These are our bankers

Liu Xiaobo was awarded the Nobel Peace Prize in October 2010, but he was not there to receive it.

A writer and political activist, he could not attend the ceremony because he was locked in a Chinese prison for “inciting subversion of state power.” His wife could not accept the award on his behalf because she was under house arrest.

Liu’s is not an isolated case. The country of Tiananmen Square continues to crack down on political dissidents. Chinese people do enjoy significant economic freedom, but politically they live in a closed system.

Meanwhile, members of religious minorities are victims of persecution. China’s Christians, for example, must be members of the state-approved Three Self Patriotic Movement, a name which describes its purpose as a tool of the government. Those who aren’t can suffer the fate of the Linfen church, an underground congregation with 50,000 members that was attacked on Sept. 13, 2009, by local police, government officials and others who destroyed a building and sent 30 Christians to the hospital.

Five church leaders were sentenced to up to seven years in prison during a show trial that lasted only a day, while five others were sent to two-year re-education camps.

This kind of thing happens a lot in the country that is becoming America’s banker. According to the Treasury Department, China holds more than $1 trillion of America’s U.S. Treasury debt — 24 percent of all foreign holdings. That gives it significant leverage over American domestic and foreign policy, just as our personal bankers have leverage over us.

Someday China will use that leverage to its advantage, just as the United States has done when it was a lender and not a borrower. In 1956, Britain and France sent troops to Egypt to protect what they saw as their interests in the Suez Canal. The Soviet Union threatened to side with Egypt, a confrontation President Eisenhower wanted to avoid, so he told the British and French to get out. They refused.

So Eisenhower dropped the bomb — not a real one, of course, but one that was just as powerful and a lot cleaner. The United States, which financed much of Britain’s debt, threatened to sell much of its holdings, which would have decimated the currency. The British and French left Egypt.

Consider the ramifications of that episode in American history. The mighty British Empire was forced to bow to the wishes of its ally, the world’s emergent power. We told them what to do because they owed us money. What will happen when the Chinese want us to do something? And what will they want us to do?

This slow transfer of American wealth from our free democracy to China’s oppressive regime isn’t the worst thing our country has done, but it must rank among the stupidest. Dollar by dollar, the United States is fulfilling the prophecy of Soviet leader Vladimir Lenin: “The capitalists will sell us the rope with which we will hang them.”

So what can average Americans do about this? The first step, as with every addiction, is to admit we have a problem, and that the problem starts with us. A massive disconnect exists between the government services we expect and the taxes we are willing to pay for those services. So far, that gulf has been bridged by investors, including the Chinese. But that bridge comes at a price — the trading away of our wealth and, eventually, some of our freedoms.

Moreover, Americans must admit that we have another addiction — to cheaply made Chinese consumer goods. In 2009, the USA’s trade deficit with China totaled $219 billion. China is becoming not only America’s banker but also its manufacturer. The Chinese are loaning us the money we’re using to buy their stuff.

The benefits of free trade far outweigh its costs, but these numbers are alarming. America shouldn’t retreat into protectionism, but policymakers must ensure that American and Chinese manufacturers are competing on somewhat of a level playing field. Meanwhile, consumers should at least look at the labels. If all things are equal, and even if they aren’t completely, it’s time to consider buying American when we can. We’ll usually pay more. We’ll often get better quality.

The final step Americans can take is to make this election season different. In 2012, neither of Arkansas’ U.S. senators will be on the ballot, but, as always, all four House seats will be. This is the year when voters must demand their representatives do what it takes to move the federal budget toward balance: Reduce spending, increase tax revenues, cooperate and exercise some common sense.

The alternative is more debt to the Chinese and others, and more power for them over us.

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Steve Brawner is an independent journalist in Arkansas. His blog — Independent Arkansas — is linked at Arkansasnews.com.