Following up on an article I posted about earlier, over at Bloomberg Megan McArdle argues that it’s pretty darned understandable if Americans blame China for our own economic woes:
It’s fashionable for columnists to write “I was wrong†pieces, and if this work by Autor et al holds, this will go down as one of the four things I was most mistaken about: the Iraq War, the severity of the financial crisis that followed Lehman’s collapse, the rise of Donald Trump, and now, China trade. It’s been obvious for a while that China has played some role (though not the biggest) in the decline of labor-market opportunities for workers without a college diploma. But the authors suggest that the effect is both bigger, and longer lasting, than I would have predicted. Nor has much seemed to help the adjustment: workers are less mobile than expected, domestic American industries less able to absorb the surplus, particularly among the lower-skilled workers whose human capital was job- and industry-specific.
Free traders — and I include myself — have often sounded too glib about the offsetting benefits of cheap imports. Cheap imports are great. But people value work, and the ability to build some sort of reasonably predictable, stable economic future, more than they do cheap flat-panel televisions. With effects this large, the cost to people who are forced into economic precariousness by permanent labor market changes is larger in human welfare terms than the benefits of affordable electronics.
I don’t think a mea culpa is quite enough under the circumstances. It’s important that Megan understands why she was wrong.
The answer, as she suggests later than the passage I quoted, is that China is a special case because of its size, its politics, its history, and its society. Granting China WTO membership isn’t like granting it to Sierra Leone. There are levers that can be applied to encourage Sierra Leone to change its behavior that simply won’t work with China.
And old China hands have been telling Americans the things that China can be expected to do or not do for decades without much effect. Many of the same lessons apply to India. I wonder if they’ll pay attention now?
However, I do intend to take up the gauntlet that Megan threw down. But I’ll do it in another post.
It’s been obvious for a while that China has played some role (though not the biggest) in the decline of labor-market opportunities for workers without a college diploma.
Gee, I wonder what has played the biggest role, and where she and the other free-traders come down on that issue?
/ sarcasm
I just got through a long post by David Stockman: Red Ponzi Ticking.
(I use Norton’s DNS, and they have flagged his site a malicious. I went there anyway. It could be a false positive, or one of the ads could have something in it. It will be re-posted at Zero Hedge at some point. You have been warned.)
This is just a little sample, but he never really indicts free trade. He is indicting a credit based monetary with an unfettered central bank.
I do not know how it all plays out, but it will not be anywhere close to the conventional wisdom.
The most interesting part of that post is the analysis of China’s steel industry, TB. The short form is that the Chinese steel industry has 1.2 billion capacity, has been creating its own demand for a number of years, and probably has a real demand of less than half that. There’s no realistic hope of filling that hole either domestically or internationally. It’s just deadweight loss.
The same phenomenon is replicated in shipbuilding, auto-making, cement-making, machinery, solar, aluminum, the list goes on and on.
They could find a use for that steel and those pissed-off citizens, but I do not think it is what the free-traders or central bankers imagined.
I think most people have Russia & China mixed-up. Russia is (and wants to be) more European, but they are somewhat backward. They are not necessarily benign, but they are a manageable menace. Today’s Russians are not the Soviets. The real connection is to Czarist Russia and the Russian Empire. The Soviet tactics are only because the Czar did not have tanks, subs, nukes, or ICBM’s.
The Chinese are everything the Russians are accused of being and then some. The Chinese are not trying to recreate Imperial China. They are happy with the Mao version.
I don’t know. My impression is that the Chinese mentally just replaced the emperor with Mao. The CCP will continue to rule as long as it has the Mandate of Heaven.
That’s what’s in question. If everything they attempt flops, it will look as though the Mandate of Heaven has been withdrawn.
If you’re implying war, I doubt it. The One Child Policy was a sort of anti-war insurance policy.
Suddenly I am reminded of Zheng He’s Great Armada.