South Korean Economist Ha-Joon Chang on the Economic World Order, Trump's Tariffs, China & More
South Korean economist and author of "Kicking Away the Ladder" Prof. Ha-Joon Chang discusses the role of the IMF and World Bank in the global economy, the West's unwavering belief in neoliberal economic policies, U.S. competition with the Chinese tech industry, and more.
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Welcome to a new episode of System Update, our live nightly show that airs every Monday through Friday at 7 p.m.
Eastern, exclusively here on Rumble, the free speech alternative to YouTube tonight.
We focus a lot on this show on international relations and foreign policy from the perspective of what often shapes them, things like wars and militarism, conflicts and perception of external threats, but at least as important is the world economic order, which countries are rich, which ones are poor, which ones are developing and aren't, and how that system is maintained, as well as the truth about rising economic powers like China and its potential to undermine American dominance and the dollar as the reserve currency.
Ha-Joon Chang is a leading economist known for his very sharp critiques of international economic institutions and their defense of neoliberalism, no matter how often it fails, as well as for his advocacy for economic pluralism.
He has become quite a growing sensation online with his lectures.
He's a professor at the SOAS, University of London, and a former Cambridge lecturer.
He's probably best known for his 2002 book, Kicking Away the Ladder, which examines how wealthy nations traditionally have blocked economic progress in developing countries, and his more recent book, Edible Economics from 2022, which uses food to explain economic ideas.
In addition to all of these topics, we sat down with him last night, and he helped us understand the likely implication of Donald Trump's proposed tariffs and protectionism as a basis for his economic policy, as well as the reason basic economic literacy is so important in democracy and how often as well as the reason basic economic literacy is so important in Deliberately made it accessible through things like jargon and excessive statistics and basically a reliance on all sorts of terms that are designed to keep people away.
He has made it a life work to elevate economic literacy.
I found the conversation with him.
Very interesting.
I think you will as well before we get to that.
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For now, welcome to a new episode of System Update, where we're sharing our conversation with a professor about economic relations that I highly recommend watching, starting right now.
Professor Cheng, thank you so much for taking the time to come on and talk.
One of the reasons we were so interested in having you is we have a lot of conversations now about geopolitics, international relations, and so often it focuses on things people can easily understand, things like wars and military and various types of conflicts.
Obviously a huge part of...
Geopolitics and the international order is the scheme of wealth that various countries have or don't have and has always been.
And a lot of your work has become quite popular.
I think Kicking Away the Ladder, the 2002 book, is among your best known.
Provides one of the best explanations to understand why some countries are rich and why some are poor and kind of how there's a system to ensure that stays the same.
Can you talk about that for people who haven't read that book or are familiar with your work?
Yes.
The book was published in 2002, so it's quite a bit old now.
But there I was pointing out that, you know, This was at the high noon of neoliberalism when rich countries were lecturing developing countries, don't use stupid things like protectionism, don't use state-owned enterprises, don't have government meddled with business.
But then I tried to show that These are actually exactly the policies that the rich countries themselves use in order to get where they are today.
And now, them telling the developing countries not to use these policies is like someone using a ladder to climb to the top and kicking the ladder away so that other people cannot follow.
You know, the most famous and most robust argument for using protectionism is known as the infant industry argument.
And that argument says the government of a developing nation needs to protect and nurture its young industries until they grow up and compete in the global market in exactly the same way that we protect and nurture our children.
Until they grow up and can compete in the other labor market.
I mean, of course, in poor countries, a lot of children work from the age of five or six.
But, you know, this means that they cannot get educated, that they cannot acquire high skills and so on.
So it actually, if you can't do it, it pays to send these kids to school rather than sending them to work.
And very interestingly, this logic of infant industry protection was invented by an American, and not just any American.
He was called Alexander Hamilton, the very first Treasury Secretary of the United States of America.
And he invented the term infant industry protection.
Initially, a lot of Americans were not convinced by this, especially people like Thomas Jefferson said, this guy is insane.
We can export our cotton and tobacco, of course I never mentioned the slaves, and import the manufactured goods that are cheaper and better, even considering the considerable transportation costs.
