By Rich Lowry
One hundred and fifty years ago, no one could mistake the relative power of Europe and China. When the British defeated the Chinese in the First Opium War, they imposed an indemnity, took Hong Kong and forced open more Chinese ports to British merchants. They demanded extraterritoriality for British citizens, exempting them from Chinese law. Other Western powers extracted similar privileges.
When this wasn’t enough, the British launched the Second Opium War after the Chinese seized a ship flying the British flag and refused to apologize. The French joined in, and the two together captured Beijing, and burned the emperor’s summer palaces for good measure.
The Chinese refer to the period from the middle of the 19th century to the middle of the 20th as “the century of shame.” Now, the shame is all on their former tormentors as the Europeans beg the Chinese to help bail them out from their debt crisis.
The Europeans share a misbegotten single currency that is amplifying the inherent problems attendant to the practice of spending money that you don’t have. Perhaps the Greek crisis can be contained, but what if Spain and Italy spin out of control? Europe is trying to fund a “bazooka” big enough to fend off doubtful markets, but doesn’t want to — and perhaps can’t — fund it all by itself. Germany is Europe’s economic powerhouse, yet its public debt-to-GDP ratio is already larger than ours.
This is where China and its $3.2 trillion in foreign reserves come in. If China were to contribute to a bailout fund that Europe wants to build up to $1.4 trillion, it would surely ask for concessions in return, like the Europeans dropping their criticism of China’s undervalued currency. China also might wonder why it should come to the rescue of a European Union that still has it under an arms embargo. History comes full circle, with the ascendant Chinese in a position to extract concessions from erstwhile colonial powers.
So far, though, Beijing is not showing any eagerness to jump into the European bailout business. While it wants a robust European export market, China might be doing the math and realizing that Europe has a problem too big for serial bailouts. The official Xinhua News Agency ran a piece explaining, “Amid such an unprecedented crisis in Europe, China can neither take up the role as a savior to the Europeans, nor provide a ‘cure’ for the European malaise.”
This reversal in fortunes was a long time in coming. Nothing could have stopped the Chinese from adopting more rational, market-friendly policies a few decades ago, and it has proven immune to appeals to allow its currency to appreciate so its exports don’t have such an advantage. What Europe could control was its own destiny. It chose a comfortable, if bankrupting, social democracy and a vast experiment with a single currency. The euro was supposed to be the vehicle and symbol of Europe as a world power, and instead is laying bare its debt-addled decay.
For the United States, listing in a similar direction, the turnabout in Europe’s global position should be of the utmost interest — as a cautionary tale.
Rich Lowry is editor of the National Review.
© 2011 by King Features Synd., Inc.