Larry Summers on the Rise of China and India

The United States is entering uncharted waters as a superpower, as it slowly climbs out of a crippling recession and faces an electoral showdown this fall between cautious globalism and a desire to retrench its economy against external competition from emerging third-world dynamos.

President Obama in his State of the Union address earlier this year highlighted mildly protectionist measures to shore up US manufacturing against cut-throat competition in Asia, through tax credits and a task force that would investigate potentially unfair trade practices.

Meanwhile Mitt Romney, former governor of Massachussettes and frontrunner in the Republican presidential primary, has strategetically stoked fears among party voters about falling behind China as part of a permanent American decline. In a February op-ed in The Wall Street Journal, Romney proclaimed:

Unless China changes its ways, on day one of my presidency I will designate it a currency manipulator and take appropriate counteraction. A trade war with China is the last thing I want, but I cannot tolerate our current trade surrender.

Harsh words for America’s most important trading partner, highlighting our schizophrenic stance toward an mushrooming economic giant that we rely on to produce cheap goods for US consumers while at the same time fearing that its rising prosperity will ultimately knock us off the pedestal of the only remaining superpower.

Former senator Rick Santorum, current underdog in the Republican presidential primary, is perhaps responsible for ratcheting up anti-China rhetoric by declaring the following during an October, 2011 debate: I want to go to war with China and make America the most attractive place in the world to do business.”

Using the unadorned term “war” in relation to a formal ally is incendiary to say the least, and indicative of the deep uncertainty felt by much of the electorate about our reliance on the Communist nation to maintain our standard of living and the anxiety that they’ll turn the tables and put America in the subservient position.

But for all the bluster about reversing the tides of globalization, how did China and India go from disorganized and economically laggard countries in the last century to unprecedented growth wunderkinds in the last ten years? Here’s Lawrence Summers, former Secretary of the Treasury to Bill Clinton and chief economic adviser to Barack Obama, giving his take on the subject:

Under this schema, China and India have taken cues from capitalist economies in the West, allowing them to activate the dormant potential of their vast human and natural resources. But if this is the case, will they come crashing against the same structural barriers and financial shenanigans that have recently knee-capped the United States? And is there room for three superpowers on equal footing in a truly global economy?