Then what these Yankees can't produce?
So why should we subsidize these inefficient Yankee manufacturers?
So it was initially rejected.
But over time, the Americans figured out that actually that this is what they need.
And yeah, from about the 1830s till the Second World War, most of the time over that 120-year period.
The United States was the most protectionist country in the world.
So I was revealing this history.
I mean, it wasn't just the U.S. I mean, Hamilton got his ideas from the British practices.
Germans later developed Hamilton's theory and used protectionism quite heavily in the late 19th century.
The Swiss and...
Later, the French and the Japanese and more recently Koreans and Taiwanese and so on.
So I was basically pointing out this hypocrisy in which these countries are actually telling developing countries not to use the exact same policies that they used in order to climb to the top.
It wasn't just protectionism.
It wasn't just tariffs.
But there were a lot of other policies like use of State-owned enterprises, strict regulations on foreign investments and other things.
So, yeah, I mean, that caused a bit of a wave in the international policy debate because developing countries could tell rich countries, look, why are you telling us not to use these policies when these are exactly the policies that you guys used in order to get where you are today?
You know, it's interesting when you kind of take those principles that you just described, these historical and economic principles, and apply them to specifics, I think sometimes people can see them better in a kind of more modern sense.
And one of the things I find so interesting is that you have now a lot of billionaires who became that wealthy because they developed companies in the wake of the Internet that became public companies, became very large and successful.
Who are now essentially insisting that the only way for innovation to happen is to have massive cuts in government spending, even though the internet itself was the byproduct of massive government investment, some of whom will acknowledge that.
So is that the kind of dynamic that you're describing where there's kind of this propaganda that government spending impedes economic growth, whereas so often it's what spurs it?
Yeah, I mean, it's in a way the most obvious in the United States.
You know, it wasn't just the Internet, but the computer itself, microchips.
I mean, these are all financed by the U.S. government, especially U.S. military.
You know, the Internet, the GPS system, you know, what makes our modern information economy possible.
These were all invented with government money.
And there's a reason why Silicon Valley is where it is.
Because this is where a lot of US defense research, especially built around the jet propulsion laboratory, was conducted.
And yeah, this is like, once again, people rewriting history.
In the most convenient way, I mean, they need, they live on government support in the beginning, and then now that they are bigger and don't need the government as much, although it does need government, you know, the U.S. government is still pouring huge amount of money into the military research.
Which spills into the civilian industries.
I mean, it gives a huge protection in the form of the patent system, you know, and copyright system, without which these companies wouldn't have the monopoly they have.
So, actually, they still need the government.
But, of course, they only want the protection and not the obligations.
So now they say the government is bad.
Yeah, in fact, many and most of those companies not only exploited the technology developed by the government, but continue to rely on massive government contracts, particularly with the military, but with the intelligence.
You have Palantir and all these adjacent companies that are on this kind of austerity kick.
Everyone needs to lose their benefits.
Every government agency needs to be cut except for our massive contracts with the CIA and the Pentagon that are worth many, many millions of dollars.
The enforcement scheme you were describing earlier, how rich countries sort of dictate this economic dogma to poor countries that they know themselves, the rich countries aren't what produces growth.
The mechanisms by which they do that have been these kind of International institutions like the World Bank and the IMF. And oftentimes the message is, well, we've fostered this dependency.
You're relying on a bunch of our loans and bailouts.
And as a condition, we kind of demand that you just cut all services for your citizens, investments in your society.
We want to see massive austerity, no more government spending.
Is that done, do you think, with the kind of intention to maintain these countries in a sort of dependent state, or is it just a misguided but well-intentioned way of trying to help these countries grow?
Yeah, it's a mixture of things, you know, because there are a lot of misguided goodwill.
You know, there are these people who truly believe that, you know, the United States and other rich countries develop on the basis of free trade and free market.
You know, that there are some people who truly believe that, you know, the United States and other rich countries develop on the basis of free trade and free market.
There are economies who believe that government is bad and so on.
Some of it is misguided goodwill.
But you have to ask the question.
