Until now this scribe was sustained by two assumptions in relation to India’s foreign policy. First, that there existed a natural alliance between America and India which because of various circumstances dating to the tenure of Pandit Nehru never fructified. Secondly, that America and China had got joined at the hip economically due to the exertions of the US corporate lobby; the current US tilt towards China and Pakistan was a passing phase that would end after the US security establishment succeeded in extricating America from China’s coils. A recent development appears to demolish both these assumptions.
The latest cover story of Fortune magazine by noted Asia expert and its Contributing Editor, Sheridan Prasso, has revealed a new twist in US-China economic ties. Up till now China had a huge balance of trade with America; 60 percent of Chinese goods exported to America were US-owned; diversion of US investment from the domestic market to China by US firms cost America many jobs; China’s political stability was heavily dependent upon its exports because its economy was export driven; and the trillions of surplus dollars earned by China through its exports to America were invested in US treasury bonds.
Now Chinese firms have started to invest in the US to create American jobs. The Fortune cover story attempts to justify this development on economic grounds. It states that land and electricity are cheaper in the US than in China which is why the Chinese firms are investing in America.
This explanation just doesn’t wash. American labour is far more expensive than Chinese labour.
The author herself in the article concedes: “It's true that American workers are much more expensive, of course, and the overall cost of making a widget in China remains lower, and perhaps always will.”
Chinese companies have invested $280 million and created more than 1,200 jobs in South Carolina alone. She quotes John Ling, a naturalized American from China who runs the South Carolina Department of Commerce's business recruitment office in Shanghai: "The gap between manufacturing costs in the U.S. and China is shrinking," he explains. Yeah, but it hasn’t shrunk yet, pal! Since when have Chinese businessmen become so oblivious of production costs?
Then why are Chinese firms investing in America?
The decision is political. The same article gives the game away. It states that US authorities have reduced taxes to the Chinese firms and China’s government has agreed to subsidize Chinese firms up to 30 percent of their initial investment. This move therefore has long term strategic implications. America and China will not be joined at the hip as New York Times columnist Thomas Friedman once described. They will be fused into creating “Chimerica” as British historian Niall Ferguson had predicted.
In February 2009 Ferguson wrote: “If you think of it as one economy called Chimerica, that relationship accounts for around 13 percent of the world’s land surface, a quarter of its population, about a third of its gross domestic product, and somewhere over half of the global economic growth of the past six years.” The Fortune story suggests this trend could be irreversible. No wonder China considers buying Newsweek from Washington Post!
In her article Sheridan Prasso describes how Americans working in Chinese firms in the US are not bothered by ideological considerations. She explains: “Politically it (China) remains a communist country, despite its capitalist economy.”
Many Americans speak in this fashion. One does not know whether they are dreadfully confused or are trying to confuse the world. Mere nomenclature does not define ideology. There is not a shred of communism in China’s system. That is why corporate America is so comfortable investing in China.
China replicates Hitler’s Nazi system. There is marriage between full-fledged totalitarian rule and big private capitalism. Big business works best with dictatorships that can crush individual liberty. That was why Nazi Germany had the most spectacular economic transformation of its time. China is displaying something similar today. But there is one important difference between Nazi Germany and modern China.
The Nazis believed they were the master race destined to rule the world. Important Chinese leaders, such as Chi Haotian, former Defence Minister and Chief of the People’s Liberation Army, have expressed the same idea about China. The difference arises from Hitler’s remorseless targeting of the Jewish community through a conspiracy theory. The Chinese have done the opposite. During World War II at the height of the Jewish persecution Shanghai was the only city offering sanctuary without identity papers to all victims fleeing Germany. The most sacred Jewish religious texts were preserved for safe keeping in Shanghai. Only after war ended were these religious texts transferred to Israel. After the death of Mao the Chinese government altered its official policy to describe Zionism not as a racist movement but a nationalist movement.
It is not surprising therefore that many Americans feel comfortable with China and consider it their natural ally. China got its nuclear bomb not from the Soviet Union but from Israel. Shaul Eisenberg was a refugee in Shanghai during WWII, and later became Israel’s richest businessman. He acted as the conduit to transfer nuclear know-how to China in the early 1960s. The current review of the Nuclear Non-Proliferation-Treaty (NPT) by the United Nations has revealed that on May 6, 2010, America’s Government Accountability Office (formerly known as the General Accounting Office) released the previously secret 1978 report “Nuclear Diversion in the US? 13 Years of Contradiction and Confusion”. This document reveals that between 1957 and 1967 Israel received over 22 tons of Uranium-235 which is the key material used to fabricate nuclear weapons. The ultimate source of China’s bomb was the US. Although covert, the America-China nexus was deep. Now China needs energy contracts with Islamic nations. It doesn’t need Israel.
This background and the latest development could have far reaching implications for India. China by its approach during the past five decades has made amply clear that it will not allow India its legitimate political space. “Chimerica” as it evolves is not likely to change course. To bank on a future strategic alliance between America and India would therefore be unreal unless New Delhi is reconciled to act as China’s South Asian vassal.
If India seeks a global role commensurate with its potential it must start looking beyond America. It must reappraise its entire strategy regarding foreign policy and domestic development. Indians are thrifty people who like to live within their means. That is a good starting point to evolve a strategy that builds self-reliance at home and independence abroad. But that requires radical thinking out of the box.