By Michael Hudson,
A lecture to Global University in Hong Kong on April 25, 2023.
Michael Hudson, Janet Yellen’s 2023 strategy against China
Last week, on April 20, U.S. Secretary of the Treasury Janet L. Yellen gave a talk on the U.S.-China Economic Relationship at Johns Hopkins School of Advanced International Studies. It was a declaration of economic war, explaining how the U.S. intends to fight to stifle China’s remarkable economic growth.
Ms. Yellen noted that she is an economist, not a military or national-security strategist. But precisely for that reason her talk outlined America economic war strategy against China more blatantly than anyone else to date.
It is a cultural characteristic of our times that women are the most belligerent warlike voices today. Janet Yellen is in the tradition of Madelaine Albright, Hillary Clinton and Victoria Nuland in the US, and Ursula von der Leyen in the EU and Annalena Baerbock in Germany. They are voices of hate against Russia and China.
Yellen and the rest of America’s Biden Administration has framed this hatred by claiming that the United States is surrounded by enemies, headed by China and Russia. They make this claim despite the obvious fact that it is the United States that has attacked the Near East, NATO that has expanded to move against the post-Soviet countries and overthrown governments in other nations.
So we are seeing an old trick. As the Nazi propaganda head Joseph Goebbels explained, the way to mobilize a population to support a war is to say that their country is under attack.
That is how the Roman papacy mobilized European warlord armies to attack Constantinople and the Near East in the 12th and 13th centuries. Popes claimed that the Crusades were a war of civilization against the Saracens and other Moslems.
It is how Nazi Germany militarized in World War II to attack Russia. And it is how George W. Bush sought support to attack Iraq, lying that it had biological and nuclear weapons of mass destruction. It was the United States that had these weapons.
Secretary Yellen states that America is under attack, and needs to protect itself. Her evidence is to blame China for causing America’s deindustrialization: “They have harmed workers and firms in the U.S. and around the world,” she told her audience.
But what actually has ended U.S. industrialization is that finance capitalism has replaced industrial capitalism – financialization, privatization and rent-seeking, coupled with a class war against labor to prevent productivity growth by ending the rise in living standards for wage labor. The financial sector’s aims at denying responsibility, and is trying to blame China.
That is what America’s neoliberal economic teaches in the universities. It applauds finance capitalism as economic progress into a post-industrial society, not a relapse into special privileges of absentee landlordship and making economic gains not by industrial profits but by land rent and natural-resource rent paid as interest, and monopoly rent to make companies more valuable by their ability to make monopoly rents at the expense of the economy at large. Predatory finance is applauded as wealth-creation, not as the road to austerity and debt peonage.
What Ms. Yellen blames China specifically for is that its government actively subsidizes its industrial modernization and invests in public infrastructure. She told her audience that in recent years she has “seen China’s decision to pivot away from market reforms toward a more state-driven approach.”
That is of course the essence of socialism. It also has been the essence of how America achieved its successful industrial capitalist takeoff.
But American strategists want to prevent China and other countries from becoming prosperous by strong government investment and support of labor and industry, that is, in the way that the United States itself has grown.
Ms. Yellen complained that:
“China has long used government support to help its firms gain market share at the expense of foreign competitors. But in recent years, its industrial policy has become more ambitious and complex. China has expanded support for its state-owned enterprises and domestic private firms to dominate foreign competitors. It has done so in traditional industrial sectors as well as emerging technologies. This strategy has been coupled with aggressive efforts to acquire new technological know-how and intellectual property – including through IP theft and other illicit means.”
To block China and other countries joining what Russia’s President Putin calls the new unipolar World Majority, Ms. Yellen describes the U.S. economic approach to China as having three principal objectives. Her list reveals the sinister and exploitative character of America’s planned economic attack on China.
“First, we will secure our national security interests and those of our allies and partners, and we will protect human rights. …And we will not hesitate to defend our vital interests. Even as our targeted actions may have economic impacts, they are motivated solely by our concerns about our security and values. Our goal is not to use these tools to gain competitive economic advantage.”
But of course that is precisely her goal.
The historical reality is that no technology ever has been able to keep monopolized – for example, China’s silk-making. It would be morally wrong to deny technological potential to any economy. The U.S. plan is to turn technology into rent-extracting monopoly – what its lawyers and economists call “intellectual property” privileges.
So it is clear that by “national security” Ms. Yellen means the ability of U.S. to control other countries, by paralyzing them with sanctions if they do not follow U.S. dictates:
“The Treasury Department has sanctions authorities to address threats related to cybersecurity and China’s military-civil fusion. We also carefully review foreign investments in the United States for national security risks and take necessary actions to address any such risks. And we are considering a program to restrict certain U.S. outbound investments in specific sensitive technologies with significant national security implications.”