If it's so misguided and have produced terrible results because the World Bank IMF programs have basically wiped out the economic growth, increased inequalities, and created all sorts of problems in almost all the developing countries where they were involved, then at that point you will have to ask, okay, I mean...
Misguided goodwill or not, if these programs are not working, why do they keep repeating the same thing again and again and again?
I mean, maybe you could say that these people are mad.
As Einstein said, the definition of madness is repeating the same thing again and again and expecting different results.
But it's not madness that they are doing this.
Sorry, they are allowed to...
Repeat these policies that are not working only because they are basically backed by the rich countries, which benefit from this kind of thing.
One of the more interesting disputes that arose in the last decade, it was about a decade ago now, maybe a little more, and I don't- Focus primarily on economic policy or macroeconomics or anything, but I followed the story quite closely when the Greek economy was sort of on the verge of collapse.
The Greeks elected a fairly populist, aggressive government that tried to stand up to primarily France and Germany that were insisting that the Greeks impose a sort of rigid austerity like we were just talking about.
The Greeks tried to be very confrontational and resist and didn't really work out well for Greece in the end.
Are there ways that...
What underdeveloped countries that are put into these positions have to defy these institutions, or are they pretty much captive to what they're told to do?
Well, yeah, Greece was really crushed by the European Commission, basically France and Germany.
I mean, people say that in that episode...
The IMF was telling the Germans and the French that they were going too far.
But what happened there was this mistaken belief that the way to revive the economy is to cut government debt, which means cutting spending.
But the trouble is that when you cut the spending, the economy shrinks and the tax revenue falls.
And as a result, even while spending was cut brutally, public debt as a proportion of GDP was still rising because GDP itself was shrinking very rapidly.
And there was a huge unemployment, especially youth unemployment, reached over 40 percent.
So it was a total disaster.
But, you know, there are instances where the countries defy these international institutions and the Asian financial crisis.
And yeah, instead of signing these austerity agreements with the IMF, Malaysia They suspended the capital outflow for, like, a year.
And, yeah, there was a huge uproar.
You know, they said, oh, when this ban is lifted, you know, 70, 80 billion dollars will flow out of the country.
But what happened was that because of this ban, because the money couldn't flow out, Stayed and then started doing something.
So the economy got revived.
And when the government lifted the ban one year later, only six or seven billion dollars flowed out, which is kind of normal amount.
So, you know, there are these instances.
And also, you know, look at the, you know...
The successful economies in East Asia, you know, Japan first, and then Korea, Taiwan, now China.
I mean, these countries that never really followed the advice of the World Bank and the IMF. So, you know, the proof is that they're staring you right into your face, but, you know, apparently, you know, The people refuse to understand it.
Was it the Canadian-American economist John Kenneth Galbraith who said that if someone's salary depends on not understanding something, you can never make that person understand anything?
It might have been often Sinclair, but basically these institutions, these governments, they are refusing to accept this reality because it means that they have done wrong.
It means that they have to do something that benefits them less.
That is interesting, this emergence of this kind of new economic power based in Asia, obviously led by China.
We're, as you might know, our program is based in Brazil.
Brazil had, for a long time, been kind of under the thumb of the United States.
It's in what the United States considers its backyard, which is all of South America.
But then Brazil became a founding member of the BRICS Alliance, and the Brazilian president, Lula da Silva, has said several times now that he wakes up every day dreaming of de-dollarization.
Is the emergence of things like BRICS or the attempt to move away from the dollar as the dominant reserve currency, are those potential paths to undermining this system that you're describing?
Of course, if you zoom out, the history of capitalism has been a history of domination and resistance and military invasion and colonization, gunboat diplomacy that led to unequal treaties.
It's been a constant struggle between the different...
What are the countries and societies that are located in different parts of the global economic hierarchy?
In the 60s and 70s, with decolonization, a lot of developing countries wanted to be independent of the U.S. and European domination.
They wanted to be allowed to kind of change their positions in the global economic hierarchy.
And, yeah, they called for the new international economic order.
They organized a non-aligned movement.
