US fiscal cliff and potential lessons for China

However, history again took a surprising turn. In the 2000 presidential election, Al Gore, the Democratic candidate, lost to obscure Republican candidate George W. Bush, the son of George Bush Sr, despite the booming economy and moral high ground the two Clinton terms had created. It seemed the new world order designed by Bush Sr and his advisors was destined to be carried out by another President Bush. 

President George W. Bush surprised the world by condemning Iraq, Iran, Syria and the Democratic People's Republic of Korea as an "Axis of Evil" in his State of Union address in 2002. In 2003, Bush launched the Iraq War, on top of an ongoing war in Afghanistan, after the September 11 attacks. The Bush administration lied about Iraq's mass weapons program. Over one million innocent Iraqis died as a result of the Bush administration's lies. The Iraq War bankrupted the United State's moral high ground derived from its human rights offensives. After the Iraq War, few people took US human rights rhetoric seriously anymore. A government that lied to launch a war against a sovereign nation in defiance of the United Nations Charter, with a toll of over one million innocent Iraqi people, could no longer claim to be an upholder of human rights. A government that allowed torture and abuse of war prisoners and wonton killing of civilians forfeits its rights to talk about human rights.

It was a commonly accepted argument in the US that war is good for business. However, the so-called "War on Terror", including the wars in Iraq and Afghanistan, has become a huge financial drain for the US due to continuous resistance against US military presence in the region. 

While engaged in the above-mentioned wars, the Bush administration also cut taxes for the rich, leading to the largest wealth gap between the rich and poor in American history since the Great Depression. The policy destabilized American society, giving rise to the Occupy movement. There are more than 47 million people in the US without medical insurance and over 40 million people who are hungry on any given day. A large number of people are homeless and depend on government handouts to survive. Mitt Romney, Republican presidential candidate, said in one of his fundraisers that he had had to write off the 47 percent of the US population who were hopelessly dependent on the government to survive.

The former Chinese ambassador to the US said in a recent interview that the US is very good at feigning poverty. The former ambassador apparently did not keep up with US events in the last 12 years. American national debt has reached $16 trillion, equal to the entire US GDP. The US government has resorted to printing more money and selling more Treasury notes to finance its operations despite the dire potential long-term consequences. 

The Bush administration dared to cut taxes for the rich in the face of running a deficit from overseas wars because US capitalists felt they had won the contest with socialism. They did not need to make any more concessions for the working class with the collapse of the Soviet Union and the economic reforms in China. 

Workers wanted higher salaries, better working conditions and more benefits. But many would not have jobs at all as more and more American firms relocated their operations overseas. Today, manufacturing accounts for less than 9 percent of the American economy. Even many service sector jobs have been outsourced to countries like India and the Philippines. When a customer in the US calls for help, he or she is more likely to talk with somebody based in the Philippines and India rather than someone based domestically.  

In the US today, only 2 percent of all people are employed in agriculture, a primary sector of the economy. As the manufacturing sector declines to less than 9 percent, the tertiary sector has become overwhelmingly dominant, accounting for 90 percent of the economy. As the US economy becomes more and more service oriented, unemployment will continue to be a problem for US society. 

Outsourcing and relocation overseas did increase economic efficiency for US firms. But this economic efficiency was achieved at the loss of social efficiency.  

The government had to increase social spending to make sure the unemployed population could survive. Government spending to fight crime, maintain prison facilities, and battle greater alcohol and drug abuse as a result of unemployment continues to rise.

What can China learn from the US then? The lessons are many. First, the Chinese government should do everything it can to reduce the wealth gap between the rich and poor, using State power to tax the rich in order to make sure that the wealth of the nation be distributed more evenly. Second, China should categorically reject the poisonous advice and suggestions by the World Bank and Development Research Center of the State Council, which call for the privation of State-owned enterprises. State-owned enterprises are the most important pillar of the Chinese economy, the most important source of Chinese national revenue, and the foundation of Chinese citizen well-being. They should be protected by all means. Third, China should stop pushing for more urbanization in order to ensure China’s food security and environmental health.  

Chinese farmers and rural areas are mainstays of Chinese society and culture. China has fared relatively well in the face of the current global recession simply because of the resilience of Chinese farmers and rural areas. China has been able to outperform other third world countries in the last 60 years because China underwent land reforms while other countries did not.  

China's spending on social welfare is relatively low at this point largely because Chinese farmers can survive without government handouts.  

The Chinese government must realize that urbanization is irreversible and comes with huge environmental and social costs. Concentration of land in a small number of farmers could increase economic efficiency in the short term, but will have tremendous long-term environmental and social costs. China has a huge population and very limited arable land. Food security should be given priority above anything else. China should abandon using GDP figures as a measure of Chinese economic health and adopt a more comprehensive human development index to measure economic health.

The author is a Professor of Warren Wilson College in the US.

The opinions expressed here do not represent the views of the China Daily website