April 6, 2010

Durbin warns of China's rising economy

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Senator Dick Durbin (D-IL) cast doubt on America’s place in the global economy in the face of a rising China at a talk yesterday in the Cloister Club.

Durbin saw his experiences from a recent visit to Ethiopia as exemplary of China’s success in the international economy. According to Durbin, Ethiopian President Girma Woldegiorgis responded to a question about the American and Chinese presences in Africa by saying,“With all due respect, you’ve given up on Africa. The Chinese invest in Africa.”

Woldegiorgis also said, “[The Chinese] are prepared for that day when we have an emerging middle class and a market for their goods,” Durbin said.

Durbin contrasted the strategy of Chinese businesses, who win contracts by offering low bids in the hopes of collecting greater returns on investments later, with that of American companies. “We have no plan or coordination in expanding our presence,” he said.

In response to a question, Durbin explained that investment, not charity, should define the United States’ strategy in Africa. “We are committed to development assistance. It defines who we are that we are caring for the poorest in the world…but we should be talking about how we should be investing capital in these parts of the world,” he said.

Durbin recounted his first trip to the Soviet Union, another communist superpower, during the 1970s. Bored, he ducked out of a meeting and took to the streets of Moscow. “I noticed a long line—about two blocks long—in front of a shop,” Durbin said.

“This shop had just received a shipment of toilet paper. People were coming in with twine to buy 100 rolls of toilet paper,” he said. “This is what happens with a planned

economy when the government tries to decide how much toilet paper people can buy,” he said.

But Durbin saw China’s global position as different than that of Russia. “So I saw the line in the snow in Moscow as the failure of central planning, but it appears that there is another type of planning going on now,” Durbin said, referring to China’s long-term investment planning.

Compounding America’s problem of competing with China, Durbin said issues at home would make improving the international role of the U.S. more diffi cult. The recession removed $17 trillion from the economy, he said, but he insisted that the benefits of the government stimulus package passed in 2008 to combat the recession outweigh the problems of the defi cit. With an even split between safety nets, infrastructure, and tax breaks and a cost of $1 trillion, the stimulus put $5 trillion back in the economy, Durbin said.

He emphasized a need for a consumer protection agency to prevent abusive practices and regulation of the derivative market to prevent future crashes. He also said that the bill may not pass easily. “It is hard to imagine that, after what we’ve been through in our economy, the banks and fi nancial institutions have the infl uence that they do,” he said.

Durbin also discussed his and President Obama’s three main domestic initiatives: health care, energy, and education. The health care bill that just passed will control health care costs, Durbin said, and he advocated for economics-based solutions, rather than government mandates, for energy and education. He endorsed cap-and-trade to reduce carbon emissions and suggested that financial incentives could motivate states to improve their schools.

Though he stressed their importance at home, Durbin tied domestic issues back to global ones. “These are the three things our president is leading us on to develop our economic potential. But we don’t have a plan for our economy like the Chinese,” he said.

Durbin also discussed immigration reform, advocating a path to citizenship—learning English, paying taxes, and prioritizing legal immigrants—for the 12 million undocumented aliens currently living in the U.S. Durbin also explained an immigration reform project of his called the Dream Act. “The Dream Act says, if you came to

the US before the age of 16, graduated high school, and are without a criminal background, if you serve in the military or complete two years in college, you have a path to citizenship,” he said. It has not yet passed Congress in several attempts, and Durbin expressed an urgent hopefulness that it will do so soon.

“We need Republican support. It has to be this year,” he said.

The event was hosted by the Chicago Society.