Unfortunately, all of this was crushed in the 80s and 90s with the third world debt crisis starting with the Mexican default of 1982. And yeah, especially countries in Latin America and Africa are basically being forced to implement this World Bank,
IMF policies, which basically created decades of stagnation and social unrest.
We cover it from that phase and with the rise of China, with the kind of revival of some of the developing economies in the 21st century, these countries have started demanding a different...
So, there's BRICS, also G20, which was created when the rich countries were in big trouble after the 2008 financial crisis.
There has been the creation of new developing country-focused financial institutions, very often led by China, the Asian Infrastructure Bank.
The New Development Bank.
And, yes, things are quite different.
In the 80s and 90s, if you didn't agree with the World Bank, you didn't get money.
Because there was only one bank in town, and it was called the World Bank.
Now there are different banks.
Now there are different countries with slightly different views about development, like, say, South Korea giving foreign aid.
Now China is rising.
Brazil is becoming quite assertive.
South Africa, in its own way, is trying.
I think this is a time of great global geopolitical shift.
When it comes to dollar dominance, I'm afraid that it's going to be a while before it can be changed.
Because once you become the dominant currency, it gives you so much extra power, even without you trying.
So it's very difficult to change that.
I mean, it has been changed only once with the rise of the U.S. You know, Britain had to cede the position of the home of dominant currency.
But even that took decades.
And, you know, this time around, even with the creation of the euro and the rise of China and so on, it will still take some time.
Before the currency domination can be changed.
But in other respects, you know, the World Bank is now almost irrelevant.
You know, the IMF is kind of less domineering.
And yeah, to his credit is the change that practices a little bit, not massively.
So, yes, I think the world is in a very interesting place.
Unfortunately, it means that it can be a very dangerous place because now the Americans, the Europeans, they are desperate to stop China's rise.
And they are doing a lot of things that could create quite a lot of collateral damage.
Your work has become quite popular in various sectors online, as I'm sure you know.
And one of the viral clips that I saw circulating several times was one where you were talking about how modern-day economic thinking and language is sort of comparable to Catholic theology in the Middle Ages.
And the thing that I thought of when I heard that was The very first U.S. presidential election that I really paid close attention to was, you know, in my young adulthood, was the 1992 presidential election where you had the Democrat, Bill Clinton, and the Republican, George H.W. Bush, who were in full agreement on the virtues and the sanctity of free trade.
And then, this was at the time of NAFTA and the like, and then you had this third-party candidate who was kind of treated as a crazy person, Ross Perot, a Texas billionaire, who was saying NAFTA will gut out Industrial jobs and factories and good-paying middle-class lives for Americans.
And then, you know, 20 years later, everyone agrees that the major problem is that we have massive deindustrialization.
All these towns are shuttered.
The middle class has kind of withered.
You know, very prescient.
At the time, I didn't know who was right, but it seems very clear that the NAFTA opponents were.
And yet, any attempt still, even after all of that...
To question the tenets of free trade and the necessity of having full-scale free trade, it drives people insane, like it's some kind of an outrage.
Is that the sort of thing you were talking about with this middle-aged theology?
And can you kind of expand on what more you mean by that?
Yeah, well, yeah, Ross Perot's giant sucking sound from the south.
No, no, absolutely, yeah.
It's not just in relation to free trade that economics has become the modern equivalent of Catholic theology in medieval Europe.
I mean, it is basically now a doctrine that justifies the existing socio-economic order.
So it's basically telling us the world is what it is because it has to be.
However unjust, irrational, wasteful, you think it might be, the science of economics, or in the old days, the words of God, especially as interpreted by the Vatican, is saying that it is something that you have to accept.
I mean, of course, in our capitalist economy, economic considerations have always been dominant, but especially in the neoliberal age when economic considerations are the ultimate and very often the only logic that you have to accept.
I mean, economics has become basically the language of power.
Of course, when I say economics, I must qualify that there are different types of economics.
Not all economists that believe in free market.
Not all economists think nothing else matters other than the market.
But economics as it is practiced today.
It's like that.
And therefore, it has become a very important obstacle to changing the world.
Because it says that this is the best of all possible worlds.
And that anyone who tries to challenge it is either misguided or has a hidden agenda to...
