The old KGB used to keep two sets of books on the Soviet and world economies – one that regurgitated the regime’s fanciful propaganda, and one that tried to reflect sharply contrasting reality.  Is Treasury Secretary Timothy Geithner displaying similar cleverness in some of his recent pronouncements on the global economic crisis?

Take one of the biggest canards he’s been pushing – that China’s stimulus program has brought the United States and the world closer to recovery.  “The actions of China and India were very important,” Geithner said last week.  “Their commitment to cooperative force was a necessary complement to all the things we did in the U.S.”

Not even close.  An excellent measure of a country’s helpfulness in overcoming the crisis is its manufacturing trade balance with the United States.  Manufacturing dominates U.S. and world trade flows, and focusing on industry permits factoring out the volatile effects of the massive global trade in oil that is so heavily and artificially influenced by the OPEC cartel.  Moreover, if the United States can’t manufacture its way out of its own crisis, then its trade deficits will remain too high, global finances will remain dangerously out of kilter, and the world economy as a whole will remain dangerously unstable.

By this standard, India has indeed been helpful.  It still runs a manufacturing trade surplus with the United States, but this surplus fell by 25 percent during the first half of this year.  That’s more than twice the 11.93 percent decline in the world’s total manufacturing trade surplus with America.  But China’s much bigger manufacturing trade surplus with the United States fell by only 10.10 percent from January to June this year.  That’s less than half the change in the Indian surplus and 15.34 percent less than the drop in the global surplus.  So China is clearly doing much less than its share to rebalance world economic flows and bring the crisis to a lasting end.

Making claims of cooperation even more preposterous is Beijing’s continuing, pervasive reliance on predatory trade practices like currency manipulation.  That’s the same currency manipulation that Geithner’s Treasury Department last April denied was occurring.  Does that mean that neither ignorance nor naivete explains his praise?  Only if you believe that endless panda-hugging really can turn China from an economic rogue into a responsible global player.      

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