Sometime in the mid-1990s, during the roaring days of globalization, the high-tech boom, and a soaring market, I published a commentary in the Business Times titled “One Bill’s Washington vs. the Other Bill’s Washington: Guess Who Is Winning?”
I actually wrote the piece upon my returning from a visit to the Microsoft “campus” in Redmond, which is located in the state of Washington where chairman Bill Gates and his nerdy whiz kids were building the world’s leading software company to my office in Washington, D.C., where President Bill Clinton was under pressure from Congress to punish Japan (or was it China?) for this or that “unfair trade practice.”
In fact, the Clinton administration was even toying with the idea of “breaking up” what some critics argued was a “monopolistic” Microsoft.
The point I was trying to make then was the following: Who really cared what the members of the declining political class in the U.S. capital were doing in those days? Those guys in the White House and Capitol Hill were history, I argued.
The future was in the hands of the entrepreneurs in Silicon Valley who were remaking the world as we knew it, and there was not a lot that that anachronistic group of politicians could do about it.
Bill Gates and his partners in Redmond, Washington, were leading the process of globalization, including the free flow of products, investments, and labor, and creating the foundations of a unified global economy, while Bill Clinton and his buddies in Washington, D.C., were playing catch-up as they tried to protect the dying nation-state.
So they were attempting to place a few more obstacles in the way of free trade, but at the end of the day, they were on the losing side. When we would meet 10 years from now, I predicted, we would discover that it was Microsoft Bill and not White House Bill who ended up determining the way our political and economic system would look in the early years of the 21st century: Our trade and investment ties with China and other Pacific economies would flourish, and Microsoft would be leading the way.
Well, on one level I was right. The efforts by the government lawyers to split up Microsoft had failed, and the company continues to be one of the main business engines that is driving U.S. economic ties with China and the rest of East Asia. That clearly was evident two weeks ago when Chinese President Hu Jintao was the guest of honor in Bill Gates’ mansion in Seattle. With the State of Washington exporting more than $5 billion to China in 2005, it was not surprising that China’s leader and his entourage were welcomed to America’s Pacific Northwest by Mr. Gates and the other leaders of the nation’s high-tech industry as close friends and allies. But as a headline in the New York Times made clear, the Chinese president didn’t get the same kind of warm reception on the East Coast, where he met with Bill Clinton’s successor, George W. Bush, and had to suffer many indignities, including quite a few anti-China demonstrators.
“China Wins Over Washington (State), But D.C. Proves a Bit Tougher,” noted the Times, pointing that what the White House occupant and the politicians in Washington seemed to be focusing on was the $202 billion trade deficit with China, its growing military power, and its human rights conduct.
While Bill Gates and his business allies were celebrating their rising investment in China, Mr. Bush and his political buddies were responding to pressure from lobbyists, interest groups, and members of a bureaucracy that perceive China as a threat that is supposedly responsible for the loss of U.S. manufacturing jobs, that refuses to embrace the American concept of democracy, and that challenges U.S. military dominance in East Asia.
When I compare my predictions from the 1990s to the political and economic realities of 2006, one point becomes clear: I certainly played down the ability of the members of Washington’s political class to protect their interests and even to expand their influence.
Microsoft and the other American companies that helped produce the Internet explosion and the amazing global economic growth of the 1990s weren’t able to get rid of the nation-state (assuming that they even wanted to do that), which remains alive and well, thanks in large part to dramatic developments in the global political arena, including 9/11 and the war on terrorism.
The mounting sense of nationalism in both the United States and China combined with the economic dislocations that result from globalization, the introduction of new technology, and the impact of interest groups and electoral politics play into the hands of “political entrepreneurs” who exploit these trends by demanding that the Bush administration “do something” about restricting imports and punishing China.
Indeed, as the rejection in Washington of bids by a Dubai company to manage U.S. ports and by a Chinese company to buy a U.S. energy firm demonstrate, when push comes to shove, the Political Man overpowers the Economic Man.
That doesn’t necessarily mean that the China-bashing forces in Washington are bound to crush the efforts by Microsoft and other American businesses to expand trade and investment ties with China. But the only way to ensure that the interests of Washington State and Washington, D.C., converge with regard to China is by establishing a coherent and effective strategy to manage the diplomatic and military ties between China and the United States.
For better or for worse, that remains the responsibility of the politicians in Washington, D.C., whose performance during Mr. Hu’s visit wasn’t very impressive. It’s too bad that Bill Gates and his colleagues in Washington State only produce and sell computers and software and don’t also do foreign policy.
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