You know, enrich himself, empower himself, but really don't care about the rest of the world.
So, yeah, I'm afraid that it's become like that.
And to extend the analogy of it further, economics, as it is practiced, has become basically impenetrable to ordinary citizens.
Because it uses a huge amount of jargon, lots of mathematics, you know, lots of statistics.
And, yeah, I mean, ordinary people find it difficult to understand.
So it's become the Latin of the Middle Age.
I mean, it's the language for the ruling class.
And if you don't know Latin...
I mean, you're not even allowed to debate anything.
And the Vatican made sure that no one other than the priesthood and sons of some very rich people that understand the Bible by preventing the translation of the Bible into vernacular languages.
It became a big deal that, you know, the Bible was translated into English, German, French, and so on, because now it meant that a lot of people could read it.
So, yes, I'm afraid that this analogy is not as frivolous as it might seem.
Well, it's interesting, though, because...
Although that's clearly accurate in terms of how economic theory and economic thinking has gone, especially in the last and in these institutions we've been describing, but probably even globally, you now have a new American president who ran on a campaign very hostile toward free trade and very favorable to protectionism and tariffs and explained it in a way that enough people could understand it that they voted for him,
believing that Tariffs would protect American industry, would enable its re-emergence, the return of jobs.
And you have these establishment economic outlets like the Wall Street Journal and those types, the neoliberals and sort of the classic conservative economic dogmatists who are horrified and outraged by what's coming out of the Trump White House with regard to protectionism and free trade and tariffs.
What do you make of his and his administration's approach to these questions?
Yeah, well, first of all, most of his tariffs are used to get concessions on other things than straightforward economic things.
So the use of the threat of tariffs to Canada and Mexico to kind of intensify their border controls.
But in so far as it is used for economic purposes, I think it's very poorly conceived and will backfire.
Most immediately, it's going to increase inflation, especially if you impose tariffs on Chinese imports, which account for a big proportion of U.S. consumer products.
Then it will have an immediate inflationary effect.
I mean, this is why I initially talked about 100% tariff on Chinese goods, but now it's only 10%, because even he and his people know that it could spark inflation.
But in the long run, this importation of cheap Good quality consumer products from China has been one of the most important factors in the modern neoliberal American political economy because wages have been suppressed for the last 50 years.
The U.S. median wage fell from the mid-70s till the mid-90s.
And then it started rising again, but recovered at the 70s level only a few years ago.
And in that story, of course, another important role was played by the ballooning of credit cards and other consumer debts.
But the availability of these cheap Chinese goods were very important.
Now, if you impose tariffs on Chinese goods, you'll have to pay your workers more.
How are we going to cope with that?
So, it actually could undermine the whole neoliberal economic system.
Now, he says that this will rebuild the U.S. industry, but I'm afraid it's not going to happen like that, because...
You know, protection, as in the infant protection story, protection only creates this space in which the improvement can happen.
And in order for that to happen, companies need to invest.
They need to do research and development to innovate.
They need to recreate the skill base of American workforce and so on.
And there's no plan to do it through that deliberate industrial policy.
So he's basically leaving it to American corporations to do it.
But then these corporations are actually not interested in rebuilding the economy.
Because the U.S. now has...
Yeah, this really started in the 80s, but really...
It came into full being in the 21st century.
The U.S. now has a parasitic financial system which is not interested in long-term investment.
In the last 25 years, the American stock market sucked out money from corporations rather than putting money in, which is supposed to be their job.
Because now these companies...
In order to satisfy these short-term-oriented shareholders, they have to do huge stock buybacks, sometimes borrowing money to do stock buybacks, because they want to do stock buybacks that are bigger than their profits, and giving away huge dividends.
So, in the last 25 years, 90 to 95 percent of U.S. corporate profit It has been given back to the shareholders.
So these companies are like leaky buckets.
You create more water by temporarily protecting your economy from foreign competition.
These companies get more resources because of that.
Because now they don't have competition.
They can charge higher prices and so on.
But this money is going to leak out of these corporations.
I mean, look at the way that Boeing has been destroyed.
