by Lester R. Brown, president, Earth Policy Institute
I know Santa Claus is Chinese
because each Christmas morning after all the gifts are unwrapped
and things settle down I systematically go through the presents
to see where they are made. The results are almost always
the same: roughly 70 percent are from China. After some research,
it seems that my one-family survey is representative of the
country as a whole.
Let’s start with toys. Some 80 percent of the toys sold
in the United States—from Barbie dolls to video games—are
made in China. Talking toys that speak English learned the language
from Chinese workers. Electronic goods—from Apple’s
iPod to Microsoft’s Xbox—are made in China. Clothing—from
the latest cashmere sweaters to gym suits—is also likely
to have a “Made in China” label.
The Christmas tree itself may come from China. While real Christmas
trees are grown in every state in the United States and are marketed
locally, many families now gather around artificial Christmas
trees. Eight out of every 10 artificial Christmas trees sold
in the United States are made in China. Last year Americans spent
over $130 million on plastic Christmas trees from China.
This year Americans will spend over $1 billion on Christmas ornaments
from China. And in perhaps the greatest irony of all, even nativity
scenes are made in China. Last year Americans spent more than
$39 million buying nativity scenes shipped in from the East.
China’s success in attracting foreign investment capital
and mobilizing this huge workforce has made it the workshop of
That the U.S. Christmas is made in China is a metaphor for a
far deeper set of economic issues affecting the United States.
Today Christmas is celebrated in both the United States and China—but
for different reasons and with far different economic consequences.
For the Chinese, the manufacturing bonanza means record profits,
rising incomes, and, in a society where people save some 40 percent
of their income, a sharp jump in savings. In the United States,
Christmas shopping expenditures, headed for another record high
this year, contribute to rising credit card debt and a soaring
Underneath the American Christmas spirit and good cheer is a
debt-laden society that appears to have lost its way, mired in
the quicksand of consumerism. As a society, we seem to have forgotten
how to save so we can invest in a better future. Instead of leaving
our children a promising economic future, we are bequeathing
them the largest debt burden of any generation in history.
At the personal level, credit card debt just keeps climbing,
and at the government level, we have the largest deficit in history.
At the international level, we have a trade deficit that moves
to a new high month after month.
It’s not the fact that our Christmas is made in China,
but rather the mindset that has led to it that is most disturbing.
We want to consume no matter what. We want to spend now and let
our children pay. It is this same mindset that introduces tax
cuts while waging a costly war. Economic sacrifice is no longer
part of our vocabulary. After the Japanese attack on Pearl Harbor,
President Roosevelt banned the sale of private cars in order
to mobilize the manufacturing capacity and engineering skills
of the U.S. automobile industry to build tanks and planes. In
contrast, after 9/11, President Bush urged us to go shopping.
In the United States we are so intent on consuming that personal
savings have virtually disappeared. We have an average of five
credit cards for every man, woman, and child. Of the 145 million
cardholders, only 55 million clear their accounts each month.
The other 90 million cannot seem to catch up and are paying steep
interest rates on their remaining balance. Millions of people
are so deeply in debt that they may remain indebted for life.
The official national debt, the product of years of fiscal deficits,
now totals $8.5 trillion—some $64,000 per taxpayer. By
the end of the Bush administration in 2008, this figure is projected
to reach a staggering $9.4 trillion. We are digging a fiscal
black hole and sinking deeper and deeper into it.
Each month the Treasury covers the fiscal deficit by auctioning
off securities. The two leading international buyers of U.S.
Treasury securities are Japan and China. In this role, China
is now also becoming our banker. This developing country, where
income levels are one sixth those of the United States, is financing
the excesses of an affluent industrial society. What’s
wrong with this picture?
In times past, when our fiscal deficits were covered largely
by U.S. lenders, interest payments on the debt were reinvested
in the United States. Now they are flowing abroad to Japan, China,
and other foreign holders of U.S. debt.
While the U.S. fiscal deficit, driven partly by the war in Iraq,
soars to stratospheric levels, the country is facing an unprecedented
fiscal challenge as the baby boomer generation retires, pushing
up the costs of social security, Medicaid, and Medicare. This,
combined with the growing interest payments on our debt to China
and other countries, will put a nearly impossible tax burden
on the next generation—something for which they may never
The U.S. trade deficit is growing by leaps and bounds, nearly
doubling from $452 billion in 2000 to an estimated $850 billion
in 2006. Rising oil imports and the trade deficit with China
account for over half of it.
National policy failures such as not adequately supporting the
use of renewable energy technologies have contributed to the
growing U.S. trade deficit. For example, the United States should
be a leading manufacturer and exporter of solar cells and wind
turbines, but it has fallen behind both Europe and Japan. The
solar cell, invented at Bell Labs in 1954, is an American technology.
But the U.S. effort to develop solar energy was so weak and sporadic
that both Germany and Japan forged ahead and developed robust
solar cell manufacturing and export industries.
The situation is similar with wind. Although the modern wind
industry was born in California at the beginning of the 1980s,
the U.S. failure to sustain support for wind resource development
allowed European countries to largely take over this industry.
Even though rising oil imports are widening our trade deficit,
we consume oil with abandon, weakening the economy and undermining
our political independence.
We have lost influence in world financial markets simply because
of our mounting debt, much of it held by other countries. If
China’s leaders ever become convinced that the dollar is
headed continuously downward and they decide to dump their dollar
holdings, the dollar could collapse.
Beholden to other countries for oil and to finance our debt,
the United States is fast losing its leadership role in the world.
The question we are facing is not simply whether our Christmas
is made in China, but more fundamentally whether we can restore
the discipline and values that made us a great nation—a
nation the world admired, respected, and emulated. This is not
something that Santa Claus can deliver, not even a Chinese Santa
Claus. This is something only we can do.