I’m genuinely surprised that it has taken people so long to realize this. In his Washington Post column Robert Samuelson writes about three of China’s leading exports:
China may be an even bigger economic deal than we thought. Almost everyone knows that, in the past three decades, China has gone from a huge and poor nation to the world’s biggest exporter and second-largest economy. Now, in a new report, two economists claim that China’s emergence explains a lot more. Specifically, they say it fostered three major global trends: low interest rates (which also prop up stock prices); weak or declining wages for workers; and growing economic inequality.
The central cause of these massive side effects is population change, contend Charles Goodhart of the London School of Economics and Manoj Pradhan, formerly of Morgan Stanley. The infusion of hundreds of millions of Chinese workers into the world economy weakened global wages and created a glut of global savings. Lagging wages worsened inequality; surplus savings depressed interest rates.
Read the whole thing.
It didn’t have to be this way. If China hadn’t maintained its mercantilist policies and, indeed, had merely conformed to its international agreements, some of the adverse effects of China’s becoming a participating member of the global economy could have been mitigated.
And none of this was unforeseen. I said it 35 years ago and again 20 years ago when granting China MFN trading status and admitting it to the World Trade Organization were being debated.
