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There is a way America can have a viable market economy again (2)

09:14, June 02, 2010

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It is evident from the recent second round of the annual Strategic and Economic Dialogues that American policymakers do not understand yet, but partly recognize they must change their mindset towards China to make America successful again. Chinese policymakers need to successfully help focus their American peers on the need for new American policies that work. The urgency of the crises make the traditional American approach of focusing uselessly on seeking to change China's policies that are working and essential for economic stability.

New American policies are very urgently needed in the new post September 2008 era. America's pre-September 2008 market economy abruptly failed. Eventually in this century the Chinese economy would, like the Chinese population, dwarf the American economy and population. But disastrous American financial innovation and regulation has crippled America. Its market economy vital to global economic growth has been replaced and is being temporarily held together by panic driven and politically divisive, massive American government intervention.

The American government is trying to prevent the onslaught of economic market forces initially harming America's "Wall Street" and its financial system, which are instead devastating "Main Street," America's real economy and already eroded middle class. Today Americans distrust and outrage at "Wall Street." Disputes between Republican and Democratic legislators unless a historic breakthrough aligning America and China's economic growth is achieved now soon, President Obama's popularity and exceptional abilities to protect the American people. Public opinion could increasingly limit his options unless he can demonstrate an immediate and effective way to restore investor confidence, create urgently needed jobs, increase American exports to China, and restore non-US government borrowing funded economic growth. President Obama needs new policies that restore confidence because they work both immediately and sustainably.

America's badly damaged economy and businesses need new equity. China has US 3.5 trillion dollars of American government debt and dollars it needs to invest. Old American policies and more debt will not be enough to restore America's economic and national security and global leadership. All three are interdependent and vulnerable as Paul Kennedy's The Rise and Fall of Great Nations explained presciently in 1987. China's policymakers understood and implemented Professor Kennedy's advice. American policymakers didn't.

By 2010, only America and China's governments fully collaborating in a successful new era of economic and military partnership will restore reasons for confidence. A successful new era requires new American policies, which will only be designed and implemented with President Obama's determined problem solving abilities. President to president leadership in implementing new American policies towards China can quickly create a breakthrough and fundamentally different and better American and Chinese collaboration that will astonish, and then restore investor, capital market and business confidence that America can economically recover and that its market economy can be successful again.

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The articles in this column represent the author's views only. They do not represent opinions of People's Daily or People's Daily Online.

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John Milligan-Whyte and Dai Min are the executive producers and co-hosts of the Collaboration of Civilizations television series adapted by the eight books they wrote in the America-China Partnership Book Series published in English and Mandarin in 2009-2010. They founded the America-China Partnership Foundation and Forum in 2008 and the Center for America-China Partnership in 2005. E-mail: [email protected]