By JIM STODDER
Everyone is trying to figure out what China means for the West.
New business opportunities in the East? More poverty in the West? A
rival superpower?
Jack London asked all of these questions a century ago. Already
famous for tales of the Alaskan gold rush, the 28-year-old author
was hired by the Hearst newspapers in 1904 to cover the war between
Russia and Japan. London, who loved boxing, was now ringside for a
major defeat of a European country by non-Europeans - the first
since the fall of Constantinople in 1453.
This Asian triumph came at the same time immigration was leading to
anti-Chinese riots in California. In this climate, London sent home
a 1904 essay titled "The Yellow Peril" - predicting that the
Chinese might one day inherit the earth.
Three years later, in 1907, he wrote a science fiction story
called "The Unparalleled Invasion," in which he made two accurate
predictions about China's future.
First, he predicted that Japan would invade China, but eventually
be expelled. The Japanese invasion came in 1931, 15 years after
London's death, and their expulsion came at the end of WWII.
More important was his second prediction. He saw that China would
industrialize in the 20th century, and that its vast supply of
cheap and disciplined labor would again make it what it had been
for millennia before - the world's greatest economic power by far.
London wrote that:
"China ... entertained no dreams of conquest. The Chinese [were]
not an imperial race. .. [they were] industrious, thrifty, and
peace-loving. War was looked upon as an unpleasant but necessary
task that at times must be performed. And so, while the Western
races had squabbled and fought ... China had calmly gone on working
at her machines and growing."
Until, in his story, it becomes the largest economy on earth. And
at current rates of growth, China's GDP will in fact surpass the
United States by mid-century.
The finale to London's prediction is horrific: The Western powers,
terrified by China's new power, wipe out its population with
biological warfare. London may not have approved of such genocide,
but there is no question that he saw the "yellow peril" as a threat
to the West.
Despite this ugly racism, Jack London's story captures two faces of
globalization: the promise of amazing growth in the East, and the
West's shock of relative decline.
First the bright side: Most of humanity is escaping from poverty.
World Bank figures show that from 1981 to 2004, people living in
extreme poverty (less than $1 a day) fell from 33 to 15 percent of
world population. Those in moderate poverty (less than $2 a day)
fell from 54 to 40 percent.
Nowhere was this faster than in China, where extreme poverty
declined from 64 percent to 10 percent, and moderate poverty
dropped from 84 percent to 35 percent over the same period. Never
before has there been such rapid improvement in human
well-being.
Quite a few foreigners are getting rich in China as well. While in
China on business last month, I visited luxury hotels and
conference centers swarming with business people from all over the
world. This is a gold rush - China's industrialization has produced
the greatest increase in absolute world wealth ever.
Meanwhile, however, there has been a decline in U.S. relative
wealth - and its correlates, our political and military power. This
is the downside of globalization, for us.
In the long run, we need to keep our military strong, and have much
better incentives for environmental protection. But our most
immediate need is for a more generous safety net - for the victims
of trade.
If free trade really is good for the country as a whole - as we
economists argue - then it ought to be possible to make it good for
the whole country. But don't do it with tariffs - they cut off the
benefits of trade for everyone. Do it with subsidies targeted to
those hurt by trade.
In Scandinavian countries, where such subsidies are much more
generous, surveys by Harvard's Dani Rodrik and others show that
more people are in favor of globalization. Recognizing what is good
for their people as a whole, Scandinavians are willing to protect
the inevitable losers.
We need to do the same - not out of kindheartedness, but to protect
our overall gains from trade. We cannot expect millions of workers
to willingly sacrifice their jobs upon the altar of globalism just
so the rest of us can enjoy higher living standards.
The United States economy has grown faster than the rest of the
world for most of two centuries. But not anymore. The poor world is
now growing much faster than the rich world. The combined GDP of
the developing world, led by China and India, grew 7 percent in
2006 - more than twice as fast as the GDP of the rich countries,
according to the World Bank.
If world poverty is to be conquered anytime this century, this very
rapid growth for the poor must continue. We in the U.S. can get
richer by investing, helping the world's poor - the vast majority
of our planet - to work smarter and better. China is showing us how
great our world's potential is.
We must not let our fear of a resurgent Asia cut us off from this
immense engine of wealth creation. Let's be constructive - and go
get a bigger piece of that wealth.