All because of this parasitic financial system.
So I'm afraid that it's not going to work.
It's not to go back to the infant industry analogy, although in the current U.S. case, it's not an infant.
It's kind of the revival of an old person.
I mean, it's not enough to go to school.
The kid has to study.
You have to provide incentive and punishment to the kid so that it puts adequate hours and concentration to study.
I mean, what Trump is doing now is like sending the kid to school, but letting the kid decide what he wants to do.
When he goes to school, he will skip classes and not concentrate.
Good luck to the revival of the U.S. industry.
I'm afraid I don't see it happening.
I just have a couple more questions.
I want to talk about what you just said and what you talked about before in this comparison to Catholic dogma and theology and the like.
Which is that if you had a set of pieties or orthodoxies in a particular field that was producing positive outcomes, you could almost understand why there weren't a lot of people questioning it or challenging it because it's working.
Here in economics, especially international finance, you have not just the destruction of jobs in the middle class throughout the West and the United States, but also the 2008 financial crisis, what you were...
You know, just alluding to in a lot of ways that wreck the economic security and future of a couple of generations of people and countries all over the world.
And you would think it would prompt a re-examination of a lot of these unchallenged premises.
And yet one of the things you describe is this kind of oligopolistic system of economics to prevent these principles from being challenged, I suppose, because they actually have worked well for a certain group of people who have an interest in perpetuating them.
But how does that work, this oligopolistic system to preserve these pieties and make sure there's no challenge to them?
Yeah.
So the most shocking is how poorly the neoliberal system has been.
I mean, of course, it benefited hugely, a tiny group of people at the top.
But, you know, compared to the days of so-called mixed economy, the period between the 1950s and 70s when there was a lot more government regulation, you know, the top income tax rate in the U.S. was 92 percent in those days.
And there were a lot of strong state involvement in economic development, industrialization, all over the world, not just in developing countries, in the U.S., in Europe.
Compared to those days of so-called mixed economy, neoliberalism has not only produced higher inequality and more social problems, which...
You know, even many of the advocates of neoliberalism admit it might happen.
It has produced much less growth, you know, because in the earlier period, the world economy is growing at about 2.8 percent.
In the last 40 years of neoliberalism, it has been growing at half the rate, 1.4, 1.5 percent, both in power capital terms per year.
If it cannot even produce growth, why do we have this?
So that's the biggest mystery.
But of course, those who benefit from it have all the interests in the world to defend it.
So they basically finance politicians who support their agenda.
It's more blatant in the U.S. because there's a lot of money flowing around in the U.S. politics legally.
In other countries, it's a bit less, but those who have money have a huge influence on government policy.
They control the media, and they make sure that people are...
We're kind of indoctrinated into believing that this is the best of all possible worlds by making sure that the right kind of economists are given the Nobel Prize, the right kind of economists are given faculty positions in top universities, the right kind of economists are right in the...
You know, financial press and, you know, pontificate on what is a good economic policy.
And, yeah, above all, I mean, they have basically found a trick in diverting people's attention away from economics by, you know, creating all kinds of, you know, kind of single-issued debates on Gun control and abortion and the culture war and the war-kism.
So, yes, I'm afraid that this is why I have been on a personal mission in the last couple of decades to propagate mass economic literacy.
Because in the kind of society we are living in, without that...
Everyone, knowing at least some economics, democracy is meaningless.
It becomes like voting in a talent show.
Oh, I like the look of that guy.
He has a beautiful voice or whatever.
It's not about the substance, because those who have power and money do not want people to think about the substance.
With my last question, I'd love to have you back on because it's been super enlightening, But I want to ask you about China because I remember in the 1980s in the United States, or into the 1990s, the overwhelming economic discourse was about fear-mongering about Japan and its rising economic power.
They're buying all of our buildings.
They're taking over our industries.
There's no stopping them.
And apparently there was some stopping them because none of that really happened.
But now we're hearing very much the same thing, the same kind of rhetoric about China, that they're rapidly growing so fast that they're going to have parity with the United States in terms of purchasing power.
They're going to be this unstoppable economic force.
