bottom of the canyon.

Yes, this is where a failed U.S.-China relationship might wind up.

At first it does look like a very long way down, but gravity would make a fast trip of it. All it would take is a cliff-edge miscalculation or a loss of balance by one or the other for a huge geopolitical slip. China and the United States, the odd couple of the first half of the 21st century, would be at the bottom of the canyon of international stability.

It was that breathtaking possibility — that arid abyss — that caught the attention of the two leaders of China and America in Beijing last week. U.S. President Barack Obama was on the third leg of his Asia tour, after first hitting longtime Asian ally Tokyo and then Singapore for an international meeting. With all smiles but little evident warmth, China President Hu Jintao greeted him for a two-day stay in Beijing.

Afterward, many media assessments were gloomy about the summit. They said the two leaders of the world's two giant countries talked past each another, not looking at each another.

That's hard to believe. Both Hu and Obama are smart — and they are smart to be wary. The modern-day China-U.S. relationship is in its early chapters: Remember the international skies over the 1989 Tiananmen Square implosion? They were so ugly that they kept American presidents away from even summiting in Beijing until Bill Clinton broke the ice in 1998.

And today all of the issues are quite tough. They must figure out the national mess of North Korea, which has scraped together a handful of nuclear bombs. And they've got to figure out the national ego of Iran, which wants them, too.

Beijing itself has Muslim agitations on its western edge and a tense Tibet that somehow touches nerves and hearts all over the world. Washington has Iraq to get out of, Pakistan to get more involved in, and Afghanistan to make a major decision about. Doing the same old thing hasn't been working.

Overhanging these issues is the question of the Chinese and American economies. Both have serious problems — and in many respects are quite different. Their currencies are intertwined, almost like the famous DNA double helix.

Fundamental factors underlying the economic tensions are political. And the main one is this: Both presidents understand their system's vulnerabilities should unemployment continue to rise. They would be edging toward the cliff of catastrophe.

I put the matter to two of my favorite international economists. I asked professor Michael Intriligator of UCLA whether he agreed with the idea that America doesn't work if people are out of work, and that the Chinese need to know that.

He absolutely agreed: "People seem to have lost sight of the economic commitment of the U.S. government to full employment. This is in the Full Employment Act of 1946 and it is still on the books."

Unemployment in the U.S. now hovers above 10 percent. Should it rise much more, it will become the most explosive political issue on Obama's White House desk.

True enough, but for another perspective I ran my proposition by Asia-based Economist Kenneth Courtis. The former managing director and vice chairman of Goldman Sachs Asia is based in Tokyo, runs his own firm called Courtis Intergalactic, and probably deserves the distinction of having predicted (better than most) Japan's economic slide together with China's rise. His reaction was different from Intriligator's. He would rewrite the proposition to take the focus off the U.S.: "China doesn't work, if people are out of work."

The point these two economists make is simple but vital: The key issue in the U.S.-China economic and indeed strategic relationship is unemployment. Translated politically, it is "too many angry and frustrated people with no jobs, a lot of grudges and too much time on their hands."

Thus the Sino-U.S. understanding, for the immediate future, needs to adhere to this rock-bottom principle: Neither side must do anything to exacerbate unemployment problems for the other guy. Sure, this is easier said than done: It will mean achieving a tense trans-Pacific balancing act, trying to avoid getting too close to the edge and falling over. It will take constant communication, easing off and signing on, and the ability to ignore minor irritants.

If the most important bilateral relationship in the world falls off the cliff, the probability is that the rest of the world goes down with it.

Columnist and former university professor Tom Plate is writing a trilogy of books on Asia. © 2009 Pacific Perspectives Media Center. This regularly syndicated column ran in The Japan Times, among other newspapers around the world, on Nov. 23, 2009

The Japan Times: Monday, Nov. 23, 2009