Secretary Yellen concluded her talk with an absurd attempt to deny that the United States is seeking international economic dominance for its own gains, but to save civilization in a humanitarian, peaceful way:
“these national security actions are not designed for us to gain a competitive economic advantage, or stifle China’s economic and technological modernization. Even though these policies may have economic impacts, they are driven by straightforward national security considerations. We will not compromise on these concerns, even when they force trade-offs with our economic interests.”
Ha! Just today, April 26, Korea’s resident is in Washington meeting with President Biden to get his instructions to sacrifice Korea’s computer-chip industry to support America’s economic war with China.
DEMETRI SEVASTOPULO, “US urges South Korea not to fill China shortfalls if Beijing bans Micron chips,” Financial Times, April 24, 2023.
“Beijing’s retaliation against President Joe Biden’s steps to block China from obtaining or producing advanced semiconductors.
“The White House has asked South Korea to urge its chipmakers not to fill any market gap in China if Beijing bans Idaho-based Micron from selling chips, as it tries to rally allies to counter Chinese economic influence. this is the first known occasion that it has asked an ally to enlist its companies to play an economic role.
“The US made the request as President Yoon Suk-yeol prepares to travel to Washington for a state visit today.
“China this month launched a national security review into Micron, one of three dominant players in the global Dram memory chip market alongside South Korea’s Samsung Electronics and SK Hynix. It is not yet clear whether the Cyberspace Administration of China [CAC] will take punitive action but the stakes for Micron are high: mainland China and Hong Kong generated 25 per cent of its $30.8bn in revenue last year.”
U.S. observers have spelled out the U.S. strategy in greater detail. For instance,
Gavin Bade, “White House nears unprecedented action on U.S. investment in China,” Politico, April 18, 2023. https://www.politico.com/news/2023/04/18/biden-china-trade-00092421
In addition to the expected executive order on limiting U.S. technological investment in China, “it is also considering a potential ban on the widely popular Chinese-owned app TikTok.”
The article adds that “Those moves would come on the heels of aggressive trade action last year, when the administration put in place new export rules that explicitly sought to undermine Beijing’s prized microchip sector and passed massive industrial policies aimed at breaking reliance on the Chinese economy. At the time, national security adviser Jake Sullivan was clear that the goal of the strategy was to preserve America’s competitive edge in emerging high-tech industries …”
“We must maintain as large of a lead as possible” in high tech sectors like microchips, Sullivan said, previewing new Commerce Department rules released in October that sought to grind Chinese chip development to a halt.
Spelling the U.S. plan in detail, the Politico article points out that U.S. “policymakers last year considered including up to five major Chinese industries — microchips, artificial intelligence, quantum computing, biotechnology and clean energy.”
This has nothing to do with national security. The U.S. plan is to use a national security umbrella as an an excuse for economic warfare.
Martin Sandbu, “Europe has to be much clearer when it comes to China,” Financial Times, April 24, 2023, points out that European Commission president Ursula von der Leyen gave a speech before her trip to China describing it as a a systemic rival simply because it is an efficient economic competitor. “But she went much further in threatening to block China’s economic opportunities with Europe if Beijing stays on its current course.”
“But something is changing,” Mr. Sandbu noted: “‘Access to China’ for EU corporations increasingly means expanding production in China itself, not exporting Europe-made goods and services there. Before the pandemic, EU carmakers shipped about half a million cars to China — but they built 10 times as many European-branded cars there. Some will even con- sider it easier to build electric vehicles there to ship back to Europe than to expand production at home.”
“The gains from such trade will mainly benefit corporate shareholders in the EU and not the workers, small companies and countries currently tied in to Germany’s car supply chain. Eventually politicians will wake up to the fact that the benefits are not broadly dispersed. Only then are we likely to see economic considerations firmly conditioned on geostrategic interests in EU-China policy. … It is time for Europe to learn that what is good for VW is not necessarily good for Europe.”
So the anti-China trade strategy is to appeal to labor to support America’s New Cold War against China and the rest of the Global Majority.
In the U.S. view, socialism is the enemy of labor, not its means of raising its living standards. That is the upside-down logic of what America’s economic students are taught.
The problem is that America cannot reverse time and undo the enormous burden of debt, privatized monopolies (including health care) and dysfunctional financial system.
Korea is being promised a wider U.S. market if it will stop exporting chips to China. It is being forced to choose. The U.S. diplomatic tactic is to say, “You’re either with us or against us.” The US will impose sanctions this autumn if Korean companies continue to produce chips in China. They are being told to close down their factories.
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