There's a lot of talk about them having to be our implacable enemy and at least Cold War type competitor or adversary.
What do you think from a Western perspective and an American perspective is the right way to understand what one might call the threats I must declare at the beginning that I'm not a fan of any country.
I'm a citizen of South Korea.
Korea has been bullied by everyone around us for the last few thousand years, Chinese, Japanese.
The Mongols, the Manchus, and the Huns, and later Russians and Americans.
So, you know, whatever I say about Japan, China, and so on, it's not because I'm particularly fond of or hate that particular country.
You know, I hate all the countries equally, if you want me to do it that way.
So, yeah, the rise of Japan was halted partly because Japan...
That got bullied into opening the financial market and accepting huge revaluation of the currency in the 1985 Plaza Accord.
So once that happened, there was a huge financial bubble.
It burst.
The Japanese didn't manage the aftermath very well.
And then the economy went into...
It was a permanent kind of depression, and yeah, it was seen off in that way.
And that happened, well, maybe mainly, if not even not partly, because Japan was dependent on the U.S., on the military.
Because when they lost the Pacific War, they were forced to sign this constitution, which prevented it from having a sizable army.
And then the U.S. military is stationed in Japan.
So in that sense, even though it was rising economically, it's a political position.
China was subordinate, that of the U.S. China doesn't have that problem.
And actually, from a Chinese point of view, the U.S. is the aggressor, because basically China is surrounded by U.S. Navy and Army bases almost all across this border, except the one that shared with Russia.
U.S. Army stationed in South Korea, as well as the Air Forces, the South China Sea is kind of covered with the U.S. Navy presence, and you name it.
So China is not going to play that game that Japan had to play.
So it's not going to accept the financial liberalization, which is the easiest way to undermine a rising economy, because China does not have the kind of financial power.
And I'm not just talking about money, but the financial institutions and the skills that people who work in the financial industry have and so on.
That it can't mobilize to fight the American financial power, whereas it can't and it is fighting the American power in terms of production and international trade and so on.
So, my prediction is that China will not play that game, which means that a big problem for the U.S. Because, first of all, it's not as if this is, as some people argue, the Second Cold War.
In the real Cold War, there was no real economic relationship between the Soviet bloc and the U.S. bloc.
This time China and the U.S., these economies are deeply intertwined.
China is the biggest trading partner with the U.S. after the EU and NAFTA countries.
It owns 13% of the U.S. Treasury bills.
And as I mentioned earlier, the role as a source of affordable, good quality consumer goods is very, very critical to American political economy.
So, you know, the U.S. cannot push it around in the way that it could with Japan.
More importantly, what the U.S. has been doing in the last several years, and this is not just Trump.
I mean, even from the days of Obama, but more clearly Biden, it has been actually pushing China into We're catching up faster.
Because of all these restrictions on the high-grade microchips and the key technologies, China, you know, they say this is a model of invention.
China's come up with these ways of doing the same things with less resources and lower technologies.
Biden made the Dutch companies, German companies to export lithographic machines that make the circuit board for semiconductors.
Americans thought, well, now this will make it impossible for the Chinese to have the latest microchips.
Lo and behold, within a couple of years, it found a way to make the latest seven nanometer chips without using the latest machines from the Dutch and the Germans.
I mean, lately, this Chinese AI company DeepSeek has kind of created an economic earthquake.
By creating an AI with a fraction of the cost that American companies are using.
So, yeah, I mean, if the U.S. really wanted to push back China, it should have started 20 years ago.
Now it's too close.
putting more pressure on China will not necessarily, but most likely to bring forward a day when it catches up with the United States and the rest of the world.
And this is why the U.S. and the EU are panicking and breaking all the rules of the WTO and other international institutions that they were so insistent on upholding because now they are desperate to fend off China.
But without a coherent industrial strategy and without reforming the leaky parasitic financial system, I'm afraid that they are not going I'm afraid that they are not going to be able to do that.
All right, Professor Cheng, it's always good to have one's economic literacy raised, and in the spirit of doing that, we will show everybody who's watching where they can follow your work.
We really appreciate you taking the time to talk to us.
