A powerful and dangerous force has been unleashed on the global economy. It’s a new source of skilled labor that has put American workers at a competitive disadvantage — and no one knows just how many jobs have already been lost because of it. The U.S. is running a huge trade deficit with this force; every year we’re spending millions more on what it produces than it spends on American goods and services. And to top it all off, this entity has built a massive currency reserve, investing large sums of it on U.S. government securities and thus enabling America’s fiscal profligacy.
Why, oh why, won’t the U.S. government do something to protect us from . . . Tiger Woods?
You thought I was talking about China, and I was. But I’m also talking about the modern-day golf legend. You see, China and Tiger Woods are a lot alike.
In seven out of the ten years since Woods burst onto the golf scene he’s been the top money-earner on the PGA Tour. He has forced his best competitors into second place while pushing countless players at the bottom of the heap out of the pro game entirely. He also has nudged athletes of all stripes from the lucrative endorsements market. He’s the best-paid corporate mascot ever, lending his name and likeness to General Motors, General Mills, American Express, Accenture, Nike, and more.
Such success both on an off the course has paid very well. Woods can’t possibly spend all the money he makes. (He took in $100 million from his Nike deal alone.) And what he doesn’t spend he either saves or invests, no doubt putting ample resources into U.S. government securities.
So what is Tiger Woods doing that’s any different than what China is doing?
Both are competing successfully. Both are earning more than they are spending. And both are saving and investing their wealth. If you think of Tiger Woods as his own country, he and China are just the same. Yet not a day goes by that we don’t read of some new political effort to throttle competition from China for the sake of the American worker and the American economy. Where are the initiatives aimed at protecting us from Tiger Woods? Think about that the next time a politician proposes protectionist legislation aimed at China.
Of course, pro golfers aren’t whining about being beaten by Woods. Rather, they know they must improve their games — or at the extreme, find new games to play. Competition is the lifeblood of sports, and the professionals accept this premise. At the same time, the consumers of sports — the rest of us who watch it on TV — insist on it: If there were no competition, sports wouldn’t be very interesting.
So why are American manufacturers whining about being beaten by China? And why do our politicians support these false notes?
Competition is the essence of business just as it’s the foundation of sports. That’s why we have antitrust laws; they’re an attempt to keep competition alive and well. And just as in sports, competition is good for consumers. It forces businesses to improve their products and keep prices low.
Yet there are people who understand all this in principle and still make an exception when it comes to competition from foreign nations. Why? There’s no fundamental difference between competing with someone across town or someone across the globe. Why the different set of rules for China and Tiger Woods, or for foreign and domestic competition?
One of the usual arguments against foreign competitors is that they are “unfair”; that they expect us to buy from them, but they won’t buy from us. China, it is said, is cheating us by building up an enormous “trade surplus,” which now totals over $1 trillion.
But Tiger Woods doesn’t buy as much from America as America buys from Tiger Woods. In fact, Woods is no different than anyone who has ever succeeded enough in life to accumulate savings. China does just that and it’s a problem. But it’s no problem when Woods does it, or for that matter when you and I do it. We often hear that the “trade deficit” with China means that America has gone into debt to buy Chinese goods. But that’s no more true than saying we’ve gone into debt in order to watch Tiger Woods play golf.
Some of the goods we import from China are paid for with exports. In fact, U.S. exports right now are running at record levels. For the rest of the goods we import from China, we pay money. But that’s money we have earned, fair and square. Just because China sold more to us than it bought from us doesn’t mean there’s any debt involved.
Say you bought a pair of Nike’s because you thought that ad with Tiger Woods in it was so cool. Did you pay for your sneakers with money, or did you export something to Nike? Last I checked this isn’t a barter economy, so you probably paid money. But that doesn’t mean you went into debt for those sneakers.
The China-bashers also say that China’s investments in U.S. government securities are “unsustainable,” and they worry about what will happen to U.S. interest rates if those investments are liquidated. Well, suppose China took that money and started buying U.S. goods with it, instead of saving it. That means U.S. producers would have a lot of very profitable work to do. And that money wouldn’t disappear. It would simply change hands, and its new holders would ultimately have to invest it.
Perhaps China worries so many, and Tiger Woods doesn’t, because he’s an American and China is, well, China. But try this thought experiment: If Woods weren’t an American, would you feel differently toward him? Would you want to slap a targeted tax or other penalty on him? Or would you restrict Americans from doing business with him? Your answer is likely “no” to each of these. You love watching him play golf. And even his competitors know that if he wins and they lose, that he has raised the level of the game and made it a better business for everyone involved.
So why do so many endorse protectionist laws against China? Don’t these very same people love buying cheap toasters at Wal-Mart — toasters made in China? And don’t the American firms which cannot compete with China understand that the ascent of this new economic force has lifted the entire global economy, ultimately making it a better game for everyone?
When you think it through there’s only one sensible approach to trade with China: Go get ’em, Tiger!